Bitcoin Protocol  •  Features  •  Investors

Why Lightspeed Venture Partners Sees Bitcoin as a Good Investment

(@danielcawrey) | Published on February 20, 2014 at 11:28 GMT

Lightspeed Venture Partners is a venture capital firm with a global reach. Based in Menlo Park, California, the company also has people on the ground in India, Israel and China.

The firm has a keen interest in bitcoin, investing in BTC China, Ripple and startup incubator Boost, which launched a bitcoin accelerator class last year.

Seven bitcoin startups from this accelerator were accepted onto the Boost program last summer, including BitWall, Vaurum and Gliph.

Jeremy Liew is a partner with the firm. His first impression of bitcoin was positive, as he quickly realized the opportunities the young currency presented. He said:

 “I first got into bitcoin through looking at Coinbase when they were raising money at the end of last year. It took me 24 hours to realize how revolutionary it was. It very quickly dominated my life after that.”

Keeping an open mind

Liew was present at the New York financial hearings last month. He testified in front of the members of the Department of Financial Services, stating that bitcoin is “moving in the direction of greater legitimacy”.

However, at this point, he’s still not quite sure what policies the US regulators are going to put in place. “It’s still not totally clear what they may do,” he says. “But we’re keeping an open mind, and we’ll see what happens.”

Jeremy Liew (R) seated next to SecondMarket’s Barry Silbert at the New York DFS hearings last month. Source: Vice
Jeremy Liew (right) next to SecondMarket’s Barry Silbert at the New York DFS hearings. Source: Vice

Whatever may happen, Liew stressed that Lightspeed VP is looking to fund startups that will comply with future regulation.

However, some bitcoin startups may not have so much regulatory exposure. Liew emphasised that his focus is on the business idea, which is the critical factor. Thus, some companies in the space may simply use bitcoin as a ‘pipe’ to move value around:

“If you are going to build a micropayments system for charity where you are just using bitcoin as transport, then it’s not clear to me you’re going to be heavily regulated.”

However, exchanges (as money transmitters) will need to follow all applicable policy: “Certainly, being an exchange, that would definitely be the case,” he said.

Down the road

It’s important to remember that, as an open-source project, bitcoin is a new and ever-evolving financial innovation. Lightspeed Venture Partners is watching closely as the protocol continues to grow and change: “I think that, as the number of people in the bitcoin ecosystem increases, the pressure to ‘fix bugs’ in the way bitcoin works increases.”

However, mainstream acceptance of bitcoin may require the currency to shift towards a more consumer-oriented focus, says Liew. The fact that a consensus has been developed in the past for changes is a good sign for the future:

“Just as bitcoin has made changes in the past, there will be more changes in the future that are adapted to solve the business problems.”

Alternative cryptocurrencies, such as litecoin, have some advantages over bitcoin – such as faster transactions.

Liew believes that the beneficial elements of other altcoins could be brought into bitcoin’s source code to help it improve. The way to look at it is: “what litecoin can do today, is what bitcoin can do in the future,” he said.

Payments problem

In Liew’s view, it still isn’t incredibly easy to pay with bitcoin as an individual. That remains a challenge to overcome.

Are QR codes the answer for in-person bitcoin payments? Source: Hack A Day
Are QR codes the answer for personal bitcoin payments? Source: Hack A Day

However, there is potential in what he refers to as “remote payments”, digital transactions that don’t utilize a physical point of sale. “I think there is going to be more and more e-commerce, and [bitcoin] can be used for remote transactions – that’s an enormous opportunity.”

Liew pointed to Amazon as a company that doesn’t need to confirm a transaction right away. It takes time for Amazon to process and ship an order. Therefore, that company doesn’t need to wait for the blockchain to produce a record of sale instantaneously.

“It’s fine to have a little bit of time for confirmation of transactions [for online purchases],” he says.

How that will be done with personal payments is still problematic, as bitcoin processors are currently exposed to the risk of  doing off-block chain transactions. The question is, will this continue as adoption increases?

Around the world

Lightspeed’s investment in BTC China was carried out through the firm’s Chinese subsidiary.

“Lightspeed China Partners, which led the investment in BTC China, is a separate fund that we spun out a couple years ago that is based in China,” said David Chen, another partner at the firm.

Recently, Lightspeed Venture Partners India published its 2014 predictions for bitcoin. The top declaration? That venture capital in bitcoin startups would hit $100m this year. “We work closely with the folks in India and Israel in various areas, including bitcoin,” said Chen.

In the United States, Liew singled out New York as a place where financial innovation will occur:

“There’s a lot of stuff going on in New York. It’s the financial capital of the world, so there’s a lot happening there.”

However, when pressed for comment on where the global hotspot for cryptocurrencies will be, Liew would not commit. He made it clear that bitcoin is a global instrument, and new ideas could come from pretty much anywhere.

That might explain his firm’s investment in BTC China and its search for new investments the world over.

“There’s going to be innovation in a whole bunch of places,” he said.

Startup image via Shutterstock

InvestmentLightspeed Venture PartnersVenture Capital

Don't miss a single story

Load Comments