The truth about Bitcoin investment

The author of this article is Thomas Tongutz, a co-partner of Redpoint Ventures, who focuses on software investment. Before joining Redpoint, Tongutz worked as a project manager for Google Ads. After completing his undergraduate degree in mechanical engineering and a master's degree in engineering management, Tongutz co-founded a small SaaS service company with his friends, mainly providing SaaS software support services for law firms.

There is a report titled "The Fastest Growing Areas of Startup Investment in 2015", which points out that investment in the Bitcoin field ranks at the top. In response to this, I have been asked many times. In which field does Bitcoin investment mainly appear? At which stage? How much investment do Bitcoin companies ultimately receive? I used the Crunchbase database to analyze Bitcoin investment patterns over the past four years.

The above chart shows that Bitcoin investment really started in 2013. In 2014, the total investment value of Bitcoin soared to $3.5 billion. In June 2015, Bitcoin startups had raised more than $4 billion in investment. These data show that 2015 will be the best time to invest in Bitcoin.

As for the stage of investment, I think the terms "first round" and "second round" are too vague to describe the stage of a company when raising funds. I instead divide the investment value by amount, such as less than $5 million, less than $30 million, etc. Early Bitcoin investment reached its limit in 2014, with more than 200 rounds of less than $5 million and 200 rounds of $30 million. Today, the former is down 55%, while the latter is down 87%.

Million-dollar rounds have taken their place. 73% of all investments in bitcoin companies were over $30 million. As early bitcoin companies continue to mature, early-stage winners are benefiting from a vibrant late-stage investment market. Meanwhile, early-stage investors appear to be waiting to see how these companies progress.

There seems to be a lot of debate about the future of Bitcoin. In countries like Argentina, Bitcoin has become an important part of the daily economy. In the United States, Bitcoin accounts for a relatively small share. Some people point out that the chain reaction brought about by technological innovation and this decentralized, highly secure transaction technology may be counterproductive, but it is too early to draw a conclusion.

I believe Bitcoin will be a transformative technology. But it will take time to bring this innovation to market and for people to understand and appreciate its value.

But at least for now, the early winners of bitcoin startups are getting a lot of late-stage funding, even though the market for early-stage companies is no bigger today than it was in 2014.