VC interest in Bitcoin, the decentralised digital crypto currency, is undoubtedly riding high right now. A few big names have even made some pretty big bets. But there's still plenty of confusion and uncertainty around the nascent digital currency. VCs are clearly thinking about making investments in Bitcoin startups but many are also still in a learning phase, as several investors taking part in the Bitcoin London conference noted today.
Passion Capital's Stefan Glaenzer openly described himself as "totally clueless" and "on a learning mission" regarding Bitcoin, quipping that VCs usually only arrive for the start of their panel and depart abruptly at the end — yet he said he intended to stay the whole day to learn as much as possible. Indeed, as another speaker at the event put it, Bitcoin is rather like the quantum physics of new technologies: anyone who says they understand it really doesn't.
So the issue is this: no one really knows enough about Bitcoin to have fully formed opinions about it yet — not even VCs, even though all the investors speaking on stage at today's event sounded like they needed no convincing of Bitcoin's investment potential. Put another way: they're bullish at bottom, but acting a little bearish on the surface — likely owing to a healthy respect for how much remains unknown. From Bitcoin's mysterious origins, to the scope of its future role as an alternative currency. To various details to be hammered out in between, such how it will be regulated, how banks might react to it, whether governments will accept it or try to kill it, and so on.
"I'm as clueless as everyone else out there," was how Spotify investor and founder of Bitcoin news site Coindesk, Shakil Khan, put it. Founding Coindesk was, he said, at least in part about coming up with a way to educate himself about Bitcoin.
Mangrove Capital's Michael Jackson said the fund hasn't yet made any Bitcoin investments but is "very prepared to". "We see the financial services area as something which has a lot of the same trends as we saw in the telecoms area and therefore I'm convinced there are opportunities there," he said, speaking during a VC panel. Mangrove Capital was an early investor in Skype, and Jackson pointed to similarities between that decentralised comms network and Bitcoin, the decentralised digital currency.
Meanwhile, of the nearly 2,000 business plans Passion Capital saw from April 2012 to April 2013, Glaenzer said "there was not a single Bitcoin business plan among them" — his assumption being that Bitcoin startups are therefore mostly bootstrapping. Or at least not throwing themselves en masse at VCs' feet to get their attention just yet.
"You tend to become lazy as a VC," he added. "You wait until somebody is approaching you. And the reason why I gladly accepted this invite [to the conference] is I want to be more on active side and understand what action is really going on with Bitcoin."
Not getting pitched yet by Bitcoin startups was also something Jackson commented on. "We haven't received in our inbox, any Bitcoin company per se," he said. "But something's going to happen here, it's absolutely going to happen here and if you don't get out to listen to people nobody knows you have an inbox so this is part of the outreach we have towards this community."
Of course this lack of Bitcoin pitches is likely to change soon enough, as exposure and awareness grows — in turn helping to dial up the quantity and ambition of startups in the space. Big name investors making public bets is also likely to encourage a few more VC bears to become Bitcoin bulls sooner than they might otherwise.
"There is an element of herd mentality around all this," said Jackson, discussing whether the likes of Peter Thiel investing is a tipping point for the Bitcoin investment ecosystem. "It's this element of respectability you need when you're going upstream to the guys who've given you the money."
"We're very much getting to the point where the exposure of the investors and our customers is there — and that's going to make things a lot, lot easier," he added.
"I feel there is a lot of stuff happening over the next five years," added Glaenzer. "I'm pretty sure that we at Passion will do one or other investment in this sector."
Nick Shalek of Ribbit Capital, who was also speaking on the VC panel at today's event, is in the vanguard of Bitcoin startup investment. Ribbit has, he said, already made two investments in Bitcoin startups, as well as investing in Bitcoin (i.e the currency) itself. "Our approach is generally to try to make fewer investments and be more involved with our businesses," he said. "There are lots of interesting Bitcoin companies we have seen — maybe we've made ourselves too available!"
Despite being (relatively) bullish about Bitcoin, Ribbit has only had skin in the game since March. "We consider ourselves very early investors in the space," Shalek said. "We are incredibly early days, and the entrepreneurs who are coming into this space are getting better all the time, all the time, month over month and I think that will continue over the next number of years as Bitcoin grows."
What has Ribbit been looking for in its early Bitcoin investments? Startups that are focused on building trusted consumer brands for the long term, according to Shalek.
"What we've been looking for at Ribbit is people who are building trusted consumer brands and experiences — and we think that those are enduring if you look across the financial services sector. It's very important who people entrust their money to, entrust their livelihood to, so with the partners that we've been working with in the ecosystem we've been stressing that, encouraging them to focus on security, to get regulated… and to always put the user and the user experience first," he added.
Passion Capital is a partnership of entrepreneurs and operators applying our experiences to helping founders and early-stage teams build great digital media/technology companies. We are Stefan Glaenzer, Eileen Burbidge and Robert Dighero. We have been personally involved in the largest European technology exits of the past decade, including the biggest exits of the year for 4 of the past 10 years by market value (Ricardo.de acquired by QXL, Skype purchased by Ebay, Last.fm acquired by CBS, and QXL/Tradus acquired by...
Mangrove Capital Partners “Mangrove†provides venture capital with a punch to entrepreneurs looking to build world class companies. Their mission is to help turn visions into realities by providing financing, thoughtful advice, relevant experience and deep industry relationships to their portfolio companies. They look to invest in companies operating Internet or Software businesses as early as possible in their development. They are particularly comfortable investing prior to product launch and view their role as an accelerator of growth and a...
Ribbit will focus its investments on startups that are building financial services related to lending, payments, insurance, accounting, tax preparation, personal financial management, and more.
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