by Joseph Young
Prominent venture capital firm and growth stage investor Institutional Venture Partners (IVP) has revealed its new $1.5 billion fund that will focus on early-stage startups in the bitcoin and cryptocurrency sectors.
Over the past two years, IVP has experienced significant success in funding bitcoin startups. In August 2017, IVP invested $100 million in Coinbase, the world’s largest bitcoin wallet platform and a major cryptocurrency trading platform, valuing the company at $1.6 billion. In the upcoming months, IVP intends to aggressively pursue investment opportunities in the cryptocurrency market, providing startups with necessary infrastructure and capital for operating at a larger scale and expanding internationally.
With the latest $100 million funding round provided by IVP, Coinbase fulfilled the promise of its CEO, Brian Armstrong, to drastically improve its customer support. For the first time in the company’s history, Coinbase released a live phone support system for its customers in mid-September, after receiving hundreds of complaints through regulated government financial regulators.
As it did with Coinbase, IVP and its partners are aiming to provide companies with resources they need to evolve into multi-billion dollar companies. In the past decade, IVP has produced some of the technology market’s most iconic startups including SnapChat operator Snap and AppDynamics, which was recently acquired for $3.7 billion. Forbes further reported that IVP invested in more than 20 billion dollar startups apart from Coinbase, Domo, Slack, Snap, and The Honest Company.
The newly created $1.5 billion cryptocurrency fund will be managed by long-time IVP partners including IVP general partner Todd Chaffee. He explained that the firm wants to be a part of the rise of cryptocurrencies and the exponential growth of bitcoin. In regards to the naysayers in the traditional finance sector such as JPMorgan CEO Jamie Dimon, Chaffee stated, “it feels like the rise of computing did [fuel the cryptocurrency industry]. I think Jamie Dimon is wrong.”
Venture Capital Firms in the Cryptocurrency Sector: Can They Coexist With ICOs?
On August 9, 2017, initial coin offerings (ICOs) surpassed the amount of investment raised by venture capital firms within the cryptocurrency sector. CNBC reported that 92 ICOs in 2017 raised $1.25 billion, securing more funds from crowd sales than early-stage venture capital firms.
“ICO as a new business model leveraging blockchain technology will sustain as the digital way, combining crowdfunding and (a) new hybrid asset class of equity ownership and currency,” Oliver Bussmann, a former chief information officer at UBS, told CNBC.
But, venture capital firms and ICOs could still coexist. In the Bitcoin industry specifically, the majority of startups are directly dealing with bitcoin as a cryptocurrency, unlike in the Ethereum ecosystem wherein startups focus on building completely new applications on top of the decentralized Ethereum protocol. Thus, startups in the bitcoin industry such as mining firms, exchanges, trading platforms, and payment service providers will need venture capital funding to expand their services and maintain their operations, as ERC20 tokens will not be applicable to their business models.
For instance, the services offered by Bitcoin startup Xapo and Ethereum-based platform Token Card are nearly identical. Xapo offers bitcoin wallet and Visa debit card services, while Token Card allows users to spend cryptocurrencies by connecting consumer wallets with debit cards. Token Card conducted an ICO campaign to sell its tokens that are used as a native currency in the platform. But, Xapo, a company that has been offering similar services to Token Card since 2016, did not run an ICO campaign because it did not need native tokens to operate its platform.