Transparent Systems announced its launch Wednesday following months of quiet fundraising and product development since the spinning out of Vulcan in 2018. The heavily-funded Seattle startup is finally ready to unveil its first product, which supports real-time, business-to-business payments using a system secured by blockchain technology.
The vision for Transparent Systems started with the late Paul Allen, co-founder of Microsoft. He and colleagues at his investment firm, Vulcan, sought to modernize outdated financial systems. After testing various ideas, Vulcan provided the capital necessary to get Transparent Systems off the ground in July 2018.
“The initial funding from Vulcan, which came at the direction of Paul Allen and Vulcan Capital, was instrumental for us in building the initial team, getting all the bits and bytes that a company needs to come together, and we’ve been really focused on hiring a really stellar, world-class engineering organization,” said Transparent Systems CEO Alex Fowler.
Transparent Systems finished beta testing its business-to-business payment product three months ago. In December, the company closed a $14 million funding round led by Pantera Capital, with participation from Square, FuturePerfect Ventures, IDEO Colab Ventures, Digital Currency Group, and CMT Digital. That brought Transparent Systems’ total funding to $22 million. The initial $8 million came from Vulcan Capital. The 25-person company is growing and plans to share more about its work in the coming months.
Financial institutions in the United States are Transparent Systems’ initial target customers. The startup’s goal is to replace existing payment networks, like ACH, with a faster and less expensive option. Right now, Transparent Systems is not focused on building payment tools for consumers, but “certainly real-time payments have a real opportunity in the consumer area,” Fowler said.
“If we think about how fragmented the financial infrastructure is within the United States, we have all kinds of counterparties and financial service providers and payment rails that are all layered into a very complex payment landscape,” he said. “New innovations in financial services and payments have to be able to work within that legacy but also look for opportunities to provide new capabilities and that’s really where we’re focused.”
Fowler joined Transparent Systems as CEO in 2018 after co-founding a blockchain startup called Blockstream. Before taking the entrepreneurial plunge he held leadership positions at Mozilla and PwC.
Transparent Systems says blockchain’s distributed ledger technology minimizes the financial risks traditionally associated with instant payments. But it isn’t clear whether blockchain-enabled settlements bear those assumptions out in practice. A trial of the technology in Germany proved to be costly and slightly slower than traditional transaction services, according to Bloomberg.
But several banks are betting the technology will improve over time and developing their own blockchain-based settlement services.
Transparent Systems is the latest financial tech startup born in Seattle, where the sector is small but growing. Madrona Venture Group and its managing partner, Tom Alberg, are working to grow Seattle into a fintech hub. The region pales in comparison to New York or Silicon Valley but does have some natural advantages. Seattle’s cloud computing chops prompted JPMorgan Chase and others to establish engineering centers in the region.