Web3 infrastructure provider Parfin has raised $15 million in a bid to dominate the Latin America region.
The seed round, which closed at the end of November, is led by Framework Ventures. It also includes backers such as Alexia Ventures, Valor Capital Group and L4 Venture Builder, which is the Brazilian stock exchange’s investment fund, according to a company release. L4's investment is still subject to approval.
Founded in 2019, Parfin evolved from a company planning to develop a regulated stablecoin, into an infrastructure provider offering digital asset custody, trading, tokenization and management tools to some of Latin America’s largest financial institutions.
"As a matter of fact, I initially invested in Parfin as an angel,” said Marcos Viriato, Parfin’s CEO. “There was this guy with a PowerPoint, trying to raise funds and I said, ‘Oh, I like the idea.’ But the idea back there was to do a regulated stablecoin.”
A LatAm plan
The startup’s strategy has been to focus on the Latin America region because no other competitors were honing in on that area, Viriato said.
“We said, ‘Let's try to dominate the region and then use that as a springboard for the rest of the world,’” Viriato said. “And that played really well because we ended up getting big financial institutions, big players, including the Brazilian Stock Exchange, which is one of the largest exchanges in the world, in terms of volumes, so they are using our crypto-as-a-service platform to offer crypto-as-a-service for all the regulated broker dealers in Brazil.”
Santander also recently put out a proposal to broaden the scope of the digital Real, Brazil’s central bank digital currency (CBDC), with plans to use Parfin’s technology.
The startup now has around 70 people with more than half coming from the banking industry, Viriato said. The new raise will enable Parfin to build out existing products and launch new services.
A permissioned public chain
Parfin is currently developing Parchain, a permissioned Ethereum Virtual Machine compatible blockchain that will enable regulated entities to participate in decentralized finance (DeFi) and asset tokenization.
The startup makes its technology compatible with deploying on the server side, which means financial firms can deploy it within their firewall or security infrastructure, said Brandon Potts, a principal at Framework Ventures.
“That's huge because these institutions, they're not going to want to deal with a mobile phone or have to call up multiple people on a Saturday morning to sign a transaction to move funds,” Potts said. “They want to bring it in and automate it and have it embedded within their entire security spend, their entire risk budget.”
Several investment banking giants are either building or leveraging private blockchains such as JP Morgan’s Onyx blockchain or Digital Asset's privacy enabled blockchain Canton, which Goldman Sachs tokenization platform GS DAP is built on. However not every bank will have that luxury, Viriato said.
“Our goal is to build and allow mid-sized small banks to take and leverage this infrastructure in a unique way,” Viriato said. “And the beauty of what we built was we created some very sophisticated mechanisms for bridges where you can smoothly interoperate between different blockchains.”
Parfin’s chain is also unique in that it’s a permissioned Layer 2 that’s attesting to a public chain, Framework’s Potts said.
The new funds will provide the startup with a runway of between 25 to 30 months, Viriato said. The startup is used to operating in a lean way, after fundraising in early 2020 and then losing most of its committed investments when Covid-19 hit. It wasn’t until September 2020 when Parfin managed to raise a pre-seed round, he added.
“That actually was one of the points that Framework liked a lot because we're being very controlled,” Viriato said.
While the most recent raise was an equity only round, the startup has provided investors with token warrants in the past. It has a view to launch a token for Parchain in the late second quarter or third quarter of this year, he added.
This story has been updated to clarify that Canton blockchain is developed by fintech firm Digital Asset
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