Homomorphic encryption, a complex technique that uses cryptographic algorithms to keep data secure as it travels across networks and to third parties, continues to elude mass-market scalability and thus adoption—mainly because currently, the complexity that makes it being so effective also makes it slow and difficult to use widely.
But in a world filled with data leaks and creative, malicious hacking, the approach holds great promise for ensuring data security in the long term, so investors continue to fund startups with smart people who rule out making the idea a reality.
In the latest development, a startup from Paris called Zama has raised $73 million in a Series A, led by Multicoin Capital and Protocol Labs, at a valuation approaching $400 million. Notably, among the long list of other investors in this equity round is Metaplanet, a deep-tech investor from Estonia that wrote the first check for DeepMind (among hundreds of other investments).
This is the largest round to date for a homomorphic crypto company not only outside of Europe, but perhaps globally. Amid an ongoing global funding crisis, deep tech in the region appears to be opening more checkbooks. Earlier this week, quantum startup Multiverse Computing also raised $27 million.
The plan is to continue investing in R&D, as well as hire more engineers (expanding a current team of 75) to capitalize on the two market opportunities Zama sees for early versions of its work.
It has solutions for dealing with blockchain transactions and solutions for data exchange related to education and the use of artificial intelligence. He has also created and published four libraries to do this work on GitHub and claims that 3,000 developers use them.
While there are many deep-tech efforts underway to improve how HME can be used in the world — including those at Zama — the startup is also getting on with business. . . it’s a business.
“We started commercializing Zama six months ago and have signed $50 million in contract value,” Rand Hindi, co-founder and CEO of Zama, said in an interview. Although Hindi strongly believes the long-term bigger business will be machine learning, customers so far are mostly from the blockchain camp, so $50 million is a rough value estimate since not all of them operate in fiat.
“If they have a coupon, we charge chips,” he said. “If it’s a bank using a private blockchain, we charge by transaction.”
Before that, Zama raised $8 million in a pre-seed and seed round, bringing the total now to $81 million. We understand from sources that the latest funding puts the company’s valuation in the high $300 million to $400 million range, although Hindi declined to disclose the figure.
If you think these are big numbers for technology that has yet to enter mainstream markets, especially in the current funding climate, there are a few reasons why the company has gotten attention.
The first is a simple buying opportunity.
“FHE is the most important fundamental cryptographic primitive for the next decade of computing. Zama’s technology is the key to creating privacy-preserving multiplayer applications,” said Kyle Samani, managing partner at Multicoin Capital, in a statement. “Zama’s pioneering work on open source FHE tools is just the beginning. We’re proud to help them build the next generation of encryption-enabled, privacy-first apps.”
Second, it is possible because of its founding team.
Hindi’s background is in computer science with a PhD in bioinformatics, but he is a polymath interested in artificial intelligence as well as privacy and how to maintain it in the modern world. One of his previous startups was an AI voice platform called Snips that was acquired by Sonos.
Zama’s co-founder Pascal Paillier, CTO, is a cryptography expert whose patents (he notes has approximately 25 patent families) used today in smart cards and other applications.
Together, the two began working as early as 2016 on the early technology that would become Zama. The breakthrough, Hindi said, was in 2019 when they arrived at algorithms that sped up calculations by 100 times.
“That was the unlock that allowed us to turn it into a business,” Hindy said.
This still doesn’t represent useful speeds for most transactions in the world, but since blockchain transactions themselves are typically slow, this provided an opportunity to offer Zama’s solutions to crypto developers. As Hindi puts it, whether you’re a crypto skeptic or not, when you look at the payroll and other kinds of financial transactions that are being created, it’s undeniable, he said, that “hundreds of thousands of people are building on the blockchain, and that’s giving them an opportunity to build more ».
As we’ve described before, full homomorphic encryption is something of a holy grail in the security and cryptography worlds in part because its implementations are too complex to execute in realistic time frames.
Some of these may be addressed over time with the development of compute-optimized chips, which are being developed by both startups and big names in semiconductors such as Intel.
Meanwhile, companies like Zama continue to work on algorithms and techniques to compress the work required to implement homomorphic encryption on existing infrastructure. His libraries and work to date include fully homomorphic cryptographic libraries FHE in machine learning; one compiler to help translate Python programs to the FHE equivalent. and one library to allow an entity to interact with an Ethereum virtual machine using homomorphic cryptography.
There are plenty of other startups in the space, including Ravel, Duality and Enveil, but for now, Hindi said, the market is so small — and still trying to prove itself, I’d add — that the goal is really to keep going. market development.
“We’re mostly friends with each other,” he said. “The goal is not to fight but to build a market. Competition. We see each other at conferences and talk [it] and one day we will fight but not today.”
