Blockchain companies have been ramping up their game to solve real problems. Just this year, Sierra Leone held an election with citizens voting via a blockchain. Now, a startup in India called Enkidu hopes to make setting up joint ventures, which could easily cost thousands of dollars, a lot easier.
Varun Mayya, one of the founders of Enkidu, also owns Avalon Labs, a company that seeks out entrepreneurs for cross-border partnerships. The company owns multiple joint ventures across India, Singapore, Bahrain, and the US.
Mayya’s career started in 2009 when he learned coding and began designing websites as a freelancer. By his third year in college, he was paid US$100 per hour. At the age of 20, he started his first company, an online job portal which he built from scratch. After two years, he sold the company and founded Avalon Labs at the age of 24.
Due to Mayya’s early entrance into the internet business, his vast network of clients gave Avalon Labs a steady head start. “We eventually accumulated enough money to start placing bets with [a variety of] joint ventures across the globe,” he said.
Over time, the growing number of joint ventures they owned in different locations became a problem, according to the now 25-year-old business owner. Each one required them to register a new company in a jurisdiction that suited both parties, and different laws govern different states.
“We had to find a lawyer and an accounting consultant, and it became difficult to track the expenses, revenue, and shareholding tables of these different companies. So we figured we’d build a solution to our own problems,” Mayya tells Tech in Asia.
With the help of another partner at Avalon Labs, his team created Enkidu.
Making joint ventures more affordable
The chief promise of Enkidu is the reduction of inconvenience and cost for every new joint venture. They achieve this with an Ethereum feature called smart contracts, which automatically performs actions when predefined conditions are fulfilled by parties to the agreement. According to research Accenture published in 2017, investment banks could save around US$12 billion annually if they replace current systems with blockchain and smart contracts.
For smaller joint ventures, the cost of hiring lawyers and accountants may cripple their finances, says Mayya. According to his experience at Avalon Labs, business setup cost can vary from US$500 to US$5,000. They also need to shell out at least US$2,000 to hire a lawyer. “These expenses are unnecessary for a small two to three-man operation,” he adds.
In addition to the cost, traditional joint ventures require one party to physically transfer revenue to the shareholders. Kiron Cheong, a lawyer in Singapore, tells Tech in Asia that it is common in joint ventures for partners to pull out, refuse to comply with its obligations, go bankrupt, or refuse to pay shareholders.
Smart contracts can avoid those costs and, according to proponents of blockchain technology, provide ironclad security for all parties. “If every operation of the company — whether it’s payments or decision-making — was made digital, then you can erase the legal system,” says Mayya. However, legal advisors like Cheong remain skeptical about the replacement.
“Blockchain can only enforce contractual obligations, but there are directors duties or even tortious liabilities that can arise which machines cannot enforce,” says Cheong, who specializes in commercial law.
The so-called ironclad security promised by the blockchain is not short of critics either. Because the technology is so new, researchers warn that there may be many hidden vulnerabilities yet to be plugged. In 2016, a hacker siphoned US$50 million from the Decentralized Autonomous Organisation based on the Ethereum blockchain.
How a blockchain-based joint venture works
In conventional joint ventures, you would pay a lawyer and wait for them to draft the required documents. You would also need to rely on a central figure in the company to wire money to you.
Now imagine a smart contract as a vending machine. Every time you want something of value — like your shareholder’s dividends — all you have to do is pop in a token and the machine spits it out. Furthermore, smart contracts automatically enforce the same clearly-defined rules found on traditional contracts.
“Every business on Enkidu is given a payment gateway based on the blockchain, and every payment is split between the members of the shareholder table based on the prior rules set by themselves,” explains Mayya. Enkidu allows 14 decisions to be executed on the blockchain. These include adding a new partner or changing of intellectual property ownership. Majority votes on a resolution will change the rules of the shareholder’s table automatically.
For example, a partner could pass a resolution to add a new partner indicating the percentage he or she wants to own. The system then polls the existing members. If the resolution passes, the percentage owned by existing members of the table will change to reflect the addition of a new partner.
“Every payment will hence split according to the latest calculated rules, all timestamped on the blockchain,” says Mayya.
While companies like Stripe Atlas make incorporation of tech and internet companies easier, it does so by being their proxy when they deal with lawyers and accountants. Enkidu promises to eliminate the need for third-party management all together.
The startup currently focuses its attention on Southeast Asia, the European Union, and South America. According to Mayya, setting up joint ventures in these places is inconvenient.
“Our target audience is global. India is quite unorganized when it comes to digital companies and won’t be our immediate audience,” he added.
Enkidu’s pre-ICO with a US$5 million cap went live on March 12 and raised US$100,000 in two days. However, the startup has put a pin on sales due to a slump in Ether’s value, the startup claimed, adding that Ether’s plummeting value since the start of the month will affect all ICOs taking place.
Once the market recovers, the startup will announce new dates for the ICO, but “we’ll be focusing on building the product until then,” says Maya, who remains optimistic about the business and the blockchain landscape in general.
To ensure sustainability, the startup will need to maintain a high volume of transactions, which the founder believes is attainable.
“I was born and brought up in the age of the internet and have always been positive about the possibilities of the digital economy,” he says.
This post He wants to make joint ventures painless – by putting them on the blockchain appeared first on Tech in Asia.