Blockchain company Align Commerce receives $12.5 million in funding

Blockchain payments startup Align Commerce has raised $12.5 million in a Series A funding round led by Silicon Valley investment firm KPCB.

     The round was led by an all-star lineup of first-time and repeat investors, including Digital Currency Group, FS Ventures, Pantera Capital, Recruit Venture Partners, SVB Silicon Valley Ventures, and the investment arm of Silicon Valley Bank.

     Founded by former Western Union managing director Marwan Forzley, Align Communications is looking to crack the cross-border payments market for small businesses (SMBs), which is characterized by high costs and poor customer experience. Prior to Western Union, Forzley was the founder of eBillme, a payments startup that was acquired by the remittance giant.

Forzley said:

   “We believe the cross-border payments landscape is broken and we are using new technology like blockchain to help reduce friction and reap the benefits of global payments.” Focusing on this, Forzley claims the product improves on traditional wire transfers for cross-border transactions because it reduces fees in a unique way, while also delivering other benefits.

     “We’ve simplified a lot of the painful experiences by allowing SMEs to go into their bank account, their email address and allow them to send funds to a receiver,” Forzley said. “The whole system is fundamentally different than the online system and it simplifies the whole thing.”

     The new funding, believed to be an undisclosed seed round in April, will be used to expand Align’s service reach far beyond the 60 countries it serves today. Forzley declined to provide more detailed information, such as the company’s current transaction volume, but he did say the funding round is a testament to the success of its business.

     The round comes amid an overall decline in industry investment that began in the third quarter but has continued into the fourth quarter. The $12.5 million is the most Series A funding since September, when Abra and Chain raised $12 million and $30 million, respectively.

     As part of the deal, Randy Komisar, a general partner at Kleiner Perkins and a former senior lawyer at Apple, will join the company's board of directors.

Early blockchain advocates

     While some companies are also looking at bitcoin applications and blockchain payments, Align may be the only company that took blockchain seriously early, making blockchain language part of its public messaging as early as January 2015.

As mentioned earlier, Align’s product allows small and medium-sized businesses to send dollars to a receiver who receives euros. However, the end user will still use a traditional bank account, and Align will convert the sender’s funds into Bitcoin, sell the digital currency and convert it into the currency the recipient needs.

     Forzley stated that due to the large number of foreign exchange partners, blockchain allows Align to facilitate this process in a way that minimizes exposure to Bitcoin price fluctuations. In addition, he said that blockchain allows Align to provide more benefits to merchant customers, such as providing remittance information in real time.

     “You can track your logistics, but you can’t track your payments online. Blockchain has a perfect tracking mechanism to find out where the money is,” he said, adding: “Is this new technology different from existing technologies? The answer is yes, this new technology is cheaper, faster and easier to track.”

Disrupting correspondent banking

     More specifically, Align Commerce uses its technology to replace correspondent banks in cross-border transactions, which it believes will provide cheaper transactions for its merchant clients.

     Their market positioning is similar to that of Ripple, which provides distributed payments and recently announced a focus on cross-border payments in October. Despite the similarities in technology, Forzley said the two startups are not competing for the same customer base.

     “Ripple is targeting banks, and we’re targeting the SME market,” Forzley explained, going on to explain another difference, which is that although the company designs technology that has nothing to do with blockchain, Align Commerce currently uses the Bitcoin blockchain and will use Ripple’s distributed ledger if needed.

     “We are the application layer,” he added. “We designed it so that there is only one API for different cryptocurrencies. So we can switch between any cryptocurrency.”

Bitcoin Exchange Dependence

     Forzley said that, given the current size and liquidity of bitcoin, even though Align currently uses bitcoin’s blockchain, the startup still needs to help the bitcoin system grow to support the company’s ambitions.

     To provide services in certain jurisdictions, Align Commerce must be able to convert bitcoin back to its equivalent in local currency, which means the company benefits from the availability of local bitcoin exchanges. Forzely declined to name any specific partners, but said that in areas where there are no bitcoin exchanges, the bank is maintaining its bank accounts for bitcoin transactions.

     The goal of building a commendable system is challenging given the current difficult situation of Bitcoin exchanges, which have been going through a lot due to the long-term stability of the value of digital currencies, the increasing number of competitors, and the pressure of lower fees in 2015.

     Still, Forzley was optimistic about the next steps. “We will spend more time and effort on expanding the exchange,” he said, including this statement: “We think this is an important development that the market needs.”