Bitcoin businesses attract Scandinavian investors

At the beginning of the month, Sweden's Creandum led a $14m series-A funding round for Stockolm-based cryptocurrency mining business KnCMiner.

Three weeks later, Danish venture firm Seed Capital invested a multi-million DKK figure likely to be less than DKK 10m in Coinify, a bitcoin payment services and trading company based in a Copenhagen suburb.

While bitcoin remains a hot topic in the media, the finance sector and with US venture capitalists, investments in the space in Europe have been few and far between.

Though the digital currency is considered highly volatile by many, Seed Capital investment manager Richard Breiter says the reason there has not been a flood of investments in Scandinavia is not because VCs are necessarily more hesitant to back bitcoin-related businesses. "We generally think fintech and bitcoin are exciting sectors. There are a lot of start-ups in the US, but there are not many in Denmark," he says, adding that he is only aware of "a couple".

Unlike KnCMiner and previous European bitcoin investments such as Passion Capital's Coinfloor and Octopus Investment's Elliptic, Coinify's main focus is payment services: providing products that allow merchants to accept bitcoin as payment in their physical and online shops.

According to Coinify, Seed Capital's investment is the first venture capital backing of a bitcoin payment services firm in Europe. "Coinify's position is quite strong because it has both merchant processing and an interface to the exchange so you can buy and sell bitcoin," says Breiter.

Nerdy currency
Digital currencies such as bitcoin, dogecoin and litecoin have yet to have their mainstream breakthroughs, despite substantial attention from the media and the tech industry.

However, bitcoin is slowly seeping through to the general public, as increasing amounts of merchants have begun accepting bitcoin as payment, and bitcoin ATMs have popped up in the trendier parts of cities such as London and Berlin.

Since it began operating in 2010, the number of clients using Coinify's services has grown to 7,000 – including both brick-and-mortar shops and online traders.

Breiter says the services KnCMiner and Coinify provide both feed the ecosystem that must be built for bitcoin to work. "Right now it is a little nerdy," he says. "It's definitely not mainstream to pay with bitcoin, but on the other hand you can't spend your bitcoins before there are shops willing to accept them, and places to exchange them to currency."

People dealing in bitcoin have so far mainly been speculators in the digital currency and early adopters. "The battle will be to make it more mainstream so it becomes a technology that Mr and Mrs Hansen can use, and we're not there yet. That is the big challenge the bitcoin ecosystem faces, as does Coinify," Breiter says.

For Coinify, the focus will now be on its payment gateway and expanding the company's reach in Scandinavia and possibly Europe, though the company does already have customers beyond the Nordic borders.

In the discussion of whether bitcoin is a fad hyped up by speculators looking to make a killing, and which will eventually implode, or a new technology "disrupting" the old guard of the financial services industry, Breiter and Seed Capital firmly side with the latter.

"I believe this is the beginning of it, and I believe there is a future for digital currency in general, because they can disrupt so many of the well-established industries," says Breiter. "I am sure there will also be a future for the types of services Coinify provides. Whether or not Coinify will ‘win' is a different matter, but Seed Capital believes it will, and this is definitely a sector we will only see more of in the future."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Nordics
• Technology
• Bitcoin
• Denmark
• Sweden
• Creandum
• Passion Capital
• Octopus Investments
• Top story