Coinbase has secured $25 million in funding from Andreessen Horowitz. The venture capital firm headquartered in Menlo Park, California was founded by Marc Andreesen and Ben Horwitz. Obviously enamored by the “Neon Sign“, these gentlemen are putting their money where their heart is. As anyone in Silicon Valley will tell you, when Andreessen Horowitz get on a train, heads turn.
From the Coinbase Blog:
On August 1st, Coinbase reached a milestone of 200,000 users. That was quickly followed in mid-October by the news that we had reached 300,000 users. Today, there are more than 600,000 consumer Bitcoin wallets on Coinbase, signaling that we are nearing a tipping point for broad adoption of Bitcoin – what we at Coinbase believe to be one of the most important shifts in the global economy in our lifetime.
In order to keep up with the growing consumer and merchant demand for Bitcoin, we must scale. And in order to do that, we are pleased to announce that today we have secured a series B funding round totaling $25M, led by Andreessen Horowitz, with participation from existing investors Union Square Ventures and Ribbit Capital. With this funding, Andreessen Horowitz’s Chris Dixon will join our board, along with Union Square Ventures’ Fred Wilson.
This investment represents the largest fundraise in Bitcoin to date (bringing our total raised to $31M). We see it as a key moment to show the opportunity of Bitcoin and the dramatic impact it will have on the global economy.
And we aren’t alone in that thinking. As Chris Dixon writes today on this blog, The designers of the Web built placeholders for a system that moved money, but never successfully completed it. Bitcoin is the first plausible proposal for an economic protocol for the Internet.
This funding solidifies our position as the largest and fastest growing Bitcoin service in the U.S. We plan to use the funds to expand our team, continue to educate the market, and promote the mainstream adoption of Bitcoin. We’ll also expand our referral program, where you can give and get $5 in bitcoin for free when you refer a friend who buys or sells at least $100 of bitcoin.
Separately, we’re also very pleased to share that Gavin Andresen has joined Coinbase as an advisor. For those of you who don’t know him, Gavin is the head developer of Bitcoin as an open source software project. He said:
Coinbase has become a critical piece of the Bitcoin infrastructure in the U.S., giving people a trustworthy and easy way to buy, sell, trade and store bitcoins. The best part of my job as Chief Scientist of the Bitcoin Foundation is interacting with the brilliant people at Coinbase and other startups all over the world who are working hard to make Bitcoin accessible to everybody.
Coinbase is the only company that touches the three most important points of the Bitcoin ecosystem: consumers, merchants, and developers. We are averaging 10,000 new customer sign-ups a day, and are now working with over 16,000 merchants including OkCupid, Khan Academy, and Reddit, who use Coinbase to accept bitcoin. We are making it easier for consumers to buy, merchants to sell, and developers to build, and we can’t wait for our next chapter.
We think it’s going to be an exciting one!
Andreessen Horowitz take on Coinbase:
A neon sign sits on the floor of Coinbase’s loft-style office in San Francisco. The curving orange and white tubes depict the distinctive B-symbol for the digital currency bitcoin, with the words “Accepted Here” beneath it.
The joke, of course, is that the sign is reminiscent of something that could be a regular part of the landscape, as commonplace as any “Bud” sign. And bitcoin at present is anything but commonplace.
But that is where Coinbase comes in, say co-founders Brian Armstrong and Fred Ehrsam, as the mechanism to take bitcoin out of the hackers and nerds-only realm. The plan is to make using the digital currency so easy and so routine, you’ll soon use it for every transaction, from buying electronics to paying your rent, even the next round of beers.
In very simple terms, Coinbase offers a service – really a layer that runs on top of the bitcoin protocol – that makes securely buying, storing and spending bitcoin no more complicated than executing a trade or transfer within most online investment accounts. Coinbase is designed to enable consumers with their bitcoin “wallets” to buy from a growing number of merchants and service providers working with Coinbase that accept bitcoin as payment.
Much has been made in recent months about bitcoin going “mainstream,” but it is hardly that. What it has been is primarily a speculative investment for a group of early adopters. Their number has been growing as the price of a single bitcoin has been on a somewhat bumpy rocket ride in the last year, from about $15 to as high as $1,200 per bitcoin.
“The rising value of bitcoin is driving interest and incredible awareness, but that is not the most interesting thing to us,” says Armstrong. “It’s this next phase on which we are focused, which is actually using it as a payment network. And we are starting to see signs that it is beginning.”
Indeed it wasn’t the speculative aspect of the digital currency, but Bitcoin’s advantages as a payment network that got Armstrong and Ehrsam (who coincidentally both studied computer science and economics on college) hooked on the digital currency in the first place. When you meet the two it makes perfect sense. The duo isn’t your stereotypical hoody wearing entrepreneurs. There is no other way to describe their vibe than “bankerly,” pressed shirts (tucked in no less) nice shoes, the whole nine-yards.
Armstrong was working on international fraud prevention in 2010 at Airbnb, when he read a paper on Bitcoin. “I got really excited about the potential,” Armstrong says. “This was the first open payment network for the whole world, but it was just way too difficult to use.” Indeed, unless you had a background in cryptography or a knack with building your own computer rig to “mine” bitcoin, it was out of bounds for almost everyone.
While Armstrong was pondering Bitcoin’s advantages and barriers, Ehrsam was a young foreign exchange trader at Goldman Sachs. He too started poking around in the digital currency.
“One thing that trading foreign exchange at an institutional level made me acutely aware of is it really not a democratic process,” Ehrsam says. “It’s not difficult for high-net worth individuals or hedge funds to transfer from one currency to another, but when you think of the average person who needs to send money back to their family outside the United States it’s a very opaque marketplace, and the fees are significantly, significantly higher.” With Bitcoin, with its decentralized structure and no third party sitting in the middle of the transaction, the cost of sending the digital currency is the same as sending any data – virtually zero.
Ehrsam extended that advantage not just to the remittances, but also to say the razor-thin margins of the electronics business. Rather than paying the typical 2 percent-plus in interchange fees, a retailer that accepted bitcoin might get that down another percentage point or more. “All of the sudden you can raise the profit on a given electronics purchase by at least 50%,” Ehrsam says.
It took more than a year of long-distance discussion, but after finding common ground around bitcoin, and realizing they made a good team, Ehrsam headed out to San Francisco to start building what would become Coinbase with Armstrong. They tackled the problems Armstrong saw – hard to acquire and spend Bitcoin – and leveraged the potential upon which both were focused.
Now 18 months after launch, Coinbase has 600,000 consumer wallets on the platform, 16,000 merchants and 3,000 developers building apps to offer a variety of bitcoin-based services. Users are growing at 31% month over month, and the people signing up come from all over the country. The number of women signing up for bitcoin wallets has grown 50 percent in the last six months alone.
All of which is to say bitcoin, with Coinbase in lock-step, might indeed be starting its next phase, away from the speculative and toward the transactional – even the commonplace. There is much still to be done. Regulations to hammer out, a public that needs to wrap its head around trusting what amounts to an opensource, math-based currency – rather than something that is backed by a government.
“This is the web in 1995, this is the Wild West right now,” Armstrong says. “But we will get the regulation, and we will get the trust. It will happen because the entire world is moving toward this, and we will have to adapt.” Which is exactly where Coinbase hopes to help, as the trusted guide through this new world of digital currency. Just follow the neon sign.
Last modified: April 20, 2014 18:25 UTC