Following what data indicates was one of the weakest funding quarters on record for the industry, blockchain API provider Gem kickstarted 2016 with a $7.1m Series A announced this week.
Founded in 2014, Gem raised $2m in seed funding for a bitcoin API product aimed at industry developers. However, the most recent announcement finds Gem advertising its service as an agnostic 'blockchain API', a move that puts it in line with industry firms such as ChangeTip and Uphold that have sought to diversify their offerings away from digital currencies in recent months.
In conversation, Gem CEO Micah Winkelspecht acknowledged that the funding round comes at a time when the two-year-old company’s business strategy is changing.
Gem’s product, he said, has become less "bitcoin-focused" as the company has sought to tap into a growing new market for blockchain project development expertise at enterprise financials.
Winkelspecht compared his company's new model to competing competing blockchain API provider Chain, which raised a $30m Series A in September after pivoting away from bitcoin.
Winkelspecht told CoinDesk:
"I'm still a huge believer in bitcoin as a currency, but our focus is on enterprise use cases and exploring those with those types of companies. That’s where our focus is."
The CEO went on to suggest the startup has "always realized" its product would need to integrate with different blockchains, citing Gem’s integrations with the litecoin and dogecoin blockchains.
In total, Gem has raised $10.4m to date as part of three public rounds.
The latest round of funding notably saw participation from participants in Chain’s September funding round, including the Digital Currency Group and RRE Ventures.
Changing customer base
While Chain has cut its bitcoin API service, Winkelspecht indicated that Gem has no plans to stop supporting bitcoin-focused partners like Bitwage and Purse.
Winkelspecht framed the shifting emphasis as a prudent one given that, in his view, users from the bitcoin industry don’t need to be educated on its products or the technology on which it is based.
This, he suggested, is a sharp contrast from new customers, who require more time to learn how the tech can meet their needs.
“Our goal is not to be a consulting company," he said. "Why we do consulting is our customers need help. Before they’re building out a solution and they’re putting their engineers on it, there’s a huge amount of time on that.”
Following the funding, Gem said it will seek to add new employees that can complement its existing engineering personnel, which means adding business support.
Evolving thesis
Core to Gem’s strategy going forward, Winkelspecht said, is a belief that the bitcoin blockchain does not meet the needs of enterprise clients due to its inability to satisfy certain use cases.
Winkelspecht worded his remarks carefully, but indicated that while he sees bitcoin’s proof-of-work mining network and open consensus algorithm as essential components of a decentralized global currency, they might limit the technology's wider adoption.
"Quite frankly, financial institutions don’t have the need for a censorship-resistant blockchain. They do have a need for speed, and custom assets that they can represent," he said.
Still, he noted that, in his view, participants in the industry are "talking past each other", and that he believes the future will be one where there are many available blockchains.
“Some will be more focused on solving smart contracts and automation, and some will be geared toward financial transactions, and some are going to be geared toward data management,” he added, concluding:
"There will be both public and private chains and both will be successful."
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