2013 was easily the best year so far in terms of Angel/VC funding in the Bitcoin segment. The virtual currency Bitcoin garnered a great deal of interest in 2013 from Angel/VC funding, but analysts expect 2014 to be a huge growth year for Bitcoin exchanges, mining companies, and other startups associated with the currency.
6 Major investments in Bitcoin firms in 2013:
On December 12, 2013, Andreessen Horowitz led a $25 million series B investment in Coinbase, the San Francisco based platform/app that enables buying, selling and trading of Bitcoins. One of the biggest investments by any firm in a Bitcoin-based company, Andreeessen said that Bitcoin feels like the early days of Internet. Furthermore, he said, the currency has been widely misunderstood as an investment tool.
Coinbase, co-founded in June, 2012 by Brian Armstrong (CEO) and Fred Ehrsam with Mark Peter Davis as an investor, has received a total funding of $31.9 million from investors Alexis Ohanian, Y Combinator, Greg Kidd, Garry Tan, FundersClub, Union Square Ventures, Ribbit Capital, SV Angel, Red Swan, Interplay Ventures and Andreessen Horowitz. With the latest round of funding, Andreessen Horowitz’s Chris Dixon along with Union Square Ventures’ Fred Wilson will join Coinbase’s board.
On August 1, 2013, Coinbase reached a milestone of 200,000 users. By mid-October ,they had reached 300,000 users. As of December 2013, the company reported that there are more than 600,000 consumer Bitcoin wallets on Coinbase. The company says that they are averaging 10,000 new customer sign-ups a day, and are now working with more than 16,000 merchants including Khan Academy, OkCupid and Reddit, who use Coinbase to accept Bitcoin.
Total Funding Received: $31.9 Million
Circle Internet Financial was recently launched with the aim of increasing the adoption of digital currencies such as Bitcoin by enabling consumers and merchants with a payment platform. Jeremy Allaire started the company; he also created Brightcove, an online video platform. Circle received $9 million of Series A funding through investors Jim Breyer, Accel Partners and General Catalyst Partners.
Circle says that it will provide a secure system that will enhance protection and privacy of consumer and enable them to make payments, receive and send this digital currency. For charities and businesses, the company says that it is working on tools and services that would enable them to accept both in store and online payments without any transaction fees.
“Bitcoin and digital currency represent a once-in-a-lifetime opportunity to shape the future of the Internet and global commerce. There’s a tremendous opportunity to make payments easier, more secure and less costly for consumers and businesses. Digital currency can dramatically reduce the friction and costs currently experienced in the world by consumers and merchants” said Jeremy Allaire. Widening the presence of Bitcoin among merchants is the key to expanding its use according to him.
Total Funding Received: $9 Million
itBit is a Bitcoin trading exchange that allows for trade between U.S Dollars, Euros, Singapore Dollars and Bitcoin. It utilizes NASDAQ technology to support millions of trade per second. The platform is built to handle more volume than the amount of Bitcoin being traded today. itBit also uses multi factor authentication and has identity verification built in to monitor for any suspicious activity.
itBit acquired a funding of $3.25 Mn in a funding round co-led by Canaan Partners and RRE Ventures. Liberty City Ventures, as well angel investors such as Jay W. Jordan II and Ben Davenport were the other participants. itBit is headquartered in Singapore and employs 13 people. It is available to Bitcoin retail investors in all markets barring the U.S.
Total Funding Received: $5.5 Million
BTC China was launched in June 2011. It is China’s first and most established Bitcoin trading platform. The company has received a funding of $5 Mn through investors Lightspeed China Partners and Lighspeed Venture Partners.
Bitcoin Trading in China however, recently suffered some big blows. On 5th December 2013, China’s central bank had regulated the Bitcoin by banning financial institutions and payment providers for conducting transactions in the virtual currency. According to China Business News (affiliated with Shanghai government), third part service providers were told by the Chinese Central Bank to stop offering clearing services to online Bitcoin exchanges. The announcement was made on 17th December. “The PBOC statement on Dec. 5 was somewhat vague and there is more clarity now,” said Zennon Kapron, MD of Financial Consultancy, Kapronasia. “The way it’s reading now is that after the Chinese New Year, you won’t be able to get your money off the platforms.”
After the announcement by PBOC (People’s Bank of China), third party providers in the country have taken quick steps to stop funding Chinese Bitcoin exchanges. BTC China, the world’s largest exchange, was the first to suffer from this development. The company announced that it had received a notice on 18th December, 2013 and had stopped accepting new Yuan deposits onto its marketplace.
“Dear BTC China valued customer: Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim. Rest assured that BTC China will continue to operate normally. Please pay attention to our notices for updates, as we find other ways to allow for CNY deposits. We deeply apologize for any inconvenience. BTC China, December 18, 2013.”
Kraken, a virtual currency exchange, is the brainchild of Jesse Powell, the CEO of San Francisco-based company Payward. Powell is a founding member of DATA, the self-regulatory organisation created to develop finest practices for the transfer of digital assets. The management team also consists of Michael Gronager (COO), Constance Choi (General Counsel) and Walter Stanish (Founder/Architect). Kraken had raised $260,000 initially in the first round of funding. This was followed by a $3 Mn fund as equity in the second round. The main investor in the second round is Roger Ver.
Kraken has been designed to bring digital currency traders some of the same features enjoyed by forex traders such as stop orders and margin trading. It is an upcoming exchange for crypto currencies. Kraken is headquartered in San Francisco, California. It let’s individual traders and institutions in the US and abroad trade fiat currencies like the US Dollar and the Euro against digital currencies like Bitcoin, Litecoin, Ripple, and Ven. The beta version of Kraken was released in May 2013. Thereafter it moved out of the beta phase and launched a live trading platform in September 9, 2013.
Total Funding received: $3.2 Million
GoCoin was co-founded in July 2013 by Steve Beauregard (CEO), Brock Pierce (Chairman), William Quigley and Kevin Beauregard (V.P, Engineering). The company has received a funding of $550k through investors Prolific Venture Capital, Owen Van Natta (former Facebook and Amazon Executive),Andrew Frame (Founder, Ooma), Bit Angels, Mikael Pawlo, Jonathan Congdon, Ruvento, Ronnie Wee,Gary Stiffelman and David Neuman. GoCoin is headquartered in Singapore, with an office in Santa Monica, California.
GoCoin says it will initially focus on providing Bitcoin payment processing for e-commerce, digital content and interactive/social gaming companies. Online content, gaming & E-commerce, are sectors that will be a primary focus for GoCoin. The platform is currently in a private beta with a small group of merchants processing on their platform with Bitcoin payments to begin with.
Total Funding Received: $550K
Angel Groups, Funds and Trusts
BitAngels was co founded by David A. Johnston ( founder of Engine.co) 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.
Total Capital Reserves: Around $18 Million
Bitcoin Investment Trust (BIT):
A hot new startup? Not quite. It is Barry Silbert’s new Bitcoin Investment Trust (BIT). The trust is open only to accredited investors, and the minimum investment is $25,000. The value of the BIT derives entirely from the price of Bitcoin.
Barry’s name may sound familiar he started Second Market in 2004. SecondMarket is the world’s biggest broker of venture-backed private-company stock by the value of shares traded.
Barry has established that there is millions of dollars that would like to invest in the future of Bitcoin but for a number of reasons can not buy and hold Bitcoin directly. Since establishing the Trust it has already surpassed $70 million dollars in assets.
The shear force of intuitional investors buying into the Bitcoin economy will have a huge impact of the price of Bitcoin. It will certainly raise but it will certainly fall, just not as far as it raises over time.
“Once Wall Street starts putting money into Bitcoin — we’re talking about hundreds of millions, billions of dollars moving in — it’s going to have a pretty dramatic effect on the price,” he stated.
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