As one of the earliest enterprise firms to specialize in blockchain, Deloitte has quickly become a fixture in industry news and at conferences. But just how important is the emerging technology to its business?
For context, despite generating $36 billion in revenue last year, the “Big Four” auditing firm has invested in just one blockchain startup. Further, it has only officially opened two blockchain labs – with a third soon to be launched.
In this light, Deloitte’s investment strategy might seem like a small series of shots in the dark. But the truth, according to Deloitte Consulting’s chief technology officer, Bill Briggs is that it’s anything but.
In an exclusive interview, Briggs described how an elaborate series of programs not only helped his firm decide how to invest in blockchain, but also proved instrumental in getting the firm into blockchain in the first place.
Briggs told CoinDesk:
“We’re creating value maps to bring to light an industry for a given domain, function, process; where are the places that have concrete, simple to understand, no-regret value?”
Briggs estimates that 70 percent of Deloitte’s investments are made in these easy-to-understand product-market fits, with the remaining 30 percent focused on less certain, more experimental prospects.
“The further out you get, no one has the answer,” said Briggs.
Data vacuum
At the core of the strategy are a number steps designed to tap into the wisdom of the crowd. But, it’s not just any crowd that generates Deloitte’s investment data.
Rather, the global consultancy that employs 244,000 people has established a network of cells around the world that scan for the latest blockchain trends culled from data created by its own personnel.
Founded in October 2015, Deloitte’s S3 group consists of strategic analysts whose sole job is to “sense, scout and scan” global financial services. Based in New York City, the team of three analysts gathers original data from events, clients, startups and paid data sources like DataFox to look for potentially valuable patterns.
This investment due diligence considers variables including the potential of an idea based on its market size, unit economics and market traction.
Then those trends are “populated” into Deloitte’s Ecosystem Relationship Management Platform (a development of the customer relationship management, or CRM, concept already in wide use across sectors) and sent directly to select groups of the firm’s employees. These groups, in turn, provide feedback based on experience related to the trends.
Similarly, Deloitte’s Innovation Tech Terminal “scouting service,” based in Tel Aviv, Israel, has been working since last November to further align Deloitte’s own investment strategy with that of its clients by helping identify startups that the consulting firm’s clients can back.
“It’s a back and forth mechanism all the time,” said Deloitte global blockchain leader, Eric Piscini. “But the crowd-sourcing is important, because that’s how you leverage the industry knowledge of the Deloitte practice.”
Aligning interests
The blockchain investment research being done in these two cells is then mirrored by groups dispersed throughout Deloitte’s global staff.
While S3 is focused exclusively on blockchain and other fintech applications, Briggs also helps manage what he calls a “sophisticated tracking function that looks at widespread investment opportunities” at a global scale.
Through a combination of client briefings as well as meetings with venture capitalists and private equity firms, “small cohorts” gather investment strategies and information on which geographic regions might be in the early stages of showing proficiency in a particular skill set.
The data extracted from these meetings is qualitatively different than elsewhere because it is derived from sources that, by the nature of their own due-diligence practices, are privy to trends arising at the earliest stages of startups’ development.
“It’s a win-win,” said Briggs. “It doesn’t just make us smarter, but we’re going to inform your investments and help them scale faster.”
Investing decisions
Back in early 2015, the concept of blockchain percolated up through Deloitte’s investment research machinery and passed the test to become one of the rare new verticals to receive investment by the firm.
Though the exact amount of capital Deloitte has so far invested in the sector is still being closely protected, Briggs elaborated for the first time how that money is being spent.
Typically, Deloitte prefers to invest directly in its clients, in what Briggs called “risk-based sharing or value-based outcome,” to help drive and accelerate adoption in “places we believe in.”
Typically, those investments tend to be in services-heavy startups aimed at growing their client base. But at this early stage of blockchain adoption, Deloitte has only publicly revealed direct investments in one blockchain startup, financial infrastructure provider SETL, and one educational institution dealing in blockchain, Singularity University.
Instead of investing directly in companies, Deloitte has largely opted to invest in regions deemed as fertile for blockchain development, with an aim to grow the pool of talent and deepen the data considered for possible future investment opportunities.
“We mix data-driven sensing and market analysis with the instincts of our global experts and practice leaders,” said Briggs, who further explained:
“Increasingly we are co-investing with our clients, alliances, and ecosystems – whether that be outcome-based deal structures, joint development of products or hybrid offerings, equity positions, or acquisitions. “
Future plans
Briggs cited initial blockchain momentum in the financial sectors of Dublin and New York City, and the cross-industry potential to expand into other sectors as crucial reasons behind the decision to invest in the construction of dedicated blockchain labs in those regions.
As revealed to CoinDesk, Deloitte’s latest investment is in a third lab, this time in Hong Kong.
Following on from a blockchain test conducted by the Hong Kong Monetary Authority, Deloitte and others, the lab is already “open, but not launched yet,” according to Briggs.
When the lab launches this September, the goal will be two-fold: to teach others how to build with blockchain, and to learn what to invest in next.
Briggs concluded:
“Whenever the market and client needs are aligned with our own growth and investments, goodness happens.”
Bill Briggs image via Michael del Castillo for CoinDesk