2014 ended well for digital currency company, Bitreserve. With a crowdfunding campaign up and running here in the UK and a parallel investment drive underway on the other side of the Atlantic, the US-based business succeeded in raising £6.3m ($9.6m) before the year drew to a close.
In the US, Bitreserve used San-Francisco-based investment platform Venovate to source funding from its community of “sophisticated” investors. Meanwhile here in Britain, the company pitched its offering via the London-based crowdfunding platform,Crowdcube, raising £500,000 from so-called “everyday investors” and hitting its funding target with several weeks of the campaign still to run.
The involvement of Crowdcube in Bitreserve’s twin-track campaign highlights the willingness of the UK’s still small but growing army of armchair investors to take part in multi-million dollar funding campaigns supporting new and disruptive business concepts. And as Bitreserve’s management team see it, the UK has also become something of a world leader in the democratization of angel investment as well has a hub for innovative financial technology.
Bringing Bitcoins to the People
Bitreserve itself on a mission to democratize the use of digital currency by protecting businesses and consumers from the risks inherent in the bitcoin model.
In theory, bitcoins provide a useful means to pay for goods and services or move money around the world without running up fees and commissions from banks and other financial intermediaries. In practice, the value of bitcoin units has been highly volatile, with the price range running from lows of $100 dollars or so to peaks of above well above $1,000. That spread probably represents an opportunity for speculators and investors with an appetite for risk, but for those who simply want to take advantage of a digital currency it creates a risk that any savings made through lower fees will be more than wiped out by a sharp shift in the value.
Taking that analysis as its premise, Bitreserve is seeking to de-risk bitcoin ownership by allowing its users (members) to buy bitcoins which can then be converted into so-called bit currencies. These are currently linked to five real-world currencies, including sterling, the dollar and the euro, with more in the pipeline. The conversion to bit currencies effectively stabilizes the value of the digital currency units within a much smaller range. The result, says Bitreserve is a system that offers stability to the user while also giving customers the opportunity to convert back from currencies to bitcoins whenever they want.
And according to Halsey Minor, founder and CEO argues by offering stable currency options, Bitreserve is opening the door to much greater adoption of digital currencies. “Is see this as a turning point,” he says. “While small numbers of people are comfortable with bitcoins, 99% don’t want to be exposed to the volatility risks.”
As things stand, relatively few people own bitcoins – around 5 million worldwide, according to Bitreserve’s publicity material – and this creates both a huge opportunity but also a challenge.
On the opportunity side, the company’s partnering and business development manager Carl Weir cites the benefits to the consumer of a stable digital currency that can be moved cheaply across borders. “I was traveling from Ireland to London and converted about 40 euro to Sterling,” he says. “That cost me £4.61. With Bitreserve it would have cost 40 pence. “ Cost savings of that magnitude can be factored into areas such corporate currency transactions and international payments to employees. As such the company is targeting consumers, corporates and financial services organizations. In other words it has a potentially vast market.
Arguably, the challenge lies in driving adoption. Bitcoins themselves are still little understood by the public at large. At one level, those who do understand the concept may well be concerned about volatility. But despite all the recent publicity, there will be very many others who have yet to see digital currency appear on the their personal radar screens or who don’t as yet detect any relevance to their lives. At corporate level Weir says there is already significant interest in the potential costs savings but any business working in this field must clearly win hearts and minds across the target market.
Perhaps that fact explains Bitreserve’s decision to raise funds in the UK as well as in the US. As Weir says: “The UK is one of the most innovative countries for financial technology in the work and it has a government that is much attuned to the importance of the sector. So for us it makes sense to be synchronized with this jurisdiction.”
Evidence of the UK’s willingness to encourage innovation within the broad arena of financial services can be seen the burgeoning equity and debt crowdfunding market, where the opportunity to invest is open to all investors. Halsey Minor says this compares favorably to other jurisdictions where investment is limited to high net worth sophisticated individuals and their advisers. Citing the US he says: “It seems strange that the government allows anyone to travel to Vegas, be given cheap alcohol and gamble away savings while putting restrictions on who can invest in technology companies. “
And in that regard, the UK’s crowdfunding model has allowed the company to connect and get its message across to a broad swathe of British investors and potential customers who might also turn out to be useful ambassadors in a country where the financial services industry is hugely important. This in turn creates a useful alignment between stockholders and customers as the company moves forward.
To date, Bitreserve has logged transactions valued at $3,079,802. It’s a relatively small number in within the financial services market but Halsey believes that cloud based digital currency is the future and that Bitreserve will be at the forefront of developing a new market.
In the meantime, the company’s success in attracting investors on the Crowdcube platform underlines that the UK’s crowdfunding market is on the radar screen not just of British companies but also ambitious global businesses.
In the US, Bitreserve used San-Francisco-based investment platform Venovate to source funding from its community of “sophisticated” investors. Meanwhile here in Britain, the company pitched its offering via […]