There have been a number of trends in the last 10 years that have allowed the supply chain finance market to finally innovate beyond the control of global universal banks and to create new platforms. The globalization of the economy has lengthened supply chains, dramatically increasing the number of suppliers and transactions. In addition, the development of direct sourcing has made supply chains more complex. The scarcity and cost of credit in the wake of the credit crunch created a major incentive for enterprises to more rapidly adopt supply chain financing technology that enables non-investment grade suppliers to benefit from investment-grade financing rates.

However, today these financial supply chain platforms are proprietary closed systems relying on archaic process and data structures. Companies today still largely send requests for payment to each other in the form of paper invoices processed and stored in various billing, accounting and ERP systems. Supplier portals and networks require participants to pay and to agree to proprietary formats. This leads to many pain points in current supply chain payments and finance — payment terms are lengthening for SMB’s, financing is difficult to secure for the long-tail suppliers, and cross-border payments are expensive and cumbersome. 
In short: supply chains could gain tremendous benefits from being more open, connected and data-rich — and to ultimately allow for open innovation on — and competition on — financing of supply chains. How companies transact, collaborate, exchange and pay can be re-invented using an open source blockchain protocol.

Started by three of the four original founders of Taulia, one of the most successful emerging supply chain platforms to challenge the status quo, Centrifuge is developing a decentralized, blockchain-based protocol which aims to rethink how financial supply chains work — making them far more efficient and open. When released, the protocol would codify businesses, organizations, and persons, in addition to the atomic units of B2B transactions, such as orders, deliveries, invoices, or remittance information. This would liberate this data from closed and archaic platforms and would allow the participants to share information with business partners, service providers, financing sources or other users of the protocol, creating the foundation for a far more efficient and transparent supply chain that could become a platform for open innovation around supply chain financing (additional applications, services, etc). The team plan to develop a native utility token for the protocol.

Our thesis

There are many pain points with the current walled-garden supply chain payments and finance platforms: they are intransparent and rent seeking, transactions and entities are not properly codified, data is not reusable, they often rely on manual labour and paperwork, they do not provide open access to finance and service providers, etc. This means they are far more expensive, inefficient and closed to innovation than they should be. As the world’s production and supply chains have continuously evolved, it is time for supply chain finance networks to do the same. A new open supply chain protocol that could liberate data from traditionally walled-off silos and codify business data and business logic on a public, decentralized network could potentially create significant new value and facilitate a number of new use cases and applications, while empowering all supply chain stakeholders to participate in the economic upside. The native token of such a protocol could then become valuable.

We are happy to be backing Maex, Philip and Martin on their mission together with Mosaic Ventures and Semantic Ventures. Here’s a TechCrunch article with a few more details.

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