Intelligent investment in digital transformation: Driving change from the grassroots
By Jed Talvacchia, Head of Corporate Development
Backed by the world’s leading banks, R3 is focussed on delivering technology to accelerate digital industry transformation.
The firm’s development fund has committed millions in funding to a range of start-up technology firms building on their Corda platform.
Head of corporate development, Jed Talvacchia, talks through the firm’s investment approach and ethos and why digital transformation is accelerating
This is an exciting time in technology investment. Capital has been pouring into the enterprise blockchain space alone at an unprecedented rate throughout 2021. Venture capital investment in cryptocurrency and blockchain firms hit a record USD 3 billion in Q1 2021 and investors continue to take advantage of the central role this technology is playing in the digital transformation of the business world.
The sector is undoubtedly buoyed by a pandemic that forced all businesses to re-think outdated ways of working—and 2021 is the year that firms are putting their digital strategies into action. Clearly, investors are taking note. The Fund’s team has been quietly deploying since 2019 and are now thrilled to welcome some of venture industry’s biggest names as co-investors.
Interest has been strong in the blockchain space since the technology emerged for enterprise usage around 2015. In 2017, we completed one of the largest ever Series A fundraising rounds for a fintech company, backed by the likes of Intel, HSBC, Bank of America, Citi and Barclays, and have continued to raise significant capital since. Through the Fund, we have been deploying capital back into our ecosystem. These investments have been early stage, but the companies are not merely experimenting—they are rolling out mission-critical solutions that promise to materially disrupt their economic sectors, from capital markets to healthcare and from green energy to digital advertising.
When we consider that worldwide spending on blockchain solutions was USD 1.5 billion in 2018 and is now forecast to reach a staggering USD 11.7 billion by 2022, we believe the ROI for investors such as the Fund is clear. But alongside the work being done by industry leaders like R3 and its peers, innovative start-ups are the drivers of this technology’s adoption. Their creativity, ingenuity, and diligent development are proving early adopters (and investors) right. Now, outside investment can accelerate the progress of the industry as a whole, from the bottom up.
While many firms benefit from their pinpoint focus and agility, the business climate of the last 12 months has still proven extremely challenging for most start-ups. Forward-thinking investors realise digital technologies will play a central role in helping businesses evolve and emerge from the current crisis.
We launched the Fund in 2019 to support the firms helping us to deliver on our combined mission to establish Corda as the new platform for global commerce. We are keenly aware that Corda’s strength is derived from its community, which includes a diverse range of start-ups from a range of industries. We see app developers in insurance, capital markets, supply chain finance, payment messaging and many others, all building and deploying solutions for customers across the globe. Now with the launch of Conclave, the Fund has expanded its investment thesis to also include start-ups building with confidential computing software.
We are very proud to report the significant growth and progress the Fund’s portfolio companies have shown in both their product and commercial development. In Q3 and Q4 of 2020, during the height of COVID-related economic turmoil, nearly a third of the Fund’s portfolio companies marked up their valuation through either equity or convertible loan note fundraises. The portfolio valuation is now at a historic high-water mark. This is no small feat in the unprecedented operating environment in which we now operate.
As of March 2021, the Fund had built a network of more than 75 distinct co-investors, routinely sharing deal flow and driving capital into the Corda ecosystem. To date, total paid-in-capital across the Fund portfolio amounts to USD 90mm+. Our operating thesis is to help sustain and support Corda start-ups as they navigate the current economic climate. Of course, this in turn maintains Corda and Conclave’s unrivaled traction in the enterprise software space.
We are excited to see so many of these companies going from strength to strength, to the benefit of the blockchain industry as a whole. After all, a rising tide lifts all boats—and it’s great to see so many of these “boats” choosing Corda. We look forward to seeing the Fund’s portfolio firms deploying many more innovative digital enterprise solutions in the coming months and to many more investors joining us in supporting that growth.
The fund has now reached the milestone of USD 10 million in capital deployed, across over 30 investments in more than 20 of the most promising early stage blockchain and confidential computing companies.
This achievement would not have been possible without the dedication and commitment of our team. They’ve spent many late nights and early mornings over the last two years working to find, structure, and execute top quality investments.
They’ve also spent countless hours with our portfolio companies, helping to support them with their fundraising, their go-to-market strategies, and their technical deployment, developing deep, trusting relationships that I believe are at the core of mutually beneficial investor-investee relationships.
I must also express gratitude for our many committed R3 colleagues that support the Fund’s deal sourcing, diligence activities, and portfolio company assistance. Their passion for growing Corda’s ecosystem is real and their work with the Fund has been essential. The Fund is truly a reflection and product of all of R3.
I’m also grateful to the entrepreneurs and visionaries that chose to work with R3 and the Fund. Choosing a platform is one of the most consequential decisions blockchain entrepreneurs make. When companies select Corda, we take that trust seriously. We value executives’ confidence in our software, and we work hard to confirm that choice with every subsequent release of Corda R3 makes and every investment the Fund executes.