BitAngels, a Y-Combinator like incubator for Bitcoin Start ups

The concept of Bitcoin was introduced in 2008 by an anonymous developer under the name of ‘Sakoshi Nakamoto’. The virtual currency debuted with a value of zero in 2009 and was traded for the first time at 3/10th of a cent in 2010. Bitcoins can be obtained on computers through a process called ‘mining’ which involves solving complex mathematical problems with the consumption of a large amount of computer power.

BitAngels was co founded by David A. Johnston ( founder of and Michael Terpin (founder of SocialRadius CEO/Marketwire). It is the first multi-city angel network and incubator dedicated to digital currency startups. In May, 2013 BitAngels was formed out of interactions between the co-founders and potential investors. Since then, BitAngles serves as an online place where Bitcoin startups and investors could connect.

Over 60 angel investors pumped in $6.7 Mn to establish BitAngels. The founders planned to invest this amount as $20K chunks or increments. Their website says startups that are ‘using digital currency to disrupt an existing industry’ can apply. If a startup is accepted it receives $25,000 along with 1,000 hours of monthly support from designers, developers and advisers in the community.

The network functions like a distributed version of Y-Combinator, focused just on Bitcoin Startups. Bitcoin startups will also be able to work out of three on-site locations in San Francisco, New York and Texas along with funding and mentorship.The idea is to be very Y-Combinator-ish. Meaning invest enough money to allow a hacker or two to focus 80 hours a week on a new startup they have been developing during weekend and evenings said David A. Johnston.

BitAngels has grown rapidly. In the first two weeks of their inception they received over 60 applications in June, 2013. The group has spread to over 20 cities across the globe, with members offering office space in places like San Francisco, New York, and Austin. One month from launch, BitAngels had almost doubled its number of investors to 120. Adding nearly $10 Mn in capital to its reserves, bringing its total to under $18 Mn, according to Techcrunch. BitAngels first $100K investment went to BlueSeed, the startup boat for international entrepreneurs off the coast of San Francisco.

Lately, BitCoin has faced criticism from US government since its inception. Some of the major concerns that the lawmakers have about such currencies is that they have not been regulated and can be used to evade taxes, purchase and sell drugs illegally, defraud investors, etc. Despite drawbacks, the value of BitCoin has seen growth over the past few months (1 Bitcoin = $135.5 as of 25th September 2013) and companies such as WordPress, Reddit, OKCupid and Expensify have started accepting Bitcoins as a mode of payment. In a counter move over USA, Germany has legalized trading of Bitcoins. .

LTP View: BitAngels as a platform has hit it off well with the investors. But operating a startup focusing on Bitcoin platform may be a risky move considering what happened to Mt. Gox. With little or no support from the Senate on legalizing Bitcoins, startups in USA including BitAngels may find it difficult to sustain their business.