It seems like everyone is talking about Bitcoin these days. Driven by increased press coverage and a major jump in the value of the digital currency, more and more people are beginning to take it seriously and think about what kinds of businesses can be built around it. With that in mind, New York City-based Liberty City Ventures is announcing its Digital Currency Fund, a $15 million commitment to Bitcoin and other digital currency startups.
When it comes to venture investing, Liberty City Ventures is a relative newcomer in the market. It was founded about nine months ago as the early-stage venture arm of investment management firm Cedar Hill Capital Partners. The fund’s founders include Cedar Hill founding partners Emil Woods and Charles Cascarilla, along with former ConditionOne and Kantar Video exec Andrew Chang, and former Brew PR VP Dorothy Jean.
Early investments by Liberty City Ventures include TripleLift, ElectNext, and Pickie. But the firm sees a big future in Bitcoin, and it plans to invest accordingly.
To its credit, the folks at Liberty City didn’t just become interested in Bitcoin: Founding partner Cascarilla says that he and his fellow Cedar Hill partners began taking notice of the digital currency back in 2010. But it wasn’t until Bitcoin survived the boom and bust of its first bubble about 18 months ago that they knew it was here to stay.
That crash, which saw the price of Bitcoins fall from $30 to about $2 in late 2011, wiped out a lot of early interest in the digital currency. But as we all know, it didn’t take long for the value of Bitcoin to rebound, and after topping $250 earlier this year, the price has stabilized around $120.
Now, the first real infrastructure is starting to emerge around Bitcoin transactions and exchanges. and investors are starting to take seriously startups that are making a push behind the new digital currency. Fred Wilson and Union Square Ventures, for instance, lent some legitimacy to the market with their investment in Bitcoin exchange Coinbase. Lightspeed Ventures’ Jeremy Liew has made a few investments in the space and is looking for more. And SecondMarket founder and CEO Barry Silbert launched his own Bitcoin Opportunity Fund. So it’s not really a bad time to get into Bitcoin investment.
More than just believing it’s the right time to invest in digital currency, the folks at Liberty City believe they can add some value through their own financial market expertise. Cascarilla and Woods have spent the last several years investing in financial services and payment systems companies, so they know a thing or two about their needs. They believe that knowledge will help suss out companies that are built to transform Bitcoin from a form of hacker money to one that is traded and regulated just like any other fiat currency.
As Bitcoin becomes regulated — which Cascarilla believes would be a good thing — the firm sees plenty of opportunity for companies to emerge around transmitting and facilitating payment by digital currency, in addition to the exchanges and digital wallets that already exist. On that front, though, Cascarilla sees real improvement needed as well. Despite investment in exchanges like Coinbase, he says, none of the current options would live up to the type of scrutiny that most real-world banking institutions face.
In addition to the money that it’s put aside to invest in Bitcoin startups, the folks at Liberty City are finding other ways to bolster the ecosystem. Chang has been organizing monthly Bitcoin meetups in New York City, for instance, the first of which attracted more than 100 people to RSVP. (The second meetup will be held in about two weeks.) Members of the firm will be attending the big Bitcoin 2013 conference this weekend in San Jose, Calif. And it’s putting together an incubator for startups in the digital currency space as well.
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