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Chroma

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Chroma

Chroma was a Portland-based startup co-founded in March 2013 by Mike Merrill and Marcus Estes. The company had three distinct phases: a Nike-sponsored indie game studio, a crowd-investing platform for creative projects, and, finally, the first company to register a legal security on the blockchain. After Merrill’s departure, the company was eventually acquired by Metrc.

Chroma is notable in KmikeyM history as one of the few companies ever launched by a shareholder vote. Merrill’s shareholders voted to have him quit his job at Panic Inc. and join Marcus in the new venture.

Origin and the shareholder vote

Marcus Estes approached Merrill in early 2013 with a pitch for a new software venture. Because Merrill is a publicly traded person, he could not accept the job without a shareholder vote. The vote was complicated by secrecy: the real opportunity (a spot in the Nike+ Accelerator, powered by TechStars) was under non-disclosure, and Nike wanted the cohort announcement to be a surprise.

Merrill posted the proposal on March 6, 2013 under the title “New Opportunity,” describing it as a “unique and exciting work opportunity” whose details he could not disclose publicly but would share privately with any shareholder who asked. The vote passed 1,694 to 1. The full story is at The New Opportunity Vote.

Chroma was incorporated in Delaware as a C-corporation, entirely separate from the KmikeyM platform. KmikeyM shareholders did not receive any equity in Chroma.

The name was chosen from film production jargon. “Chroma” refers to chroma keying, the technique (green screen) that allows low-budget producers to accomplish more with less.

Phase 1: Chroma.io and the Nike+ Accelerator (2013)

Chroma entered the inaugural class of the Nike+ Accelerator, a three-month TechStars-powered program based in Portland. The cohort consisted of 10 companies building on top of the Nike+ API and NikeFuel (Nike’s proprietary activity measurement). Each company received $20,000 in seed capital plus access to roughly 300 mentors.

Chroma’s first product was Jumpbots, a turn-based fighting robot game that converted NikeFuel earned through physical activity into in-game currency for customizing combat robots. The concept came from Merrill and Estes asking each other what they wanted to spend NikeFuel on, and both immediately answering: “Giant fighting robots.”

Demo Day was held in San Francisco on June 20, 2013. The Jumpbots demo impressed Nike enough that they hired Chroma on contract to build a different FuelBand-based game as part of Nike’s push into soccer. Chroma spent roughly the next year developing that game. The team also did work for Intel during this period. Nike discontinued the FuelBand hardware in 2014, and neither Jumpbots nor the Nike soccer game was ever released commercially.

Phase 2: Chroma Fund (2015)

In late 2013, Merrill and Estes hatched the next version of the company in what Estes later described as “a frenetic 24-hour burst of specification building and code writing.” The insight was that creative projects (games, films, web shows) needed funding more than anything else, and that Merrill’s personal IPO model could be generalized. The 2012 JOBS Act, signed by President Obama, had recently legalized crowd investing, and Oregon had passed its own state law extending the concept further.

Chroma Fund launched publicly in January 2015 as a crowd-investing platform for digital media creators. Unlike Kickstarter, backers were not buying rewards or making donations. They were buying securities that entitled them to a share of the project’s future revenue. Creators kept full creative control.

The first two funded projects were The Second River (a game from Portland’s Mountain Machine Studios) and The Digits (an educational children’s web show distributed through PBS Learning Media). Estes framed the company’s ambition bluntly: “We think this model is going to eat Hollywood.”

The company operated out of Oregon Story Board, a Portland incubator for digital storytelling startups. The core team at this point was four people: Merrill and Estes as co-founders, developer Leif Shackelford, and UI designer Adam Wong. Merrill and Estes had originally met at Less Distracted, a Portland co-working space.

Phase 3: Blockchain pivot (October 2015)

In October 2015, Chroma announced that it had become the first company to register a legal security on a blockchain. Using Bitcoin “colored coin” technology, Chroma Fund issued investment certificates as blockchain-registered securities, operating under an exemption to Oregon state securities law.

The company positioned itself as fundamentally different from other blockchain finance startups of the era. As Estes told Bitcoin Magazine: “We’re closely watching Symbiont, T0, and Digital Asset Holdings. Each of them could be considered a competitor, if not for one key distinction: They’re selling technology to Wall Street. We’re using Bitcoin to rebuild the system from scratch.”

The initial five “mini-IPOs” on the blockchain-enabled platform were:

  • FUSE Comics, a digital comics imprint from the Pander Brothers (veterans of Marvel, DC, and Dark Horse)
  • Baams Away VR, an animated VR game for next-generation headsets
  • EggDrop, a monthly subscription toy box for children
  • Publication Studio, a print-on-demand small press publisher
  • The Tannery, a neighborhood bar on Portland’s east side

The investment instrument was called a ChromaCoin, a blockchain-recorded bond representing a defined percentage of a company’s future gross revenue.

Barclays Fintech Accelerator and Merrill’s exit

Following the blockchain launch, Chroma was accepted into the Barclays Fintech Accelerator in New York City. Merrill, Estes, and Shackelford relocated for the program. The accelerator did not produce the follow-on funding the company needed. After returning to Portland, Chroma was unable to raise another round, and Merrill laid himself off.

After Merrill

Estes and Shackelford continued running Chroma as a consulting shop, taking on client work to stay alive. The company eventually pivoted into cannabis industry software and was acquired by Metrc, the dominant cannabis compliance and tracking platform.

Significance

Chroma occupies a distinct place in the history of blockchain finance. While more famous blockchain startups of the 2015 era focused on selling infrastructure to existing financial institutions, Chroma was the first to actually use the technology to register a legal, regulated security. The founders’ stated goal was not to improve Wall Street but to replace it, starting with the segment of investors (and companies) that Wall Street had excluded since the 1930s.

For KmikeyM, Chroma is also significant as the clearest example of the shareholder voting system being used to direct a career change. The vote that launched Chroma required Merrill to quit a stable ten-year job at Panic Inc. in favor of an unproven venture, and it had to be put to the shareholders without revealing the specific opportunity due to Nike’s confidentiality requirements.

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