Coinbase, the company that is well known for locking in the purchase price of your bitcoin.. unless the price happens to go up in the interim in which case the purchase is flagged as a high risk transaction and cancelled, is rumoured to be raising between USD $40-60 million. The round of new investment is rumoured to be lead by Draper Fisher Jurvetson according to an article published by Re/code.
Not to be outdone on rumour mongering, TechCrunch quickly followed up the Re/code article with one of their own in which rumours from an unknown source claim Coinbase initially hoped to raise USD $150 million but will now settle for less due to regulatory overhang and the volatility of Bitcoin spooking investors.
Should Coinbase succeed in raising the funds, it would give the company a ball park valuation of around US $400 million. Pierre Rochard of the Nakamoto Institute put the valuation in an interesting perspective, saying:
"This means @Coinbase is worth 1/10th of #bitcoin. I would argue Bitcoin is severely undervalued, not the opposite."
This capital raising by Coinbase would put the total investment in the Bitcoin space at around US $400-500 million for 2014. This is a far cry short of the billions needed to be invested in "viable Bitcoin companies" over 12-24 months if the US is intent on not missing the boat as stated by Mircea Popescu.
Mr. Rochard is right. Coinbase is doing valuable work, but why would I give up bitcoin (resilient, anti-fragile, zero counterparty risk bitcoin) for some stock and contractual investors' rights in a company whose value is closely correlated with btc market cap (and may not even be generating a USD profit)? Same upside, much greater risk. It's so easy for a company to fail. It's not so easy for btc to fail. For investors sitting on piles of USD, it would be better to purchase a btc hoard, and then use remaining USD to seed efforts to increase the value of btc. If I were Union Sq Ventures, I would ask my LPs for permission to commit as much money to buying btc itself, as is allocated to financing btc-related companies.
Instead, it seems like most VCs are buying only nominal amounts of btc, and counting on a USD-denominated profits from portfolio companies for return. Argh! Missed opportunity.
Spot on. Credit goes to Daniel Krawisz for explaining this to me: http://nakamotoinstitute.org/mempool/the-correct-strategy-of-bitcoin-entrepreneurship/