Devign Lab has closed a $200,000 seed funding round it will use to build a suite of applications including a peer-to-peer marketplace and merchant payments tools for the Korean market.
K Cube Ventures, a Korean venture firm chaired by Brian Kim, one of the country’s most successful Internet entrepreneurs, provided the investment. Kim helped start KakaoTalk, a popular mobile chat application that reported 140 million users last year. This is K Cube’s first bitcoin investment.
Devign Lab has built a peer-to-peer marketplace called Coinone. The marketplace allows users to trade for free with an order book that’s updated in real-time.
The company’s chief executive Myunghun Cha said that Korean bitcoin startups could continue to see strong interest from venture capital firms due to the technological proficiency of the country’s consumers.
Cha said:
“Korea has optimal conditions for bitcoin. Smartphone [penetration] rate is the highest in the world and Internet population is also [among] the highest levels. Moreover, Koreans are the fastest responders to new technology, that’s why many global companies use the Korean market as a testbed.”
The round brings total investment in bitcoin startups in the country to $7.1m across three companies, according to the CoinDesk bitcoin venture capital tracker
Fee-free model
Cha said Devign Lab’s goal will be to build its userbase by offering free transactions on Coinone, with revenue coming from future applications built on top of the platform. One of those applications is a merchant tools platform called Coinpay.
Coinpay would be linked to Coinone and allow merchants to easily accept bitcoin payments in exchange for South Korean won. The platform is still in development, Cha said, and is planned for a November release. He said no merchants have been signed up yet.
Cha, however, is keen to talk up his technical credentials. He led a team of hackers to a third-place finish in 2009’s edition of Capture the Flag at DEFCON, the top hacking convention. The competition involves securing or breaking into a machine on an isolated network.
He has competed in the final rounds of that competition in 2011 and 2012.
Booming investment environment
Devign Lab’s funding round comes on the back of funding announcements from local rival Coinplug, a ‘universal’ platform provider that runs an exchange, merchant payments tools and deploys bitcoin ATMs. Coinplug raised $2.5m in a new round this week that included Tim Draper and the venture capital arm of financial services giant Mirae Asset.
Coinplug is targeting younger consumers who don’t qualify for credit cards with prepaid bitcoin credit cards that will be nationally distributed at the end of the month, its chief executive said.
Another firm, Korbit, which also provides a universal platform, closed a $3m Series A round in August from a host of investors with financial markets pedigree, including Pantera Capital, Softbank Ventures Korea, Barry Silbert’s Bitcoin Opportunity Corp and Tim Draper.
Korbit claims to have 25,000 users and 400 merchants on its platform, and it counts big brands like Nescafe among its users.
High-tech sophistication
Devign Lab’s Cha further attributed investors’ growing interest in the space to favourable local technology infrastructure.
Korea is ranked second in global smartphone penetration, behind the United Arab Emirates, according to research commissioned by Google. Korea has among the largest Internet-connected populations on Earth, with 41 million Internet users, placing it 12th on the global ranking in 2012.
Cha admitted that using bitcoin is not a mainstream activity in Korea yet, although he pointed out that this provided startups like his with plenty of room for growth.
“The current bitcoin market in Korea is small, considering its high potential. That’s why bitcoin startups in Korea can raise good funding [rounds],” he said.
Images via Coinone; Shutterstock