Blockchain anti-piracy startup Custos raises R4m seed round

A little whole back, we told you about Custos; a startup that uses the Bitcoin blockchain to curb film piracy. It’s an idea that looked set to have Hollywood studios knocking at the startup’s door and now, it seems, at least one group of investors agrees.

The Stellenbosch-based startup recently announced that it had raised a US$265 000 seed round from a South African private investor, and Digital Currency Group (DCG). Based in New York City, DCG has been an active seed investor in the digital currency industry with 60 investments in 20 countries.

Custos’ technology allows companies to watermark bitcoin into a piece of media, track the blockchain to see when it’s infringed, and then recognise who the infringer is. There’s also a crowdsourcing element, with a bounty avialable to downloaders who identify other pirates.

While still at the LaunchLab incubator in the Western Cape university town, the company had secured the business of one of the continent’s largest broadcasters and one of South Africa’s largest film producers and distributors.

According to Custos CEO CJ van Rooyen, the startup plans to use the funding to expand its client base, especially those for whom piracy can cut tens of millions of
dollars from their production budget when a title is leaked.

Read more: CustosTech wants to curb movie piracy using bitcoin

“We’re thrilled to partner with investors who can really take an active role in helping us reach our target market,” he says.

While the biggest studios can absorb these losses, it can be extremely detrimental to smaller indie producers. For them, says Fred Lutz, COO of Custos, “a pirate leak can make the difference between being able to pay their employees and going bankrupt.”

“We are excited to see the Custos team developing an innovative application of bitcoin technology to solve a problem that is very costly to content producers,” said Barry Silbert, founder and CEO of Digital Currency Group.

Custos’s latest funding round follows a R2 100 000 (US$ 140 000) initial investment last year by Innovus, the Technology Transfer Office of Stellenbosch University, where the initial concept was developed.

While Custos has its sights firmly set on indie film producers at the moment, Hollywood clearly remains the ultimate goal. The startup is also testing a solution for protecting ebooks.

According to Lutz, detecting first infringers is also just the start for Custos as it looks to the blockchain’s potential make media production, distribution and consumption more equitable for all involved.

“We are already seeing some restructuring in the industry prompted by the blockchain’s potential,” says Lutz. “Custos provides the component that will form the content protection layer for this new wave of distribution.”