Coinbase raising a new round from venture capitalists at $1 Billion valuation

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Interest in bitcoin has been skyrocketing again as the price of the digital currency has hit new highs. That only helps bitcoin startups in the eyes of investors.

One of these startups, Coinbase Inc., is in talks with potential investors on a new round of funding at a valuation of more than $1 billion, according to people familiar with the matter.

It is unclear which investors are committing to the round, which was described as targeting around $100 million or more. That would represent the largest funding round on record for venture-backed bitcoin companies. Coinbase representatives declined to comment.

As more individuals and institutions jump into the bitcoin currency-trading market, Coinbase has seen strong transaction volume and revenue numbers recently, amid a spike in bitcoin prices, these people said.

The San Francisco-based startup provides bitcoin-related services including a digital wallet for cryptocurrencies bitcoin, ethereum and litecoin. It also runs a bitcoin payment-processing platform for merchants.

Coinbase has raised about $116.5 million in total from prominent investors including Andreessen Horowitz, Union Square Ventures, DFJ, Ribbit Capital and NTT DoComo, as well as banks USAA Bank, BBVA Ventures, the San Francisco-based investment arm of Spain’s Banco Bilbao Vizcaya Argentaria SA, Bank of Tokyo Mitsubishi UFJ and NYSE.

Venture investing in bitcoin as trailed off since hitting the high-water mark in 2014, when roughly $440 million was bet on the sector, according to data from Dow Jones VentureSource.

For Coinbase, its latest funding came in a $10.5 million round last July. In January 2015, the company raised $75 million in what was at the time the largest venture fundraising for a bitcoin-related startup.

Coinbase was founded by former Airbnb engineer Brian Armstrong, now Coinbase chief executive, and former Goldman Sachs trader Fred Ehrsam, who has recently left Coinbase.

Prices on bitcoin reached nearly $2,800 in late May. It was trading at close to $2,400 Thursday, up nearly 64% in the past month alone.

At the same time, bitcoin has seen a resurgence in interest in recent months.

Several factors are behind this, experts say, including instability in emerging market governments causing individuals to hedge against inflation or government failure.

Another trend is the increasing use of bitcoin for easier cross-border purchases. In addition, there is greater use of the cryptocurrency in emerging-market countries, where credit-card purchases aren’t so widespread.

Meanwhile, in early April, Japan enacted new rules that help to make bitcoin a legitimate payment method, causing trading of bitcoin in yen to surge.

And some startups are now raising funding through bitcoin-based initial coin offerings, which are more like crowdfunding than equity offerings.

“There’s more interest in bitcoin when prices go up, and then trading volume goes up,” said one venture investor. “Therefore there’s more interest in bitcoin companies.”

Coinbase has numerous competitors, including Blockchain, which is backed by Lightspeed Venture Partners and Wicklow Capital; and Xapo Ltd., which is backed by Greylock Partners, Index Ventures, Emergence Capital Partners, DST Global and others.

Source: WSJ
 
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