Off The Schneid

The almost two year long slump is over. I've led a new venture investment for USV, which closed a few weeks ago and was announced last night. The company is Coinbase and my blog post announcing the investment is on the USV blog. The WSJ also wrote about it here.

This hiatus, which I've blogged about a bit on and off, was mostly a result of being very full up with responsibilities for existing investments. I have made twenty investments since the founding of USV in the fall of 2004 (now 21) and have only exited six, so I have had fourteen investments that I am responsible for at USV. I take our responsibility to our portfolio companies higher than any other work related responsbility and these fourteen companies have required a lot of time and attention over the past two years.

Two things have happened to get me off the schneid (a hitless streak if you aren't familiar with that term). First, the fourteeen companies have all matured a lot in the past two years and the demands of that group of companies has waned a bit. And second, I have come to believe that a number of new fundamental technologies have hit the Internet and it is time to get busy putting out money.

One of these is Bitcoin. Here is a snippet of what I wrote today on the USV blog:

We believe that Bitcoin represents something fundamental and powerful, an open and distributed Internet peer to peer protocol for transferring purchasing power. It reminds us of SMTP, HTTP, RSS, and BitTorrent in its architecture and openness. Like what happened with those other low level protocols, entrepreneurs and developers are now building technology on top of Bitcoin to make it more useful, more accessible, and more secure.

It is possible that we may make more Bitcoin/digital currency investments but we will try to make sure they are not competitive with Coinbase. And there are other sectors out there that are emerging now that I am keeping my eye on as well. I hope to be more active in making new investments in the coming months. It's good to be back at it.

#VC & Technology

Comments (Archived):

  1. Carl Rahn Griffith

    Wow. Significant move, Fred.I hope that you discuss this on Max Keiser’s show, sometime soon.

    1. fredwilson

      Max Keiser’s show?

      1. Carl Rahn Griffith

        He’s also a big Sheffield Wednesday fan, like all the best people… 😉

        1. fredwilson

          well then i need to get hip to him

    2. Kirsten Lambertsen

      Fred on Max Keiser. I would watch that.

  2. Rohan

    Congrats Fred. Can’t say we didn’t see this one coming – you’ve been obsessing (for want of a more appropriate term) on this one over the past few months.I guess it was the process of strengthening the thesis before making the leap…?

    1. fredwilson

      yeah, this should not be a surprise to anyone reading this blog. and that’s a good thing.

      1. LE

        Like a spouse finding a phone number scribbled on a piece of paper in the pocket when doing the wash.

  3. David Semeria

    Hi Fred, how does this investment fit in with:Large networks of engaged users, differentiated through user experience, and defensible through network effectsI’m just wondering whether I’m missing something or perhaps USV’s thesis has evolved….

    1. fredwilson

      bitcoin is a networked currency

      1. Carl Rahn Griffith

        And secular.

        1. Avi Deitcher

          Secular? What does that mean in this context?

          1. Carl Rahn Griffith

            Not related to state/a religious body – fiat currencies have (unsurprisingly) become a false gods. And this will last a long time, as a result.

          2. Avi Deitcher

            Was currency ever directly related to a religion, except through nation-state or city-state bodies?

          3. Carl Rahn Griffith

            To me, yes, as a metaphor, in so many ways…

          4. Avi Deitcher

            OK, Carl, I want to hear more of this. If this is more appropriate for offline, feel free to send to avi [at] deitcher [dot] net or point me to your blog.

          5. Carl Rahn Griffith

            My general blog is here, Avi … http://carl-rahn-griffith.t…Sometimes it talks IT/business/economics/society; often it is just a ramble! ;-)My full contact details are here ……Add me on Skype – my Skype ID is in my link – and let’s chat there sometime soon.

          6. jason wright

            In God We Trust

          7. Avi Deitcher

            Yes, but that doesn’t necessarily tie it to religion per se.

          8. jason wright

            trueicons of belief are an enduring theme in currenciesRoman Emperors’ heads George Washington’s stareFred Wilson’s smile

          9. Avi Deitcher

            “Fred Wilson’s smile”? Currency with your face on it? Fredollars? The Frederal Reserve System? 🙂

          10. jason wright

            it’s boggling, but belief is everything with currencies

          11. Avi Deitcher

            “Full faith and credit….”

          12. kidmercury

            yes. in fact for much of history currency has been created and issued via religious temples, and in some versions of history this led to conflict and then collusion between states and religions.

          13. Avi Deitcher

            @kidmercury:disqus that is interesting. If you have references, I would enjoy reading them.

          14. kidmercury

            there is a book called babylon’s banksters by joseph farrell that i highly recommend. i should warn you, though, it is deep kook.

          15. Avi Deitcher

            Excellent, thank you. And since I am now reading Nations, and recently reread all of my Friedman and Hayek, as well as (ouch) Keynes, it cannot be *that* bad, can it? As long as it is better than Satanic Verses…

          16. ShanaC

            how is bitcoin not secular?

          17. jason wright

            probably a CIA project

          18. Carl Rahn Griffith

            Not? I believe it is.

        2. jason wright

          i always knew money was a godless religion

          1. Carl Rahn Griffith

            Indeed. That’s the trouble, it (money) became a cult increasingly manipulated by government. Agnostic currency is the way ahead.

  4. jason wright

    ironically, for a borderless virtual currency, one needs a US bank account to buy a Coinbase bitcoin.a ‘moving markets’ move?

    1. fredwilson

      they are working hard to change that

      1. jason wright

        glad to hear that. essential the meantime i’m looking for a workaround

      2. jason wright

        what are the obstacles?

      3. jason wright

        i got a reply from Coinbase. one would need to have an account with a UK bank that works with the ACH system.

  5. William Mougayar

    Cool. You’re ahead of Warren Buffett!@warrenbuffett #BRK2013: Of our $49b, we haven’t moved any of it to #BitCoin.

    1. fredwilson

      he joined twitter six years after i did

      1. William Mougayar

        That’s so true!

      2. leigh


        1. William Mougayar

          I set him up for this type of an answer 😉 If anyone, Soros would be in it before Buffett.

          1. jason wright

            but hasn’t Soros specialized in counter intuitive moves?”I saw Bill Gurley say that you can only make money by being right about something that most people think is wrong. His logic was that you can’t make money by being wrong. And you can’t make money by being right about something everyone else knows. So you have to be right about something that most people think is wrong. I really like that framework.”put another way, one can also make money about being right that everyone else is wrong that something is wrong.

          2. M. Edward (Ed) Borasky

            Nah, Soros would wait till they IPO and short it. 😉

      3. steve

        he might point out that you became a billionaire 53.5 billion (and counting?) dollars after he did!

        1. fredwilson

          i will never accumulate as much wealth as he has.

    2. jason wright

      he will, when he’s worked out how to coin it.

    3. Fernando Gutierrez

      Can you imagine the crazyness that a move by Buffet could cause? We would need to invent a new word because extreme volatility would not be enough.

  6. Avi Deitcher

    Congratulations!I have been mulling bitcoin for quite some time (mainly as I try to resolve my own fx issues as an expat), thinking much more deeply the last few days, even wrote about it at…One of bitcoin’s great values is its non-fiat borderless nature. But the real world salaries, goods, services – is still transacted in national fiat currencies.I see a few issues here:1) Tight tying to US bank accounts (nothing international) is an issue, and 4 business days is absurd; ACH is next business day.2) 1% is pretty high for conversion fees, rivals wire transfers.Unless, of course, the model here is assumed that all future transactions will be in bitcoin, and you need to seed money once, so what is a one-time fee and days? But we are a long way from that. My clients do not pay me in bitcoin, I don’t pay myself salary in bitcoin, and there is little I can buy (goods or services, personal or business) in bitcoin.Where (and when) do you see the future? At what point will companies start paying in bitcoin (but then you need to think about paying taxes, and darn if the Treasury will ever take bitcoin for taxes!).

    1. fredwilson

      this is what i think the opportunity is:”Like what happened with those other low level protocols, entrepreneurs and developers are now building technology on top of Bitcoin to make it more useful, more accessible, and more secure.”

      1. Avi Deitcher

        OK, so you don’t really view them as doing fiat currency in/out, that is just a stopgap to get there. Their real value is a platform on which others can provide such services? E.g. I buy that nice ARdrone from a vendor who accepts bitcoin, they use coinbase to accept bitcoin.Conversely, I can start such a tx processing service for small businesses, and built it on coinbase?

        1. fredwilson

          i think you would want to support other services in addition to coinbase, like stripe

        2. Avi Deitcher

          Now I am confused. Stripe makes it easier for developers to accept credit cards (but more expensive than Square). I get that. Stripe might also want to offer Bitcoin. I get that. How does Stripe need Coinbase to do Bitcoin?I guess I don’t understand where the various players fit into the value chain, and trying.

          1. fredwilson

            what i was saying is that if you wanted to build a transaction system today you would most likely want to support credit cards (stripe), bank to bank (dwolla), and bitcoin (coinbase)

          2. Avi Deitcher

            Oh, I see.Isn’t one of bitcoin’s key value props that you don’t need a bank or processing system? If I have a wallet (local or cloud or mobile), and I buy something worth 1.33333 bitcoin, can I not just send it to their address? Unlike credit cards, where I need the whole processing gateway (Stripe), and bank-to-bank, where I need access to the banks via ACH (Dwolla), what do I get out of dealing with coinbase as a merchant instead of just sending to your bitcoin address?

          3. fredwilson

            yeah but not everyone is ready to transact in bitcoin yet

          4. Avi Deitcher

            So coinbase provides the processing gateway for bitcoin, analogous to Stripe or Dwolla, which merchants can understand, to get them “bitcoinned”?

          5. fredwilson


          6. Avi Deitcher

            I can fit it into the value chain, then, see how it works.Is the merchant sector the primary target market?

          7. fredwilson


          8. Avi Deitcher

            And…1) how do they induce merchants to accept bitcoin?2) how do they convince individuals to purchase in bitcoin? When I buy that drone for $300 on Amazon (I really want it 🙂 ), Amazon probably pays <2% in credit card fees, with their volume, but I don’t see it. If I pay in bitcoin, the merchant pays 1% to convert out of bitcoin, I pay 1% to get it into, the overall fees are lower, but the merchant just pushed the fees onto the consumer.

          9. kidmercury

            exchange rate is the 800 lbs gorilla in the room that bitcoin can’t/won’t solve. you lose 2% via CC fees but bitcoin fluctuates 10% on a non-volatile day. if bitcoin gets regulated to curb the volatility, then the regulatory costs will introduce fees.

          10. LE

            To me it is very clear one of the ways to get this investment to take off (in addition to making sure that others make investments in the space (really important) so there are many companies making noise.)- Devote a fair amount of marketing to college kids, because they will be the early adopters that will drive merchants to want to accept this as a form of payment. And they have little bias and are always looking for something to call their own and aren’t cynical, skeptical etc. And they buy enough black market things to make it a viable option (like having an SUV even if it snows just a few days per year).If I walked in right now to the sushi restaurant in the suburbs (which I did with Dwolla and they loved it btw.) there is nothing that I could offer to them to convince them to take bitcoin (chicken/egg issue) and it’s a bit hard to understand, dwolla was simple “save money”). Otoh, the college market is confined geographically and it is much easier to get that demographic to adopt something.Initial adoption of bitcoin by merchants must be in the form of “here is business you wouldn’t get” same reason people do discounting and coupons. Or barter (fills empty hotel rooms and restaurant tables and gets you new customers in theory). Want me to accept bitcoin? Tell me how I will sell more of my product if I accept bitcoin. Otherwise this just becomes the “discover” card and we know how that worked out. (AMX otoh = “people who are higher income”).So if you told a college student “here is a restaurant you can spend your bitcoins at” and told the restaurant “here are students that will eat at your restaurant that wouldn’t come to you otherwise” that’s a way to attempt to solve the chicken and egg and at least start to get critical mass. (This is the way coupons are sold on college campuses something I am familiar with).

          11. fredwilson

            i sent bitcoin to my three college aged kids. they told their friends about it. their friends bought it. you are on to something, as usual

          12. awaldstein

            Just an aside–Stripe is an online system, Square is not to my knowledge.I just built a billing system. If Square has that ability, news to me.

          13. Avi Deitcher

            Good point. Square has a clear, well-defined-borders, business model.

      2. robertdesideri

        The good news is one nice barrier to entry for new ventures is a deep understanding of cryptography to even consider gaining any traction, bitcoin is kind of like Bond’s DB5 spilling an oil slick for followers. The bad news is manifold, you’ve got hackers, regulators and muggles at the gate. And mind, I said Bitcoin is the DB5, each Bitcoin venture follows that car.

    2. Matt A. Myers

      1% is less than 2.7%+ credit card fees — that’s all that really matters in this instance.

      1. Avi Deitcher

        True, but another 1% off the purchaser to get into BTC. And 1% may be low for credit cards, but its high for just converting. And much more than bank to bank $0.25

        1. Matt A. Myers

          Bank to bank isn’t anonymous, Bitcoin currently is / can be.Agreed there is still a cost, though I imagine if people are willing to pay it, then why reduce it? Likely why Coinbase is getting $5 million, and not a smaller amount.

  7. SallyBroom

    Great news Fred – congrats to you! Loving this space.

    1. fredwilson

      thanks Sally

    2. Matt A. Myers

      Agreed. It’s been exciting seeing Bitcoin evolving.

  8. AlexBangash

    Congrats…Fred, sheer genius….Great to see USV partner with another potential YC outlier. FundingCircle is revolutionizing Banking and now Coinbase will facilitate an alternative global currency. This is true venture capital.

  9. William Mougayar

    What do you think of other emerging cryptocurrencies such as Litecoin?Is crypocurrencies a market you are watching too?Coinbase can add Litecoin I presume.

    1. fredwilson

      i think there will be other digital currencies that work. like dollar, euro, yen, RMB, etc

    2. Avi Deitcher

      “cryptocurrencies”. Like new word.

    3. jason wright

      what is a cryptocurrency?

      1. William Mougayar

        Google it 🙂 Bitcoin is

        1. jason wright


    4. kidmercury

      they all suck. the only one that will work is one that has a central bank. amazon coin is the closest as it effectively is a central bank, although they are pegged to USD so it does not fully address the potential of virtual currencies. liberty reserve is one without a central bank that is also pegged to USD, and that is better, but still too awkward and bound to be regulated if it grows.

      1. andyswan

        Agree. Best to be selling the pix-axes to the pyrite miners…

  10. jason wright

    imagine having to go through life as Herr/ Frau Schneider

  11. pointsnfigures

    Congrats. They should start a futures market in bitcoin to give it depth and liquidity. Saw a new payment company startup in Chicago, subsidiary. things are happening in the payment space.governments are printing money like crazy. unless economies grow to catch pace with the supply of money, or the government decreases the supply of money, we will have rampant worldwide inflation. Think long term bonds at 10% and an inflation rate similar to the 1970’s.Maybe Bitcoin can find a foothold in that environment.

    1. Avi Deitcher

      That is one of the beauties of bitcoin IMHO. With no one “printing” extra for political reasons, inflation cannot happen. Non-fiat is beautiful.The cross-border is a practical benefit, more immediate real-term.

      1. pointsnfigures

        However, there is massive risk in holding Bitcoin currently. No way to hedge.

        1. Avi Deitcher


          1. pointsnfigures

            A futures market…..

          2. Avi Deitcher


          3. ShanaC

            i’m insistent that the invention of the futures was the best thing humans have invested. Nothing like hedging to make take a risk easier to handle

      2. kidmercury

        if by “inflation” you mean loss of purchasing power, that can still occur if everyone runs out of the currency. just like how stock prices can collapse even if there are no new offerings if everyone dumps the stock.

        1. Avi Deitcher

          Not for political reasons. The key conceit of a central bank system is that bankers are not politicians, and will not use the hidden tax of inflation to reduce the outstanding debt of government expenditures. Of course, it isn’t true, and in any case that benefit is always short term, as lenders demand higher interest rates and linkages to inflation or safer currencies when they realize a government uses devaluation to reduce its debt.Your argument, though, that ideally BTC should neither be fixed to a ceiling, nor set by a politicized central bank, but respond to supply and demand like any other commodity, and thus stabilize prices, is a good one. I need to think it through.Thanks for the idea for a follow on post.

          1. Avi Deitcher

            May I say again how awful an experience Disqus is on mobile?

    2. kidmercury

      CFTC is considering regulating bitcoin, if they bitcoin derivatives emerge, that will become even more likely.…once CFTC enters, party’s over. the big banks own the regulators and they are not going to let this come in and steal the show, rather they will put in regulations that make bitcoin just like everything already in place.

      1. pointsnfigures

        I disagree. If all the big banks enter, it will give the market the legitimacy it lacks today. They will enter if they think they can use Prime Brokerage to arbitrage it. There needs to be more traction before they come in. The CFTC is a tool of the banking industry now because of Gary Gensler. Prior to him being chairman, it wasn’t. He has a hyper political agenda which has little to do with market integrity.The problem today with Bitcoin is that it’s a minority of outlets that will take it-and there is tremendous risk in holding and aggregating it.To give you perspective: Before there was a futures market in US Treasury bonds, the spread on the bid/ask was around a half to full point or $562.50. Post introduction of treasury futures it became $31.25. That is a massive decrease in volatility-and decreases risk of holding. Currency markets before 1972 were similar. Banks in NYC fought establishment of currency markets for a few years before they finally broke down. Their trading desks were getting arbitraged against and they felt it in their bottom lines. Prior to going off the gold standard and Bretton Woods, it was impossible to hedge currencies cheaply. Banks controlled the market and kept a tidy spread for themselves. Futures changed it and blew the whole thing up.Trajectory on Bitcoin will be first acceptance among a large variety of outlets. Bitcoin will have to peg to other currencies. Then the inter currency market can calculate the math of what the true value of Bitcoin is based on $/Yen $/BP $/Euro $/SwissFranc, and the combinations of those currency cross rates.Where it gets interesting is in an inflationary time. Bitcoin should have stable value while fiat currencies decline in value precipitously. Then there should be demand for Bitcoin over other currencies.Based on what I believe, and what a lot of other economists in my camp believe-we are in for some pretty massive inflation due to the policies of the Fed and the massive increase in govt spending (along with corresponding deficits).The problem today is the velocity of money is nowhere to be found. It’s not turning over. Banks borrow at the Fed window at 0 and reinvest at 2.5-3% and then play golf. If we had velocity of money with traditional business and banking reinvestment in economic output, our inflation rate based on the money supply would be relatively high versus long run norms.In fact, USV could seed their own market by requiring all of their firms that transact in currency to begin also transacting in Bitcoin-which will give confidence to other outlets to follow. That will help set a standard.Sorry to get wonky, but I traded interest rates for 20 years.

        1. kidmercury

          i don’t think we disagree too much, because you stated “Bitcoin will have to peg to other currencies.” which i agree with totally. but it’s not designed to do that — it will need a central bank and a monetary policy to do that — which is why i think it will ultimately fail for those who are not speculators that time it correctly.the VC industry is excited about the possibility of payments disruption. that cannot happen without solving the exchange rate problem. the exchange rate issue is largely a governance issue; there is no entity that can fix the exchange rate. one will eventually comes along that understands this issue, but it will need to have political will and astuteness to understand the battle it is up against.

        2. PhilipSugar

          I agree with your entire thesis. (especially what banks are doing and velocity) This is no different than the housing bubble. I could see it coming the only question is when not if. I have no basis for this but it seems the music stops at the end of a Presidential Term.So then the question becomes, what to do now. How to best short the dollar as a non currency trading bank.

          1. pointsnfigures

            Buy Bitcoin. That’s a dollar short! @kidmercury:disqus Once Bitcoin pegs to everything and is in mainstream distribution, it will be easier to impute a transparent value for it. As long as the supply of Bitcoin holds constant against the rest of the world market, they won’t have to worry about a central bank etc. I don’t know the fundamentals of the Bitcoin market to think about how it is made, distributed etc. Also, there is no debt market for Bitcoin; and debt markets add liquidity to FOREX markets.It’s fun to watch. First step is gain wider distribution and acceptance. That brings confidence. Next step is a hedgers market. Arbitragers will bring liquidity and discipline. Then they are off to the races.

          2. PhilipSugar

            Not exactly. It is shorting the dollar AND going long on BitCoin. There are other ways to do that as well. Gold, Swiss Franc, Land, other Hard assets. I might want to be long those more than long BitCoin.

          3. kidmercury

            and that’s the issue. if bitcoin is solving the “store of wealth” problem the US dollar has, it is up against gold, fine art, real estate, other nation-state currencies. those are going to win because their more stable and far more developed. to put it in internet speak, they have the more defensible network.

          4. Deen

            Try transporting gold, currency, fine art, or real estate across borders without interference. Try hiding the fact that you own them.

          5. kidmercury

            you can transport all that stuff. jews who fled hitler had only jewelry as money. ownership of gold and fine art is easy to conceal.the larger issue though is that everyone understands gold. people who are dirt poor understand it, children get it, seniors get it, the uber-wealthy get it. no one understands bitcoin.bitcoin is also a penny stock. gold is far less volatile. this is a huge point not to be underestimated. stability is imperative for a currency to work.

        3. ShanaC

          And this is why I like having you here.q: if we’re still seeing banks play the 3-6-3 rule at ever lower percentages (for those of you who don’t know what this is –… will we ever see inflation

    3. ShanaC

      I’ve mentioned them here before – i’m a bit depressed with them

  12. LIAD

    Bitcoin community has so much work to do. Everything is still so nascent. Documentation/Protocols/API’s/Advocacy/On-boarding. But we’re going to get there. And when we do its going to be sick.Making things mainstream friendly will be a huge task. Seasoned developers have trouble getting to grips with mining/wallets/private keys/irreversible transactions/hacking/security etc. Grandma using Bitcoin to buy her groceries is a long long way off.For Bitcoin Newbies, Dan Kaminsky sets out the lay of the land very well and very quotably in this wired piece a few days back –… – Re: Coinbase & Wallet Security – Server Side Private Keys is messing with fire. I know they keep 90% + in cold storage but still. USB sticks going awry, a disgruntled employee – and they are going to have a very bad day. Would Google even take-on holding private keys server side?

    1. Avi Deitcher

      They do private keys server-side??

      1. fredwilson

        they use cold storage for that. but it can’t all be cold all the time.

        1. Avi Deitcher

          Anyone want to start a betting pool for MTTH (= Mean Time to hack)? :-)Seriously, very bad idea.

      2. LIAD

        having spent time working through bitcoin wallet issues, it’s really hobson’s choice:server side = easier for user. faster and more control – but hacking targetclient side = safer but more complicated for user, technically messier.#You pays your money (and you takes your choice)

        1. Avi Deitcher

          There are middle roads. Wallet server-side, private key client-side; separate cloud for private keys which are encrypted with symmetric key, password encrypted, etc.

          1. LIAD

            sure, but at the end of the day, the private key is what its all about, and that has to be encrypted and live on the client or server

          2. Avi Deitcher

            Yes, but putting it on server when it, itself, really equals value…

          3. robertdesideri

            serversider privs = roflexpect 3d printing privs to come up next 🙂

        2. jason wright

          hacking seems to be a pop tactic for bombing the price

    2. fredwilson

      they have a different approach they are implementing. they are investing heavily in security, but until recently this was two guys.

      1. LIAD

        I’m sure they are and I hope they pull it off quickly.With USV involvement they will quickly become a poster child for Bitcoin and if they experience a large-scale hacking event where people lose their holdings. It won’t bode well for the entire ecosystem.

        1. jason wright

          when a US bank is robbed the money stolen is insured by the federal government. deposit holders do not lose their money.bitcoin?

      2. ShanaC

        is anyone investing in liquidity? Ie, flexibility of going to phone, print, computer (even shared computers)

  13. Tom Labus

    Congrats, Fred.It’s an interesting and very new area. They’ll need some great PR to focus the average consumer and the benefits and also some fundamental education about the concept and product. Volatility can be a market killer in early markets especially when thinly traded.

  14. Avi Deitcher

    From Dan Kaminsky’s article last week in Wired: “Bitcoin could basically be thought of as the Internet, applied to Money.” Although I would view Bitcoin as one of several possibilities in alternate currencies.Nice analogy, including the inevitable bubble, pop, and real growth. What was it? Hype Cycle?

  15. Donna Brewington White

    This is wonderful news, Fred. Congratulations!From a distance that was some productive slump.

  16. jason wright

    i’m interested to see how the price of a bitcoin fluctuates in the short term following this announcement.

    1. Carl Rahn Griffith

      It’s been a roller-coaster of late but stabilised somewhat. Yes, all such moves greatly add to its credibility.

  17. Roger Chabra

    Congrats Fred. Best of luck with this one!

  18. William Mougayar

    I love the spirit of co-opetition in the VC space. One week A-H co-invests with you (Shapeways); the next week, you invest in Coinbase & compete with them (vs. OpenCoin).

  19. andyswan

    I was short a lot of bitcoin from 124ish.Covered at 99 as soon as I read this news. Still looking for re-entry now that it’s at 112 but I can say you actually putting your money where your bitcoin mouth is caused me some significant pause…and likely moved a currency market 🙂

    1. Matt A. Myers

      Warren Buffett (recently I believe) was quoted as to not having heard of Bitcoin, and that none of their $49 billion was in it; I’m not sure if the context was for investments to be made, or perhaps where their money flows are.

      1. andyswan

        If I had $49 billion I “wouldn’t have heard of bitcoin” either.

        1. kidmercury


        2. takingpitches

          haha. Spot on.

        3. Matt A. Myers

          Well, that’s mainly because to amass $49 billion in wealth you look at existing markets.

    2. kidmercury

      how did you short bitcoin? do you mind sharing the service you used to enable this? i’m not interested in shorting bitcoin, but interested in examining the mechanics of how such a service operates.

      1. andyswan

        http://bitfinex.comI used dwolla to fund MTGOX, where I bought bitcoin, then sent the bitcoin from MTGOX to BITFINEX, where I sold the bitcoin and put the USD into my “margin trading” account, which allows for the lending and borrowing of BTC for purposes of buying on leverage or shorting the currency.I have not yet attempted to withdraw from bitfinex LOL

        1. kidmercury

          wow, bitfinex is pretty interesting. it’s a clever way of enabling shorting. i would feel more comfortable if they had automatic margin calls that automatically closed out traders when they fell below their margin requirement; right now bitfinex says they will cover any amount that traders cannot repay to lenders. with this model i worry that they would collapse on a very volatile day.

          1. andyswan

            Agree. That’s why I have $5k in there instead of $50k. It feels like it could disappear.There are other, more basic problems with the platform. A lot of them are because of inherent bitcoin-market flaws, but most aren’t.It’s purely the volatility and the n00bness of the current market participants that has me interested at this point.

      2. pointsnfigures

        I should have read your comment before I typed mine. True traders want to go against the momentum.

        1. ShanaC


    3. pointsnfigures

      I didn’t know you could short. How’d you do it? I wanted to short that last screaming rally with every coin I had. Do they let you short on margin? That could get fun.

    4. fredwilson

      that’s not what i am in it for but i understand your point

  20. Matt A. Myers

    I had a hunch today’s topic might be Coinbase (or CircleUp).Congrats. It looks like they know what they’re doing.Powerful investment, and goes well to complement Dwolla.

  21. andyswan

    My calculation: If bitcoin can take 1% “market share” from the USD, then each bitcoin will be worth $4,000 or so. At 112 at the moment, it’s priced in 1/40th of the way to becoming a VERY significant currency. The volume and liquidity, however, are well below 1/1,000,000,000th of what you’d expect from a currency with that kind of “market cap”.In other words, volatility is necessarily going to be redonkulous for the foreseeable future. This is confirmed by the 1% fee to switch from USD to bitcoin that coinbase is charging.No one is even CLOSE to having a decent bitcoin/cryptocurrency trading platform or exchange. Not even CLOSE.That’s a very significant opportunity.

    1. kidmercury

      some of the forex brokers are starting to move in. i think they will get it. probably will occur outside the US though since US forex brokers are regulated to death.

    2. Aaron Klein

      I think the commerce angle is what is really fascinating about this play. Making it simple to accept bitcoin and charging a fee to auto deposit as USD will be a growing business, I predict.It does need to be crazy simple though. We’re thinking of implementing Dwolla for our customers, but they’ve still got some quirks to work out. I need to be able to let customers authorize a recurring payment from their bank accounts without forcing them through the friction of joining Dwolla themselves, etc. Otherwise, customers throw up their hands and say “this is too hard.”

    3. Ron Finberg

      there are bunch of new platforms that should hit the market during the summer. Things should get more interesting soon

      1. jason wright

        where to look for them?

        1. Ron Finberg

          These are a few names . Covered two of them in…Kraken is expected to be launching soon. Other are still in private beta.

          1. jason wright

            thanks.i think the Kraken faq needs some work;”Frequently Asked Questions (FAQ)What is your name?It is Arthur, King of the Britons.What is your quest?To seek the Holy Grail.What is the air-speed velocity of an unladen swallow?What do you mean? An African or European swallow?”AND….”Vehicles such as a glass of that Item and that’s no pain in forums. We have good lion. We play a lot more than the concrete porch. Proudly was previously sterilized by reducing commercial outdoor workers.” ??????????????????????????????????????????????????????

          2. Ron Finberg

            Yeah – they did their public beta launch on reddit, and they got some slack about the FAQ. Surprised they haven’t updated it. Might be a slight warning sign, but I’ll give them the benefit of the doubt until they start taking real funds.

  22. markslater

    bang on. I said in another comment on here that i think it is the single most transformative opportunity in my lifetime.

  23. Ric Fulop

    Fred, this is a brilliant investment. Great entrepreneur. Congratulations!

    1. fredwilson

      thanks Ric

  24. kirklove

    First off, congrats. Though I’d argue you were never “on the schneid” in the first place and rather applying your skillzzzz in other very productive ways. Though I know you like to be “in” in the action so a heartfelt felcidades amigo.Secondly, I do find it a bit humorous it takes significant “real” dollars to help a company build up a new, potential currency. No matter the currency it takes money to make money.Then again, maybe USV is giving them Bitcoins 😉

    1. Max Yoder

      Well put, Kirk.Good luck, Fred.

    2. ShanaC

      Would that be legal – exchanges are weird

    3. fredwilson

      we could have invested bitcoins but it may have taken a few days to accumulate that many bitcoins to send to them.

      1. JamesHRH


  25. Kirsten Lambertsen

    Woo hoo!Not only was this telegraphed by your recent obsession with Bitcoin, but also by a markedly sunnier vibe of late.

  26. Lucas Dailey

    Congrats! No matter what it will be a valuable education in an emerging market. I haven’t thought/learned enough about the space and team to do any armchair quarterbacking, but my gut doesn’t feel good about cryptocurrencies yet. If it’s a killer team though, in such a wide open field your odds get a lot better. Excited to watch.

  27. Paul Sanwald

    congratulations! for a while at my last job I was doing a ton of managing and not a ton of shipping code myself and I felt similarly. it’s important work, because by managing effectively you are enabling others, but it’s harder to quantify. if I had to guess at it, I’d guess that leading an investment and shipping a product feel similarl?

  28. howardlindzon

    Yoni from Etoro brought Bitcoin to my attention in 2009 i believe. told me to GET LONG. Anyways…I now always listen to Yoni and this trend is early.Also I LOVE how @warrenbuffitt has never heard of Bitcoin according to the WSJ. He also just signed up for Twitter 7 years later at $10 billion. He avoided the internet too.

    1. kidmercury

      buffett is not someone i admire, but he dissed the internet in 1999 and called it a bubble. he got that one right.

      1. jason wright

        the internet capital investment

        1. kidmercury

          i don’t understand your comment.

          1. jason wright

            internet – a bunch of computersbubble – human herd behavior

          2. kidmercury

            if you ever wish to communicate in sentences, perhaps we can have a conversation. until then, i’m afraid i don’t know wtf you are saying.

          3. jason wright

            356.73 °C

    2. LE

      “Also I LOVE how @warrenbuffitt has never heard of Bitcoin according to the WSJ”Most people have never heard of bitcoin. Now they will start to read stories about bitcoin.Once something has hit the WSJ and NYT it gets on the radar of all the (still existing) media outlets who will take it more seriously. Having gotten myself on the front page of the WSJ years ago next thing the same news was everywhere and I was contacted by everyone wanting to know more. A TV crew even showed up.Although I hope that coinbase (and bitcoin) has no security issues obviously they inevitably will. And this could be the best thing that happens to them actually (my “dead body parts on ebay” moment). A few large security breaches will get covered and then more people will know about it. And the negative will wear off. Enough of those and you can make soup.I’m not a huge sycophant of the avuncular investor but I can absolutely see why he was not on twitter and why he has never heard of bitcoin.

      1. LaVonne Reimer

        I was reveling in my new word for the day–schneid. But that last sentence there almost tops it using words I know but in such an elegant little sequence. I gotta memorize that!

      2. ShanaC

        i’ve seen bitcoin discussed in the NYTimes and WSJ before – and yet it still isn’t mainstreamed. I’m generally an early adopter when I can be to, and yet bitcoin throws me off as missing something fundamental about money – takes more than just great pr to bring in the normals

        1. LE

          “yet bitcoin throws me off as missing something fundamental about money”Explain.

          1. DavosBTC

            What Shana doesn’t realize is that it is her, and not Bitcoin, that is missing something fundamental about money.

          2. raycote

            NOT SO FAST !What fundament problems about money does bitcoin solve? What design goals must digital currency be structured around?i.e.What are our design goals for a workable digital currency?my guess is it must effectively mediate solving the social commerce equation belowpotential production = effective demandwhile, in the aggregate, maintaining an isomorphic mapping on to the substrate of goods an services that underpin its value

          3. M. Edward (Ed) Borasky

            Bitcoin solves the problem of people with too much CPU time on their hands. Think of Bitcoin as Bullshit-as-a-Service. “If you can’t dazzle them with brilliance, baffle them with Bitcoin.”

          4. JamesHRH

            transaction cost.I think Bitcoin is the digital version of gold. It has no underlying economic activity tied to it – it is not a currency.

          5. ShanaC

            Explain to me what I am missing?

          6. ShanaC

            A) that I need this digital wallet to transfer back and forth – seems inconvenient for me for all the kinds of buying I do.b) I’m not a believer in deflationary currencies – deflation to me seems to be linked to problems with overall economic growth. Moving towards a deflationary currency would encourage that

      3. takingpitches

        And Buffett is pretty upfront in his talks and writings that he does not understand a lot of things and sticks to those things he does understand. Nothing wrong with that 🙂

        1. fredwilson

          much respect for that. i try to emulate him.

    3. fredwilson

      i liked your post on this topic yesterday howard.

    4. Ron Finberg

      so when is Yoni going to finally get eToro into the bitcoin game, they’ve been talking about it, but so far no dice?

    5. JamesHRH

      A year ago, I posted on AVC about the “swimming pool Moms look” I got when i told 4 ladies b/t 35 & 45 that I tweeted.The herd takes a while to turn, but they turn together.

  29. Elia Freedman

    So that begs the question, Fred, what are the other emerging sectors you are keeping an eye on?

    1. jason wright

      nice try 🙂

      1. Elia Freedman

        Hey, doesn’t hurt to ask. 🙂

        1. jason wright

          i admire your spirit 🙂

    2. Donna Brewington White

      Just keep reading. You can generally see the breadcrumbs in retrospect. Fred’s enthusiasm seeps out.

      1. Elia Freedman

        Yes, I do that too but I thought I’d at least try to get him to discuss it!

        1. Donna Brewington White

          I thought it was a great question. Respect.

    3. fredwilson

      well i’ve written about most of them here at AVC in the past several months

  30. awaldstein

    Hey FredCongrats on this.A bit of a chide back to you that ‘only 6 exits’ is not by definition a negative metric. The size of the returns in relation to your entire portfolio is. From memory, these were some good

    1. fredwilson

      i was counting workload not returnsthe workload is pretty linear with number of dealscertainly not at all related to the amount of returns

      1. awaldstein

        So I figured.I beat myself up all the time on stuff that I shouldn’t so am sensitive to this.

        1. fredwilson

          me too. it’s a good thing to be sensitive about!

  31. ErikSchwartz

    Congratulations. You do like the stuff out of Neal Stephenson novels. The digital currency stuff is straight out of Cryptonomicon.

    1. fredwilson

      Stephenson, Christensen, Carlottathose are my headlights

      1. ShanaC

        carlotta is seriously the most readable academic ever.

  32. Ana Milicevic

    That’s an interesting word – schneid. I had not heard it before yet I find it very relatable: for the past two years I’ve been focusing on work that’s somewhat uncharacteristic for me (hello, big company land!) but that I do well, that give me a much needed change of perspective and the opportunity to flex a different set of professional muscles. This work and learning is what will enable the next chapter.It must feel really good to get back to hitting, if I may borrow the metaphor (hopefully not too poorly mangled).

  33. daryn

    Congrats Fred. I’ll admit, I haven’t delved much into the world of bitcoins – they’re a little too revolutionary for me, and to date all the people I know personally who are obsessing over the space have been on the shadier side.. not you of course! :)What would you (and everyone else here) say are the best starting places for understanding the concepts independent of the hype?

      1. takingpitches

        thanks for these links

  34. matthughes

    Nicely done Fred — very cool investment.

  35. LE

    Another way to get attention along the lines of my college adopters idea below would be to find a way to partner with some musicians/celebrities[1]/sports who could make a number of seats available for purchase by bitcoin.Thought of this when I just received a mailing from citi cards offering me the chance to get early tickets to the Rolling Stones (as if) or some other acts.[1] This sounds like a job for Louis CK. Speaking of comedy maybe they can get some people making jokes about bitcoin on SNL or latenight.

  36. Peter Fleckenstein

    Congrats Fred. I’d like to learn how to be “Off the Schneid” just like you were. You’ve had one hell of a Schneid run! 😉

  37. Dasher

    Many congratulations Fred! Really happy for you. The two years long Schneid (as you put it) may have more to do with the transition of web networks theme to new fundamental technologies. Look forward to following your new investments with interest. Wish you all the very best.

  38. ShanaC

    I still find bitcoin problematic as a cash replacement, there is nothing as liquid as a greenback

    1. M. Edward (Ed) Borasky

      I have a *lot* of problems with Bitcoin – the WSJ article highlighted the obvious and well-known risks. I think it’s another Groupon – something that sounds like win-win-win until it collapses because fanatics believed their own bullshit in the face of real-world skeptical humans. I can’t wait to see how Coinbase ‘pivots’ over the next few months when the real world slaps them in the face and kicks them in the groin.

      1. fredwilson

        well for one, its not a company

        1. FAKE GRIMLOCK


          1. M. Edward (Ed) Borasky

            That’s the *least* of Bitcoin’s problems. People do business with people they know, like and trust. For everyone else, there’s Bitcoin. 😉

  39. ShanaC

    in other news – this is the first time I have ever heard the word schneid….

  40. Boris Wertz

    Congrats, Fred – good to have you back in active investing mode.

    1. fredwilson

      thanks Boris

  41. Steven Kane

    Did you make the investment using Bitcoin? That is, did USV buy $X in Bitcoin then fund the company using Bitcoin? If not, why not?

    1. fredwilson

      not enough liquidity yet to do that. it would have taken us a few days to accumulate that much BTC and it would have taken Coinbase as long to convert it back. they can’t pay all of their bills in BTC yet.

  42. John Revay

    $5M Investment > Go Big

  43. reece

    congrats @fredwilson:disqusgood to see USV make a pick in Bitcoin… excited to see where it goes

  44. Uncle Sam

    Good luck with the Gov’t on any currency other than the dollar.Coinbase will be shut down eventually.

    1. kidmercury


  45. Sebastian Wain

    Fred, for in depth and technical articles about Bitcoins I recommend the following blog:

    1. jason wright

      can’t comment on the merits of Think’s case, but reading the complaint throws up little nuggets of information;”A Satoshi is defined as 10 ^ -8 BTC. Actually, it’s more accurate to say that a Bitcoin is defined as 10^8 Satoshis, as the Satoshi is the actual atomic unit of exchange.”the atomic unit is a Satoshi. good to know.As Fred has said many times, if you’re getting sued you must be doing something right.

  46. Peter Van Dijck

    Congrats! So no more “networks of engaged users”?

    1. fredwilson

      bitcoin is one big network of engaged users

  47. Chris Phenner

    If this kind of ‘hiatus’ is ‘The Schneid’ for you, it could be worse :)And if you read AVC and you read (for example) some of the ‘sample business plans’ (e.g., Bitcoin Bank) you’ve written about this year, my sense is that seeing USV invest in Bitcoin was a matter of time.I love the (totally unwarranted) guilt that pours through this post. It says to me that you care so much. Bitcoin will be FASCINATING to watch through your words.

    1. Donna Brewington White

      “Bitcoin will be FASCINATING to watch through your words.”Well said.

  48. BitcoinPoet

    Please build a bitcoin exchange that can handle more volume than mt gox. That is all.

    1. fredwilson

      there are some interesting candidates out there

  49. Greg Fodor

    I don’t have any strong opinions on bitcoin, but anything that increases the likelihood of Internet armchair-economist hyper-skeptics being forced to eat a little crow down the road is A-OK with me!

  50. cypherdoc

    i’m glad to see you come on board.

  51. Leapy

    I guess the trick is to be cryptocurrency-agnostic in Coinbase’ architecture. There will be multiple cryptocurrencies and there has to be plumbing between themselves and between these and the “real world”.A bit like intra-network VOIP calls terminating into the landline world. Low-friction termination is key.

    1. Leapy

      Now – imagine if it were possible to tweet purchasing power to my kids…

  52. davidhclark

    Conrats on the AWESOME investment, Fred!

  53. jason wright

    the quick way to propagate bitcoin would be for GOOG to accept ppc advert payments in bitcoins. that would complete the double helix matrix of the web’s dna.

  54. jason wright

    to bitcoin, or not to bitcoin, that is the question.the answer? “Why not go out on a limb? That’s where the fruit is.” – Mark Twain

  55. Alex Liddell

    i must agree congrats also,i wonder if those bitcoins will last,or does anyone think more and more will buy into this new programme

  56. John Revay

    Bitcoin Comes To SWIFT mention of of Coinbase when I scanned piece – still important