Online storage vault for Bitcoins raises funds

Journalist:
March 14, 2014
Xapo CEO Casares believes his vault is the safest way to store Bitcoins online

Xapo Ltd., a provider of secure online storage for Bitcoins, has raised $20 million in a first round of funding led by venture capital firm Benchmark.

Underground vaults and armed guards

Among the investors were Ribbit Capital — a Silicon Valley venture firm that invests in technologies for financial services, and Fortress Investment Group LLC (FIG) — a New York-based private-equity and hedge-fund manager. Wences Casares, Xapo’s founder and CEO, was thrilled by the amount of interest Xapo Ltd. gathered during the funding round. He confirmed the $20 million raise, but gave no further comment when asked about Xapo’s total valuation.

The cry for a safe and secure way to store Bitcoins has been going on for some time. Ever since the cryptocoin appeared, hackers and thieves have been looking for ways to steal Bitcoins. This has led to a growing industry of enterprises that focus on protecting investors’ coins.  “The security of Bitcoin holdings entrusted to online service providers came into focus following the bankruptcy last month of Mt. Gox. Xapo’s servers are stored in secret underground locations around the world, which are staffed by armed security guards.”, Casares said.

Casares founded Xapo little over two years ago. At that time, he was CEO of Lemon.com, a mobile-payments provider. Xapo’s mission was to provide secure storage vaults for Bitcoins. To facilitate that, Xapo offers web-based wallets, as well.

“Right now, Xapo already has several thousand accounts, including holders of large Bitcoin deposits such as hedge funds, venture capital funds, sovereign wealth funds and family offices.”, said Casares, who declined to comment on their identity.

“We have been talking to Wences about Bitcoin for a long time, and we think Xapo offers a unique wallet-with-vault service which is secure offline and online and, therefore, compelling for institutional as well as retail investors.”, said Matt Cohler, who led Benchmark’s investment in Xapo.

The reason Benchmark made an investment in Xapo was because Cohler himself owns Bitcoins and has been storing them with Xapo for some time. Xapo is Benchmark’s first public investment in a Bitcoin company.

As for that other investor, Ribbit Capital, we have to go back into time. Casares has been working with Micky Malka, Ribbit’s founder, for many years. They have started four financial-service companies together. On top of that, Ribbit is known to invest directly in Bitcoins, as well. Their holdings have been, obviously, stored with Xapo for a long time now.

Other competitors

As said before, there are several companies offering a similar service. One of Xapo’s main competitors is Elliptic Enterprises Ltd. This London-based Bitcoin vault is pretty new, having debuted in January 2014. James Smith, Elliptic’s CEO, claims his company can guarantee total safety towards its customers. He found an underwriter for insuring the company against any loss of Bitcoins via Lloyds of London Ltd.

While Smith had initially said Elliptic clients would be reimbursed in British pounds in the event of any loss, the company issued a statement yesterday after learning of Xapo to say that it will also compensate customers by purchasing Bitcoins at market rates using payouts in pounds.

Casares, Cohler and Malka said Xapo has no competitors offering similar services. It seems there are though.

Christoph Marckx @cryptomaniacs

Internet addict and virtual currency aficionado living in Belgium. I work in a school, where I am responsible for every computer and the entire network that keeps our students connected to the world. I love cryptocurrencies, mostly because it gives us a chance to take back our freedom. If we do this right, there are exciting times ahead!