Bitcoin wallet and data analytics provider Blockchain raised a little over $30 million from venture capital investors, the biggest single funding round yet for a digital-currency firm and a sign that Silicon Valley remains excited about bitcoin’s prospects even as its price has fallen far from its highs of last year.
The investment was led by Lightspeed Venture Partners and Wicklow Capital, with contributions from others, including Virgin Group Chairman Richard Branson and Mosaic Ventures.
Blockchain President Peter Smith said the company intends in part to use the funds to ramp up its marketing effort to a broader community of customers beyond the bitcoin enthusiasts who have so far signed up in for its digital wallet. With 2.3 million unique wallet owners, Blockchain’s service for sending and receiving bitcoin is now the most widely used in the world.
“We have captured a lot of the low-hanging fruit in terms of users and it is time to start going after people who are going to use bitcoin not because it’s interesting to them but because it’s useful,” Mr. Smith said.
He said there is special interest in expanding outside the U.S., including in developing markets, where the company has seen steady growth this year. Emerging markets are seen as one of the key growth areas for bitcoin because the digital currency, which is managed by a software algorithm over a decentralized network of computers and isn't controlled by any government or centralized authority, could allow billions of people currently excluded from banking systems to directly send and receive money electronically. That could lower the cost of commerce for such people, which have had to rely on expensive remittance services, wire transfers and other money transmitters to shift funds remotely.
London-based Blockchain’s wallet service differs from others in the bitcoin industry, including from its primary competitor Coinbase and newcomers Circle and Xapo, in that it doesn’t allow people to purchase or sell bitcoin for fiat currency.
Mr. Smith argued that his firm has broken away from Coinbase in terms of wallet expansion over the past year because it isn’t as negatively affected by the declining price, which is down almost 75% from its peak in late November last year.
“When people open a Blockchain wallet, they do so because they want to do something with bitcoin, not because they want to speculate on the price,” Mr. Smith said.
San Francisco-based Coinbase wasn't immediately available for comment.
Also unlike its competitors, Blockchain has stuck to the principle that control of bitcoins—which are managed by passwords known as the private key—must be held personally by the wallet owner rather than in the custody of the firm.
Blockchain’s funding announcement coincides with a $3 million fundraise announcement Tuesday for New York-based SolidX, which provides bitcoin derivatives trading facilities to professional investors such as hedge funds, and generally caps a strong year for venture capital in the digital currency.
Whereas there is significant skepticism as to whether bitcoin can live up to its promise to revolutionize payments, Silicon Valley investors have poured money into the sector. As of mid-2014, there had been $200 million raised in the preceding 12 months, according to a survey by bitcoin news service Coindesk.
Some of the bigger amounts have gone to wallet providers, with Coinbase raising a total of $25 million over the past year, Xapo $40 million and Circle $26 million. Blockchain, which earns much of its revenue from advertising, has been an outlier, opting instead to grow organically. The company pays its employees in bitcoin and manages much of its expenses in the digital currency
SOURCE:
http://online.wsj.com/articles/blockchain-lands-biggest-ever-venture-funding-round-in-bitcoin-industry-1412687156
