Online wallet provider Xapo has raised its funding total to $40m, leapfrogging BitPay to become the best-funded bitcoin startup to date.
Announced today, the startup’s second Series A-1 funding round took $20m in total. Spearheaded by Index Ventures and Greylock Partners, the round also included Emergence Capital Partners, venture capitalist Yuri Milner, PayPal co-founder Max Levchin and former Yahoo! CEO Jerry Yang.
Back in March, Xapo’s initial round was led by Benchmark Capital, Fortress Investment Group (FIG) and Ribbit Capital. At the time, it was the second-biggest funding round in the bitcoin space.
The wider ecosystem
In a blog post, the company stated that the record-breaking sum was good news “for the bitcoin ecosystem as a whole”, rather than Xapo itself.
Wences Casares, Xapo’s CEO and founder, also used the opportunity to announce two new board appointments: Reid Hoffman and Mike Volpi. The pair will join Matt Cohler as Xapo’s board observers.
— Xapo (@xapo) July 8, 2014
Casares noted that Hoffman and Volpi have a “proven history of recognizing emerging technologies before they reach the masses,” having both helped to usher in innovations in the past.
Casares said Xapo will remain committed to bolstering the bitcoin ecosystem and helping it evolve, with the aim to bring the technology to a much wider audience.
“Looking ahead, we will continue to invest the funds in building our team and our suite of services. We are committed to developing the framework that allow bitcoins to be used by consumers in their everyday lives while also continuing to offer highly secure bitcoin storage for Wall Street funds, exchanges, and financial institutions handling bitcoins,” he said.
High hopes for the future
Casares added that he never experienced anything like bitcoin throughout his career in the financial tech sector. He believes the industry is being led by a new generation of businesses, backed by experience entrepreneurs and “world class” venture capitalists.
The CEO ended the announcement on a high note, with a healthy dose of optimism:
“Let us keep in mind that it’s important not to be short-sighted when examining bitcoin. Today, bitcoin is used primarily as a store of value. Soon, it will be a payment mechanism. In the near future it will be a unit of account.”
Greylock Partners said bitcoin has the potential to be a massively disruptive technology and that it is promising on three levels: as an asset, as a currency and as a platform for the creation of alternative financial applications. However, Greylock Partners believes bitcoin needs security to succeed and this is where Xapo comes in.
“Xapo has created a system where average consumers can be comfortable and secure with holding and using bitcoins. The company has developed a combination of a bitcoin vault, a bitcoin wallet, and soon, will offer a bitcoin debit card,” the company said in a blog post. “Xapo’s Vault is the first bitcoin vault in the market and all deposits are fully insured in a manner similar to FDIC insurance.”
Index Ventures also praised Xapo’s emphasis on security. The company believes there is a lot of potential for profit in bitcoin and it has identified three near-term investment opportunities. Index Ventures will focus on investing in alternative payment systems like BitPay, currency exchange services such as Oanda and secure bitcoin storage services like Xapo.
Index Ventures believes bitcoin still has a long way to go and it describes it as a “baby in the financial markets,” but it is convinced bitcoin will be able to establish credibility, stability and ubiquity.
Index Ventures explains:
“It’s not likely bitcoin will become a substitute to fiat currencies, especially in developed economies. Bitcoin will never replace the US Dollar or the Euro, and that’s not its main goal. The more appropriate analogy for Bitcoin is gold – a value system that doesn’t have a political affiliation, yet plays a part in overall monetary policy.”