May 13, 2014 2:57 pm

BitPay secures $30m in fundraising drive

Freshly minted Bitcoins.©Bloomberg

BitPay, whose software is used by Virgin Galactic to let people pay for space flights with Bitcoins, has become the world’s most well-funded Bitcoin company after securing a $30m investment.

The three-year-old, Atlanta-based start-up’s fundraising round was led by venture capitalists Index Ventures. Other investors included PayPal founder Peter Thiel, Hong Kong billionaire Li Ka-shing and Sir Richard Branson. The investment reportedly valued the company at $160m.

The company processes $1m of Bitcoin payments a day, and its customers include Richard Branson’s Virgin Galactic, web-publishing platform WordPress and Canadian ecommerce platform Shopify.

“Bitcoin is a borderless and frictionless payment system, which is nearing a tipping point moment in terms of merchant adoption,” said Tony Gallippi, co-founder and chief executive of BitPay.

Bitcoin is one of about 200 virtual currencies that are attracting growing attention from the business community, with about 12 having market capitalisations of more than $5m, according to research from Citi.

They appear to have tapped into a public, post-financial crisis distaste for government support of the financial sector. “There’s no too-big-to-fail in Bitcoin – there’s no bailout in Bitcoin,” said Mr Gallippi.

Bitcoin’s backers say it solves the problem of how to transfer digital information as if it were property, making sure it leaves the hands of one user and arrives in the hands of another. This makes it potentially useful as the foundation for instant, international money transfers.

The currency’s mathematically based ledger means transactions can be processed without requiring sensitive personal information or needing the services of a trusted third-party – whether that be a stock exchange or a central government.

But the semi-anonymity of transactions has tarnished Bitcoin’s reputation, and its piratical detachment from state institutions has made its exchange rate very volatile.

Silk Road, an online marketplace used to traffic drugs and weapons, was shut down by authorities last year. The Japanese Mt Gox exchange, where people could trade Bitcoin for traditional currency, filed for bankruptcy protection in February, and said it had lost the equivalent of $287m of Bitcoin at today’s price.

Even so, investors are piling in to Bitcoin start-ups. Late last year Andreessen Horowitz, the venture capital group that was an early investor in Facebook, backed BitPay competitor Coinbase, while Bitcoin wallet and bank Xapo recently raised $20m.

BitPay makes money by charging merchants a percentage fee on transactions. It deposits the funds in either a Bitcoin wallet or a bank account denominated in a standard currency. Unusually in the payments industry, the group also offers the option of a monthly subscription fee that means all transactions under a certain limit are free.

The company will use the money to fund its global expansion and add 70 new employees to the existing 40. Most of its workers are in the US, but it also employs six people in Argentina, where it says the collapse of the peso has meant that merchants are enthusiastically adopting Bitcoin as a way to protect themselves from foreign exchange risk.

Mr Gallippi says all of BitPay’s employs take some of their salary home in Bitcoin. He and nine other employees take their whole paycheck in Bitcoin, and he spends about 30 to 50 per cent of it without converting it back to sovereign currency.

This article has been updated to describe Shopify as a Canadian, rather than British, ecommerce platform

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