The Next Level For Bitcoin Entrepreneurs: Understanding Money, Says Financier Lawrence Lenihan

December 8, 2014 09:12 UTC

“Fiat” is a dirty word in the Bitcoin world, and perhaps that’s not the best thing, insinuated Coinapult backer Lawrence Lenihan in a recent interview with CoinDesk. Worse, many people are offended by the idea of traditional venture capital firms getting involved in anyway, because, they say, the entrepreneurs are then not loyal to their communities but instead to the hand that feeds. While there is legitimacy to both sides of this argument, the fact is, you need money to do anything in business, and when you’re pioneering as many cryptocurrency startups are, you need a lot of money because you need a lot of room for failure. Furthermore, is it not better to broaden the financial base of an altcoin by financing it directly with fiat currency rather than raising capital through Bitcoin exchange markets?

Also read: Coinapult Raises $775K

“A Lot of People in Bitcoin Don’t Understand Money”

Lenihan’s firm, FirstMark Capital of New York City, has funded some of the more successful web ventures out there. You may have heard or even be a user of Pinterest or seen the successful marketing campaigns for brain-training site Lumosity. That is why it was both a surprise and a big deal when FirstMark decided to back Coinapult.

Lenihan says that a major setback for cryptocurrency is the fundamental lack of understanding that Bitcoin entrepreneurs have for the way traditional money works.

I think, honestly, a lot of people in bitcoin don’t understand money. […] In terms of FirstMark’s investment, we need industrial-strength businesses and I want to see industry-strength entrepreneurs start them.

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Nativism can be a setback for any movement, so perhaps this a call for less of that and more of a welcoming nature amongst the Bitcoin elite. It’s not a bad thing that traditional banks are now considering the Blockchain to be a revolutionary way of tracking transactions, is it? After all, the goal for many in Bitcoin is to replace the money system we were born into with one we can have a lot more say over, and if we’re going to do that, as Lenihan frames it, we’re going to need a greater willingness to learn that traditional money system. But what does he mean by this lack of understanding?

The companies that we want to back, I want to see people who understand the security consequences around money, the transactional consequences around money.

This implies that when you’re dealing with money, you’re dealing with very serious business – the very heart and soul of the economy. There is no room for another Mt. Gox, and the perils of computer security married with the fundamental intertwining of digital currency and computers means that a lot of specialities have to be combined into small groups of individuals for Bitcoin firms to really succeed. Coinapult, the wallet service provider in a sea of many, has some veteran talent on staff, and this is why they were able to attract such a large sum of money for their launch.

What do you think? Will Bitcoin entrepreneurs be willing to bring on traditional money people in order to attract larger investments? Is using venture capital “selling out” ? Is Lenihan off-base? Comment below!

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P. H. Madore has written for CCN since 2014. Please send breaking news tips or requests for investigation to bitillionaire+phm@gmail.com. He lives in Maine, USA. A single father of four young children, he does not discourage financial donations, provided they do not come with strings attached.

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