Sharing Notes on Bitcoin and the Crypto Currency Market

Though we haven’t invested in the space yet, we’ve been actively tracking Bitcoin (and the broader crypto currency market) since late 2012 when Automattic (on became one of the first large merchants to accept bitcoin and kicked off an internal discussion on the technology.

Below I’ve included our first market landscape document (which was written in the beginning of 2013) and an update written earlier this year (2014)

If you’re interested in the space, would love any feedback on our thesis below or to chat about what you’re working on.

Bitcoin in 2013

We spoke about this earlier this month, but I’ve spent some time better understanding the digital currency landscape with a particular emphasis on Bitcoin.  Below you can find a document that outlines some of the drivers of the movement and how its evolved over time. Additionally, it walks through some different ways to purchase Bitcoins and some of the interesting early products.


  • Incredibly nascent ecosystem
  • Really interesting core technology related to cryptography and systems theory
  • Risk-reward misaligned for institutional venture today
  • Important to track because it has captured imagination of individuals, lots of weekend projects

Update on Bitcoin in 2014 

The first wave of Bitcoin companies (Mt Gox,, BTCE, etc) were started by passionate individuals who were true believers mainly in the decentralized nature of the technology. Some had criminal background and it was a relatively shady world that the average consumer wouldn’t understand, nor want to interact with.

The second wave of Bitcoin companies are focused on building financial infrastructure for the technology. The highest profile examples of this set of companies are Coinbase (A16Z, USV), BitPay (Founders Fund), Xapo (Benchmark),BitGo (Redpoint), and Circle Internet Financial (GC, Accel) They’ve raised large amounts of capital, take consumer trust and regulation seriously, and have high profile investors who are spending time educating the market on the the value of the technology. Similarly, financial services companies are building out the technology that will enable large wall street institutions to trade the currency (i.e. Swaps, Regulated Exchanges)

We’ll enter the third wave of Bitcoin companies over the next 18 months. These are infrastructure companies like, Coinalytics, or Austin Hill’s Colored Coin NewCo which will help developers more easily build on top of the blockchain or distributed applications such as Lighthouse that take advantage of the distributed nature of the blockchain . Continued merchant, consumer, and platform adoption will drive this – including major platforms such as iOS finally opening up the App Store to Bitcoin (and other digital currency) Apps.

For True, businesses during the first two waves wouldn’t have made sense in our core model. The first wave was driven by effectively Founders who weren’t backable and each company in the second wave raised $8+ million in their first round of capital. With continued consumer adoption, we should start to see more companies that fit our model starting within the third wave – either at the application or infrastructure layer.

The market is extremely nascent ( has ~3.5m views a month, they’re still the largest wallet provider globally) but with large amounts of capital being used by the second wave companies to drive adoption (see the MIT Bitcoin experiment or Coinbase’s college Bitcoin giveaway) – the market should begin to accelerate quickly over the next year.

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