October 5, 2013
The Bitcoin story has just begun and presents an interesting opportunity for the creation of a variety of new businesses. Its edgy, its unclear how it will be regulated (Germany did), but early adopters stand a chance just like the early days of internet. Mark Andreessen (investor with amazing insights) recently said Bitcoin feels like the early days of internet, which he witnessed very closely and gained from it. What he really meant was that Bitcoin is a huge game-changer like 'Internet'. Opportunity is for companies focused on merchant services (like PayPal), for Bitcoin exchanges and for companies focusing on the storage of digital data as well. Opportunity is there for you and me to earn Bitcoins (might be the currency of the future). Mark's firm is keeping a watch on the bit coin industry.
Andreessen Horowitz, founded in July 2009, is a $2.5 Bn Venture capital firm. The general partners at the firm include Mark Andreessen, Ben Horowitz, Scott Weiss, John O’ Farrell, Peter Levine and Jeff Jordan. The firm invested in Belly during August 2013.
Marc Andreessen recently revealed that the firm had been meeting with lawyers to discuss the possibilities and were enthusiastic about the digital currency. Andreessen is confident that the bitcoin will finally be regulated and accepted in the US. He believes that the currency will have the highest impact in countries with unfavorable currency systems. It’s going to be adopted precisely because it’s not controlled by the government of — pick a country- which has bad policies, he says.
Ben Horowitz believes that Bitcoin is essentially software, and that its success or failure will depend more on cultural adoption rather than its early feature set. According to Horowitz such an adoption is occurring, and that it will aid in improving the technology's breadth and applicability to the mainstream.
However, Andreessen-Horowitz firm is yet to invest in Bitcoin startups. The reasons didn't sound very convincing. Given the government's crackdown on Bitcoin exchanges and legal outcry it could be a wait and watch to stay safe. Marc Andreessen said It’s the compact between the entrepreneur and the venture capitalist that most venture capitalists take really seriously. If they bet on a certain company, the firm cannot also back one of their competitors he says.
Startups like Coinbase and BitPay Inc. have raised millions of dollars till date. They claim to ease and help in the adoption of bitcoin by consumers and merchants. Interest is also growing in investment funds, bitcoin trading and 'mining' - the process of creating the digital currency. In May, 2013 BitAngels, the first multi-city angel network and incubator dedicated to digital currency startups was launched. Bitcoin startups are coming up all over the world including India. It's getting the geeks and nerds excited.
In September, SecondMarket, a platform for facilitating investment in privately held companies, launched the Bitcoin Investment Trust, which allows sophisticated investors to gain exposure to the price movement of Bitcoin without the risks of direct bitcoin ownership.
LTP View: With all the regulations and pitfalls surrounding the bitcoin, Andreessen-Horowitz may have made a wise decision to observe the developments from a distance and wait. The future of bitcoin is tricky, but full scale adoption could mean trillions of dollars even if it comprises only 1% of the market. At a Ted presentation (watch video) Paul Kemp-Robertson asked which is the most efficient currency in the world?