Here comes another mega funding round in the bitcoin space. The world’s largest bitcoin wallet provider, Blockchain, has been a bootstrapped startup so far. But the startup eventually accepted VC money, raising a little bit over $30 million from Lightspeed Venture Partners, Wicklow Capital and others.
Richard Branson, Mosaic Ventures, Prudence Holdings, Future Perfect Ventures, and angel investors, such as Rafael Corrales of CRV, Amit Jhawar of Braintree and Nat Brown also participated in the round. Lightspeed Venture Partners’ Jeremy Liew will join the board.
“We are going to scale our product engineering team, we are going to build new features,” co-founder and president Peter Smith told me in a phone interview. “And for the first time ever, we are going to spend money on marketing.”
That’s the crazy part. Blockchain now manages 2.3 million bitcoin wallets, and didn’t take any outside funding so far — it was all organic growth and staying lean.
Back in May, Smith commented on the company’s bootstrapping strategy at TechCrunch Disrupt NY. “People ask ‘when are you going to raise money?’ We make money every single month,” he said. “We are a revenue-positive business. We manage a team of 20 people solely on that revenue stream.”
The company only stores encrypted files on its servers as a backup, but it doesn’t actually hold your bitcoins
Blockchain faces serious competition from multiple companies who raised mega rounds of funding. BitPay raised a $30 million Series A round, Coinbase raised a $25 million Series B round, Xapo raised $20 million in March and another $20 million in July, Circle has raised $26 million since its inception, and the list goes on.
Given Blockchain’s footprint, the company has been talking with VCs for a while. “This time we were sharing a vision and it’s not just cash. We found partners that we were comfortable with, and were adding value,” Smith said. But the funding will also be a key asset when it comes to keeping up with the competition and convincing the next 10 million bitcoin users.
Blockchain recently updated its two core open source wallets on Android and iOS. “Overall our growth on mobile is very strong,” Smith said. The startup wants to make it as easy as possible to manage your bitcoins without relying on a central service like Coinbase or Circle.
The company only stores encrypted files on its servers as a backup, but it doesn’t actually hold your bitcoins. When you log into a Blockchain wallet, the wallet fetches that file and decrypts it. It means that Blockchain is immune to hacker attacks and can’t take transaction fees.
Instead, Blockchain relies on its very popular services, starting with its wallets. Hundreds of millions of people also visit Blockchain’s websites every month (Blockchain.info, Zeroblock and Bitcoin.com). The startup’s revenue comes from ads.
With today’s funding round, the company will work on improving its core services and may launch a few new things in the coming months. It remains to be confirmed whether Blockchain’s decentralized way of handling bitcoins will eventually win compared to its competitors’ strategy.
Bitcoin conversions with traditional currencies are slowly becoming a commodity industry, especially for B2C services. For example, Circle doesn’t take any fee when you transfer USD from your bank account to its service. Many bitcoin startups will have to find alternative revenue streams, and Blockchain already has a head start.