INDUSTRIA Technology develops blockchain solutions for the financial sector in the City of London
The original article by Rumen Sokolov was published in the third issue of Forbes Bulgaria from 2019. We are publishing the translated version with the permission of the editor. You can read the original article here.
I meet the CEO and co-owner of INDUSTRIA Technology Petko Karamotchev in the company’s office on a small street in the centre of Sofia. The atmosphere is typical for the technology sector — no separate offices for the management team, only a glass-walled aquarium for meetings. Ideas for new products are outlined on the whiteboard, yet nobody is worried about information leaking out — everything is too complex for anyone outside the company to comprehend.
It’s complex because it concerns blockchain technology. When people hear this term, their minds intuitively go to bitcoin, but bitcoin has no place here — it’s about methods of communication, harnessed to facilitate the markets, financial or otherwise.
INDUSTRIA give their clients full ownership of their own data and only create the application itself. “What Market Actor One and Market Actor Two share with each other is none of our business.”
“We are at a stage where we create new business networks with decentralised databases, providing opportunities for individual actors on the financial markets to lower their communication costs significantly. This eliminates a considerable amount of manual work and improves trust amongst them,” says Petko Karamotchev. The technology allows market actors to communicate with one another in a much more streamlined way than in the past via a new Internet for business. Karamotchev adds that such an approach is in stark contrast with the one used by companies who gather and monopolise information, such as Google and Facebook. According to him such companies pull the information towards themselves and say, “I’ll keep everything with me, just be my client and I’ll take good care of you and your private data.” INDUSTRIA, in contrast, give their clients full ownership of their own data and only create the application itself. “What Market Actor One and Market Actor Two share with each other is none of our business,” Karamotchev claims. All that matters for INDUSTRIA is that the application is functioning correctly.
The technology INDUSTRIA uses for creating solutions for their clients is R3’s Corda. “With Corda, we are now creating a sort of internet for business, with no videos or photos,” Karamotchev says. This business internet is similar to a mobile phone: each of the actors has a device running Corda, which acts as a gateway — this is what they write the applications on. The data is not kept on a central server, but rather with each of the participants on the network. This is how the businesses are assured that this internet is their own and it works for them.
Petko Karamotchev is one of the few Bulgarians specialising in the blockchain technology sector. He is a member of the British Blockchain Association and the Nordic Blockchain Association, and an alumnus of the University of Portsmouth, UK, and the Cotrugli Business School, Croatia.
INDUSTRIA is created by Bulgarians, the team is comprised of Bulgarians, but they mainly work for clients in the City of London. This is why the company was registered in London — to ensure easy and accessible conduction of business with UK clients. While making his first steps in working for clients from the islands, Karamotchev noticed the different attitude the locals had towards UK companies as opposed to foreign ones. “A Bulgarian banker once told me, ‘If you want to sell in London, go there, don’t stay here.’” This is why INDUSTRIA was registered in London, while the major part of its daily business activity remained in Sofia. The company was founded at the end of 2016 when a number of organisations were merged into INDUSTRIA. New partners soon joined the enterprise, providing additional funding.
Another reason for registering the company in London was Brexit — in such a way business could be carried out effectively both in the EU and in the UK.
Petko Karamotchev doesn’t want to talk about the company’s funding and its results. He thinks they are still a small organisation (the staff numbers around 40 people), but they want to transform their regional business into a global one. “We’re just starting out, but we’re already entering the realm of seven figures and up,” he says. Their clients are among the largest London banks and insurance companies. The banks in Bulgaria have so far taken no interest in their blockchain-based products.
“We eagerly welcomed the opportunity to trade on a more transparent and technology-driven market.”
Petko Karamotchev’s relationship with financial markets and stock exchanges began in 1997. “This is when the Bulgarian Stock Exchange began operating (again) — it had existed since the beginning of the 90s, but there was no regulation of the markets back then.” Karamotchev recalls the end of 1997 — the first attempts to create a serious stock exchange in Bulgaria and the country’s emergence from the hyperinflation crisis. He was among the first brokers of the BSE and worked for the investment intermediary Hedger. “We eagerly welcomed the opportunity to trade on a more transparent and technology-driven market.” He believes that this market is still underdeveloped, for various reasons, but his interest in the technologies persists. He spent some time trading on the NASDAQ, but after the end of the dot-com bubble, his decision to focus on the technologies was firm.
“When we were asked if we could create Balanced Scorecard solutions, we had to say that we could, and only then go about learning and understanding how to do it.”
In 2004, Karamotchev and Petar Petkov took up joint ownership of the company Magic Solutions — INDUSTRIA’s predecessor and ancestor. “We started out 15 years ago, developing websites and applications aimed at servicing the customers of the commercial banks. We created the websites of some of the biggest commercial banks in Bulgaria — the first one was UniCredit Bulbank.” They gradually augmented their business portfolio with web-based technologies such as robo-advisors and personal financial advisors. “We would work on all sorts of alternative projects, including selling bicycles and cars,” he recalls. During that time, they also worked as subcontractors to EON, taking part in creating the invoicing system for one of the company’s projects aimed at providing Tanzanian villages with electricity. Among their clients were the UN — the company developed a software solution which facilitated the organisation’s fleet management (i.e. sending an armoured automobile to a mission).
An interesting moment from the early years of Magic Solutions was when the company unexpectedly received an inquiry from an Irish firm — Platinum Developments and Investments — asking if they could create Balanced Scorecard solutions. “We had to say that we could, and only then go about learning and understanding how to do it.”
Even back in 2005–2006 (before the influx of big software companies to Bulgaria), Magic Solutions were already creating complex and bespoke IT solutions. But the 2008 recession hit them hard and they had to start from scratch twice. “At one point someone made a joke — “oh, you work with banks, what is that blockchain thing?” Petko remembers answering that he knew everything about blockchain. Then he realised that he knew about bitcoin, but he had never paid attention to the details. He started reading up on the subject and the more he read, the more he realised that he understood nothing. “But, knowing nothing, I began grasping some of the concepts and we started experimenting.”
At that point funding initiatives making use of initial offerings of cryptocurrencies (ICO, or initial coin offering) were already being carried out around the world. INDUSTRIA spent a lot of time debating whether they should start an ICO project, even though they already had a big part of the funding necessary and had a serious project. In the end, they decided against it, because their company profile, business model, and working relationship with banking institutions didn’t fit the management model and token creation processes of such undertakings.
So, they decided to seek other technologies — something that made sense for them, something that they understood and that could be a business of realities and possibilities. They tried a Chinese technology by the name of NEO. “We really wanted to create applications with that technology, because the Chinese are the driving force behind the technologies of the XXI century, but it didn’t work at all,” Petko says. Their attempts to work with Ethereum and the IBM technology Hyperledger came to a similar end. Even though their ideas for working with blockchain began to work out, in the end, they decided against Hyperledger due to disappointment with the programming language.
“What matters is that we are smarter, not cheaper.”
Just when they were ready to give up on blockchain altogether, they happened across R3 — a blockchain software company that started out as a bank consortium. Karamotchev believes the two organisations’ cultures were a perfect match and R3 took an interest in working with INDUSTRIA. At that point, INDUSTRIA had already decided to not limit themselves to front-end products only and started creating the infrastructure — things that would redefine the industry and keep transforming it in the long run. The mission they set out to accomplish is to demystify the term “blockchain” so that it would not solely be associated with cryptocurrencies.
After gaining some experience working with R3’s product Corda, INDUSTRIA participate in different blockchain competition events. In 2018, they won an award in Barclays DerivHack, London — a derivatives instruments competition organised by Barclays and ISDA (International Swaps and Derivatives Association). At the same event this year, they were amongst the companies preparing the technology solution that the participants would have to work on.
Petko Karamotchev is also an advisor to one of the working groups of the British Parliament. “An acquaintance of mine told me about the Parliament job — he was working on an HM Land Registry project to digitalise the cadastre and move it on the blockchain,” Karamotchev explains. There are a few technological expert working groups in the Parliament (blockchain, AI, etc.) that gather evidence on a particular subject for the parliament groups themselves, who give regulations to the Chamber of the Commons. “I wanted to permanently position INDUSTRIA in the blockchain community in London and when this opportunity came around, I decided to participate,” he adds. This job consumes a lot of time and money, but he believes what he learns there to be invaluable.
INDUSTRIA’s goal is to create a business that will leave a mark after them, they want to be sought after for their abilities. “What matters is that we are smarter, not cheaper,” Karamotchev concludes.
Read the original Forbes article by Rumen Sokolov in Bulgarian here.
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