Bitcoin startup funding soars

Bitcoin startup funding in the first half of this year surpassed investments for all of last year.

This happened despite a sharp drop in the value of the virtual currency from an all-time high above $1,200 late in 2013 to its price for most of this year of between $200 and $300.

CB Insights reported recently that investor-backed bitcoin companies raised $375 million in 52 deals between January and June. That’s already 11 percent more than the total invested in the sector in all of last year’s 79 funding deals.

Most VCs I’ve spoken to, though, say it’s the blockchain technology underlying the virtual currency that they find interesting, not bitcoin itself.

The blockchain is a platform for recording and verifying transactions that everyone can see and nobody can erase. It relies on cryptography instead of a central authority, which is what has investors so interested. It has the potential to cut out banks, governments and other authorities that normally get involved in many kinds of transactions.

Sheel Tyle, a principal at New Enterprise Associates, said as much on a panel I moderated last month.

“My general take on bitcoin when it first came out was that it could be a transformational means of the exchange of goods between two parties, where there’s a non-trust intermediary,” Tyle said. “I also thought it could be a replacement for some currencies. I think now the general view of the bitcoin community, to be honest, is that the blockchain is more interesting than actual bitcoin itself.”

Santi Subotovsky, a partner at Emergence Capital, said his experience growing up in Argentina makes him quite bullish on the need for bitcoin.

“I’ve seen currencies appear and disappear and people losing their money multiple times,” he said. “If I’m in Argentina and I don’t have a credit card, but I want to buy digital goods or buy an app, without a credit card it’s very hard, almost impossible. So bitcoin is starting to bridge that gap, and Argentina is not the only country where there’s a lot of friction when it comes to payments.”

Here are the top five bitcoin startup investments of the year, according to CB Insights:

• 21 Inc., $116 million: CEO Matthew Pauker and his co-founders Balaji Srinivasan, Veerbhan Kheterpal, Daniel Firu and Nigel Drego have developed an embeddable chip that can be added to several different types of Internet-connected devices to generate a continuous stream of digital currency. Their San Francisco company has attracted funding from Andreessen Horowitz — where Srinivasan is a partner — Cisco Investments, Qualcomm Ventures, RRE Ventures and Khosla Ventures.

• Coinbase, $75 million: Co-founders Brian Armstrong and Fred Ehrsam have developed technology that allows consumers to create a bitcoin wallet linked to their bank account that helps them buy and sell bitcoin. The San Francisco company’s investors include Draper Fisher Jurvetson, Andreessen Horowitz, BBVA Ventures, NTT DoCoMo Ventures, NYSE Euronext, Ribbit Capital, Union Square Ventures and USAA.

• Circle, $50 million: Headquartered in Boston — with offices in San Francisco and Dublin, Ireland — Circle was founded by CEO Jeremy Allaire, the investor of the Web development language ColdFusion in the 1990s. It also provides a way for customers to digitally store money and transfer it to and from other people and merchants. Its investors include Accel Partners, Breyer Capital, Digital Currency Group, General Catalyst Partners, Goldman Sachs, IDG Capital Partners, Oak Investment Partners and Pantera Capital.

• Ripple Labs, $28 million: This San Francisco-based startup led by CEO Chris Larsen was named a “Technology Pioneer” by the World Economic Forum this week for its development of the Ripple Protocol — a remittance and settlement system for currencies. Its investors include IDG Capital Partners, Liquidity Ventures, Seagate Technology, AME Cloud Ventures, China Growth Capital and Wicklow Capital.

• ItBit, $25 million: This New York-based global bitcoin exchange was built by Wall Street professionals and is led by CEO Charles Cascarilla. Its investors include RRE Ventures, Liberty City Ventures, hedge fund manager James Pallotta and private equity fund manager Jay Jordan II.

Via: http://www.bizjournals.com/sanjose/blog/techflash/2015/08/bitcoin-startup-funding-soars-as-value-dives-here.html

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