Union Square Ventures, Other Investors Pump $5M Into Bitcoin Startup Coinbase

"We believe that Bitcoin represents something fundamental and powerful" and not just a nerd fad.

"Vires in Numeris" lol (Photo: Flickr/Zach Copley)

“Vires in Numeris” lol (Photo: Flickr/Zach Copley)

Fred Wilson has just broken his two-year, no-investment streak. The Wall Street Journal reports Union Square Ventures is leading a $5 million round in Y Combinator-backed Coinbase, which allows you to buy, store and pay with Bitcoin. Also participating: Ribbit Capital, SV Angel and Funders Club.

These being the self-styled gentleman scholars of USV, there’s some philosophizing to justify the investment. Mr. Wilson, who took point on the deal, explained the move in a blog post:

“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.”

“We believe that we are in the very early days of Bitcoin and other digital currencies,” he added.

It’s the largest venture capital investment in the space to-date, eclipsing the $2 million OpenCoin round that included Andreessen Horowitz. Coinbase told the Journal the money will go to operating costs and hiring. Cofounder Fred Ehrsam explained, “We need 10 people yesterday.” Earlier this week the company announced it was processing $15 million per week in Bitcoin deals, and about 300 merchants have signed on to the platform.

So if you notice more dudes trying to make it rain Bitcoins in clubs across Manhattan, you know who to blame.