Blockchain startup R3 expects to close $150M round in first quarter

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David Rutter, founder and CEO of the four-year-old, New York-based blockchain startup R3 took the stage at Disrupt London this morning to discuss the progress of his company and underscore Wall Street’s enthusiasm over digital ledger technologies more broadly.

While on stage, he also confirmed earlier reports that R3 is in the process of raising a $150 million round, saying that it “hasn’t closed” but that R3 is “making very good progress” and that it “will close in the early part of the new year.”

Rutter — previously CEO of a division of ICAP, the world’s largest inter-dealer broker — jokingly added, “I’ve made and spent a good amount of money [in my lifetime]. This is the first time I’ve raised it, and hopefully, it will be the last.”

According to a Reuters report from last month, R3 — which counts more than 70 financial institutions as member banks that are helping it developing its products — had to downsize its original goal of raising $200 million to $150 million.

Though more than 90 percent of its original 42 bank members have expressed an interest in investing, said the report, two original participants — Goldman Sachs Group and Banco Santander — decided to opt out of the consortium and not to invest in the round.

R3’s current members include JPMorgan Chase, Deutsche Bank, and Thomson Reuters.

Asked on stage about Goldman, Rutter downplayed its decision, saying that “with a large crowd, it’s tough to meet everyone’s criteria. Goldman likes to see a smaller group [but] I’ve been involved in consortiums before,” and “in some ways, it’s better to have a larger group.”

Rutter also talked at length about R3’s block chain platform Corda, developed by the company’s CTO Richard Gendal Brown, the former executive architect for industry innovation and business development for IBM. It aims for its member banks to share only what’s needed for the rest of the firms in the group to confirm that assets and cash have changed hands. (Bloomberg wrote about Corda in April.) Rutter described it as the “plumbing and infrastructure for the future of finance.”

Asked what was wrong with the current “plumbing,” Rutter stressed that there’s simply too much room for improvement. Citing a McKinsey study, saying that its shows banks spend on the order of $3.6 trillion globally supporting their transactions, he likened current technologies to “spaghetti string.”

Given blockchain’s distributed ledgers, he said, R3 and its competitors see a “once in a generation” opportunity to help these same banks access a secure financial infrastructure in the cloud, one that ostensibly enables them to process and track nearly any kind of trade or money transfer nearly instantly, at less cost, rather than have to set aside money until each transaction is settled.

It’s a “panacea for regulators,” he added. “The way [things] work now, we record [transactions] on paper or enter them into a system” and there’s plenty of room for “shenanigans.” Meanwhile, he insisted, with blockchain, “the idea of hiding a ticket or manipulating a trade will be a thing of the past.”

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