With more than $800m so far invested in bitcoin and blockchain technology startups since 2012, it’s safe to say that venture capitalists are certainly captivated.
Investments in the industry have already exceeded the cumulative total for 2014, with more than $380m pledged to startups in publicly announced funding rounds this year.
While an impressive figure on its own, what that number doesn’t successfully convey is how many seed to late-stage firms are making bets on the new wave of innovators aiming to take bitcoin and blockchain technology forward.
CoinDesk’s Bitcoin Venture Capital data indicates nearly 200 VC firms have invested in bitcoin companies, a total that excludes the various private deals kept out of the public eye for as-yet-unannounced stealth projects.
Out of these many investment firms, however, clear leaders have emerged whose investment deals and ideals have influenced the wider ecosystem.
With this in mind, we’ve compiled a list of 10 of the most influential and visible investment firms in the industry.
The only non-US entity on the list, China’s IDG Capital has emerged as an early, yet conservative investor with a stronger emphasis on applications of the blockchain as a distributed ledger.
IDG’s first investment came during its May 2013 funding of Ripple Labs, a distributed payments protocol provider that has raised $37m in total and recently closed a $28m Series A.
Later, it took part in Koinify’s $1m fundraising. Originally conceived as a decentralized Kickstarter, Koinify has since announced it plans to pivot as a result of unsustainable revenues.
Though the firm seems to prefer investments in distributed ledger tech, IDG has nonetheless backed one of the largest bitcoin services providers, Boston-based Circle Internet Financial, having participated in Circle’s $50m Series C in April.
A representative from IDG Ventures USA indicated that the firm is currently looking for early stage opportunities, while its China-based counterpart is focused on late-stage deals.
Described by TechCrunch as a “mega VC firm”, Menlo Park-based Khosla Ventures recently raised $400m to fund its next batch of seed investments, some of which could end up being devoted to bitcoin or blockchain firms.
Khosla has been relatively quiet in the public regarding its stance on bitcoin, the blockchain and if its investment thesis favors one or the other. Still, that hasn’t stopped it from participating in some of the most talked about funding rounds in the space.
Khosla’s bitcoin portfolio includes industry fundraising leader 21 Inc, which has amassed more than $120m in startup capital to date, as well as the sector’s largest pure technology play Blockstream.
Elsewhere, Khosla has backed smaller funding rounds by blockchain technology specialist Chain and financial services provider BlockScore.
San Mateo’s Boost VC may be moving away from a specific focus on bitcoin (recently announcing its newest class would be equally dedicated to virtual reality), but since its inception in 2013, it’s been one of the most prolific investors in the space.
Boost VC has stated it aims to back 100 bitcoin companies by 2017, and it already boasts a portfolio including startups with growth potential including Align Commerce, BlockCypher, BTCPoint, BitPagos and Reveal.
Given that most of its investments are early stage, it’s hard to fully evaluate Boost’s emphasis on volume in its approach to the ecosystem.
So far, only one of its portfolio companies, blockchain smart contracts startup Mirror, has reached a Series A round.
The early-stage startup fund founded by Yahoo founder Jerry Yang, AME Cloud Ventures has emerged as another cautious and infrequent investor in the bitcoin industry.
The Palo Alto-based company boasts three of the best-funded startups in its portfolio to date – BitPay, Blockstream, Ripple Labs, as well as Blockcypher and blockchain identity solution ShoCard.
Despite the public investments, however, both Yang and his firm remain quiet about both their investment strategy and opinions on bitcoin.
Though Lightspeed has arguably slowed the pace of its investments in the technology, the venture capital firm was one of its earliest and most vocal supporters, with partner Jeremy Liew voicing his enthusiasm publicly for the technology as early as 2013 and appearing as a witness at the New York BitLicense hearings in 2014.
Overall, Lightspeed has made an interesting investment in an array of bitcoin and blockchain companies either directly or through its subsidiaries, backing BlockScore, digital asset exchange Melotic and China-based bitcoin exchange BTC China. Lightspeed also made a key early investment in bitcoin-focused incubator Boost VC in May 2013.
However, Lightspeed moved most decisively in October 2014 backing a $30.5m funding round for bitcoin wallet provider Blockchain. The funding, then the largest in the space, arguably set the stage for even bigger rounds at the top of 2015.
Liew has said of his firm’s strategy:
“We believe that in the next few years the core opportunities in the bitcoin ecosystem will be driven by store-of-value and speculation use cases, and that only after these use cases support a much higher bitcoin market cap will the bitcoin 2.0, distributed ledger opportunities be ready to scale to realize their full opportunity.”
Yet another venture firm that has provided perhaps more thought leadership than investment to the technology’s ecosystem is Ribbit Capital.
Launched in 2013, the VC firm was one of the first to take an interest in the space, with founder Micky Malka joining the Bitcoin Foundation, then the industry’s leading trade group, as an industry board member.
Though enthusiastic, Ribbit has been equally patient backing some of the ecosystem’s biggest funding rounds, including those from Blockstream, BTCJam, Coinbase, Ripple Labs and Xapo.
Still, according to Malka, there’s value in adopting a long-term investment strategy with regards to the ecosystem. Following Coinbase’s $75m Series C, he told CoinDesk:
“The good news for bitcoin is the long-term belief from established players that it is worth understanding what can happen in this ecosystem instead of simply believing it will never happen. It’s obviously still early but Rome wasn’t built in one year.”
Driven by outspoken partner Fred Wilson, Union Square Ventures (USV) has been among the most actively engaged in the public dialogue on the technology.
While liberal with its praise, however, USV has been conservative with its funds.
To date, USV has made investments in only three bitcoin and blockchain companies – bitcoin services firm Coinbase, decentralized commerce network OpenBazaar and open-source identity protocol OneName.
The investments, while seemingly disparate, however, suggest one of the more well-defined theses among major VC firms. USV believes in exploring whether the explosive growth enabled by the bitcoin protocol could be applied to verticals beyond finance rather than investments in bitcoin’s supporting ecosystem.
As Wilson told CoinDesk in January:
”We’re not interested in investing in a company that’s the same as Coinbase. I think Coinbase has a big opportunity in front of itself and so we’re careful not to invest anywhere close to what they’re doing.”
Another firm not as public with its praise for the technology, RRE has more quietly added an impressive list of bitcoin companies to its portfolio.
Starting with bitcoin exchange itBit in 2013, RRE has since invested in bitcoin mining firm 21 Inc; merchant payment processor BitPay; API specialists Gem; hardware wallet provider Case; Mirror and Ripple Labs.
Perhaps its most noteworthy investment, however, is blockchain technology firm Chain, which is led by CEO and RRE partner Adam Ludwin.
RRE’s investments are noteworthy given their variety, though most of these startups are focused on fundamental aspects of the bitcoin ecosystem, whether it be machine-to-machine payments or blockchain-based smart contracts.
However, these investments could come to form only a fraction of what’s next for the firm, as it has raised $1.5bn over seven funds since its founding in 1994.
Digital Currency Group (formerly Bitcoin Opportunity Corp)
BitFlyer, BitPay, BitPesa, BitGo, BitNet, BitPremier, BitX – these are just a handful of the bitcoin-focused startups boasting a ‘bit’ prefix and backed by Barry Silbert’s Bitcoin Opportunity Corp.
Recently rebranded as Digital Currency Group (DCG), Silbert’s fund has been one of the most active investors both personally and through DCG, with major names such as Coinbase, Circle and Ripple Labs rounding out its portfolio of 35 companies.
DCG has been bullish on bitcoin on all fronts, backing firms both in the US and internationally in Latin America, Mexico, Japan and South Korea, and supporting innovation in virtually all areas of the digital currency ecosystem.
Perhaps inarguably the most high-profile firm involved in the bitcoin ecosystem has been Andreessen Horowitz, the private equity firm launched by Netscape founder Marc Andreessen and Netscape product manager Ben Horowitz.
Following its participation in Ripple Lab’s April 2013 investment round, Andreessen Horowitz moved aggressively to help develop and cultivate the industry’s two best-funded startups, Coinbase and 21 Inc, which account for $227m in total investment or more than $1 in $4 so far invested in the industry.
Andreessen Horowitz has also seen general partner Balaji Srinivasan take on an active role in the development of 21 when he assumed the company’s CEO position in May.
Andreessen himself has further adopted the role of one of the technology’s most high-profile defenders, routinely tweeting about developments that both directly and indirectly impact the space from his heavily followed @pmarca account.
The company has also participated in smaller investment rounds for TradeBlock and OpenBazaar, signaling that it remains interested in early bets on potentially disruptive ideas.
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