(Adds details of how many bank members are interested.)
By Anna Irrera
NEW YORK Nov 21 Blockchain company R3 CEV has
reduced the amount it aims to raise from bank members in its
first large round of equity funding to $150 million from $200
million and is changing the structure of the deal, according to
a person familiar with the plans.
R3, a New York-based startup that runs a consortium of more
than 70 financial institutions, now plans to give bank members a
60 percent equity stake in exchange for the funding, the source
More than 90 percent of its original 42 bank members have
expressed an interest in investing, the source said.
Initially, it aimed to create a new company providing shared
services for the owners, who would get a 90 percent stake. R3
would have run this utility for 10 years and retained a stake in
Goldman Sachs Group Inc and Banco Santander SA
, both original participants, are not renewing their
memberships and not investing in the deal, spokespeople said.
Morgan Stanley and National Australia Bank
are also not participating, said the source, who requested
anonymity to discuss plans that were not public.
Most other banks have agreed to the new terms of the deal,
but R3 does not expect all existing members to join the round,
said the source.
R3's fundraising comes as banks and other large institutions
ramp up their investments in blockchain, which is also known as
distributed ledger technology. It first emerged as the
technology underpinning digital currencies such as bitcoin but
is now being adapted for use in more traditional financial
tasks, such as transaction processing.
Other new companies are also looking to sell
blockchain-based technology to banks. Competition among these
startups has intensified over the past few months as they try to
secure investments and deals with large institutions to provide
R3's funding will be raised in phases over the next nine to
12 months, the source said.
Through its consortium and technology development lab, R3
comes up with ways for the financial industry to use blockchain
According to the new terms of the deal, the banks will also
acquire a stake in the development lab, which tests new
The group's original 42 members have been given first dibs
at investing in the company, followed by members of the
company's development lab. If the $150 million target is not
reached, the round will be opened to other strategic investors,
such as a technology company, the source said.
Since it began operating in September 2015, R3 has rapidly
gained the support from the world's largest banks, with members
including UBS Group AG, JPMorgan Chase & Co and
Deutsche Bank AG. So far they have paid membership
fees to participate in the company's activities.
Thomson Reuters Corp is also a member of R3.
In a statement, R3 said it expected members of the
consortium to change over time, as the scale and scope of the
Although Goldman and Santander have abandoned R3, they have
investments in other blockchain startups, including Digital
Asset Holdings LLC, which is led by former JPMorgan executive
(Reporting by Anna Irrera in New York; editing by Lauren Tara
LaCapra, Cynthia Osterman and Alan Crosby)