On Tuesday, Coinbase announced receipt of $5M in investment funding led by Union Square Ventures with additional support from Ribbit Capital, SV Angel, and Funders Club. Coinbase’s Series A funding followed a September 2012 seed fund of $600,000 which provided the company tools to move forward. Coinbase was founded by Brian Armstrong (former Engineer at Airbnb) and Fred Ehrsam (computer scientist and former currency trader) who shared the common goal of promoting the utility of the Bitcoin currency.
Based in San Francisco, CA, Coinbase provides three main services of providing an online wallet for individuals to store their Bitcoins, services for merchants to process Bitcoin as payment in lieu of USD or other currencies, and an ability for merchants and individuals to buy and sell Bitcoin for various fiat currency options. Coinbase provides an opportunity for small businesses and individuals to accept Bitcoin in payment and then receive USD and additional fiat currencies in return.
Coinbase currently has 300 merchants including the popular dating site, OKCupid.com and the social news site, reddit.com. As a Bitcoin payment processing company, Coinbase charges a fee of 1 per transaction from dollars to Bitcoin or visa versa. Such a fee is approximately 2 percentage points lower than that of typical credit and debit card processing fees.
Fred Wilson (Partner, Union Square Ventures) stated in his blog, “We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power. It reminds us of SMTP, HTTP, RSS, and BitTorrent in its architecture and openness. Like what happened with those other low level protocols, entrepreneurs and developers are now building technology on top of Bitcoin to make it more useful, more accessible, and more secure.” Fred and his team at Union Square Ventures have high hopes for not just Coinbase but also the Bitcoin currency.
We can recognize Coinbase’s recent funding as another step towards legitimacy and greater utility of the Bitcoin currency. To date, Coinbase’s new Series A funding represents the largest funding round for a Bitcoin start up. We can expect additional venture capitalists to take note of the upward success and mobility of the Bitcoin currency. Coinbase was founded in June of 2012 and has proven to be a force to be reckoned with in the payment processing industry.