Bitcoin startup sets funding record for currency

image credit: BTC Keychain

Xapo, a provider of secure online storage for bitcoins, said it doubled the amount of money it has raised from investors to $40 million, the most gathered by a startup focused on the virtual currency.

Greylock Partners and Index Ventures led the $20 million funding round, with additional investments by Emergence Capital Partners, PayPal Inc. co-founder Max Levchin, venture capitalist Yuri Milner, and Yahoo! Inc. co-founder Jerry Yang. The investors join earlier backers Benchmark Capital, Fortress Investment Group LLC and Ribbit Capital. Greylock’s Reid Hoffman and Index’s Mike Volpi will join Xapo as board observers.

Bitcoin startups are amassing funds after the virtual currency captured the attention of investors, technologists and governments last year, fueling a rally that drove it to a record of about $1,200 from $12. In May, bitcoin-payment service BitPay Inc. raised $30 million. Last week, venture capitalist Tim Draper said he bought almost 30,000 bitcoins, worth more than $18 million at current market prices.

“Now you see almost all VCs in Silicon Valley invested in bitcoin,” Wences Casares, Xapo’s founder and chief executive officer, said in an interview. “It’s hard to find a top-tier firm that’s not in bitcoin, and it’s a big shift and a very positive change for bitcoin.”

Xapo plans to use the funding to double its workforce of about 30 people within months and develop products, he said. The company already offers secure bitcoin storage and wallet services, and by the end of this month plans to introduce a debit card for use at retail stores.

“We want to be the leading bitcoin bank,” Casares said. “If you have dollars, you keep them with Bank of America, and if you have bitcoins, you keep them with Xapo.”

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