Bitcoin startups are beginning to raise sizable investment capital even as industry leaders warn that hackers are abusing the Internet virtual currency for profit.
In the past year, fledgling businesses Coinbase Inc., Coinsetter Inc. and CoinLab Inc. have raised millions of dollars collectively from prominent venture-capital firms and angel investors, adding credibility to a digital currency that isn’t backed by a central bank.
On Wednesday, Bitcoin, which can be used to make payments over the Internet without transaction fees or involving a financial institution, is expected to win its biggest validation to date with a $5 million investment in San Francisco-based Coinbase led by Twitter Inc. investor Union Square Ventures.
That investment would top last month’s more than $2 million put into OpenCoin Inc., another virtual currency startup whose backers include venture firm Andreessen Horowitz.
“This is going to be a trigger point,” said Union Square managing partner Fred Wilson of the Coinbase investment. “You’ll see lot more venture money being poured into this space.”
Coinbase operates an online service that allows users to buy Bitcoin, store the virtual currency in a digital wallet and pay merchants for goods or services with it. The company was founded last year by Fred Ehrsam, a 24-year-old former Goldman Sachs trader, and 30-year-old Brian Armstrong, previously an engineer at short-term rental startup Airbnb.
In April, the Coinbase co-founders said the company had about 116,000 members who converted $15 million of real money into Bitcoin, up from $1 million in January. Mr. Ehrsam said its dollar conversions are increasing by about 15% a week, and its user base is growing at a weekly rate of about 12%. - Read more here: http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-227783/
Bitcoin startups are beginning to raise sizable investment capital even as industry leaders warn that hackers are abusing the Internet virtual currency for profit.
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