place for people everywhere
to store and spend their coins.
Unlike the previous startups
that Wences had started and
sold, this one was intended to
be his lifework—the last
company he would ever
found. He called it Xapo, a
name that he and Fede settled
on after looking for a simple,
distinctive word for which the
dot-com domain name was
available.
Wences initially had little
interest in taking money from
investors for this company.
He didn’t want to give control
to anyone else and he had
enough money to pay for it
all himself. But over the fall
of
2013,
his
friends
convinced him that starting a
company without investors
would deprive him of all the
connections and marketing
possibilities
that
funders
bring.
The value of having
investors became very clear
to Wences the same day that
he completed the sale of
Lemon,
when
Coinbase
announced that it had raised
$25 million from Andreessen
Horowitz
to
grow
the
company. It was the biggest
public investment in a Bitcoin
company, by a good margin,
and Coinbase reaped the
reward in new customers and
attention.
A few days after this,
Wences journeyed to San
Francisco
to
meet
with
Benchmark, a venture-capital
firm that had been vying with
Andreessen
Horowitz
to
invest in Coinbase. Wences
had been friendly with the
Benchmark partners for some
time, and he had hoped he
might find an opportunity to
work with them. One of them
was the brother-in-law of
Fortress’s Pete Briger.
The
meeting
at
Benchmark’s
offices
was
unlike Wences’s earlier fund-
raising efforts. This time, he
laid out what he needed from
Benchmark to make it worth
his while. After Wences’s
presentation, the Benchmark
team huddled briefly and then
offered to put $10 million
into
Wences’s
company,
valuing it at $50 million. As
in all of Wences’s past
startups, there was no term
sheet, just a handshake.
When Wences walked
out, he immediately called his
old friend Micky Malka to
tell him the exciting news.
Micky responded not with
excitement, but instead with
pique,
because
Wences
hadn’t offered Micky and his
firm, Ribbit, a place in the
deal. After demanding an
opportunity
to
put
$10
million
into
Wences’s
company,
Micky
finally
settled for $5 million. A short
while after that, Pete Briger
called to demand a place in
the round too, and Wences
agreed to let him put in $5
million. This left Wences
with $20 million before he
even
had
a
functioning
business.
DURING HIS TWO-WEEK stay in
the United States, Bobby Lee
visited his brother Charlie,
who had quit his job at
Google over the summer and
joined Coinbase to work on
Bitcoin
full-time.
Bobby
showed up at the company’s
makeshift
offices
in
a
converted
three-bedroom
apartment a day after the
company announced the $25
million
investment
from
Andreessen Horowitz.
Charlie Lee didn’t need to
work another day of his life.
Litecoin,
his
alternative
cryptocurrency, which was a
slightly faster, lightweight
version of Bitcoin, had now
become
the
second-most-
popular cryptocurrency in
what
was
becoming
an
increasingly crowded field of
Bitcoin knockoffs. In part
because
of
Charlie’s
transparency in launching
Litecoin, people trusted it and
were betting that it would be,
as Charlie had intended, the
silver to Bitcoin’s gold.
In November the value of
all the outstanding Litecoins
had briefly surpassed $1
billion.
The
particular
computer chips that were
good for mining Litecoins
were sold out at nearly every
online electronics retailer.
Charlie had been mining
Litecoins since the beginning,
so he owned a sizable number
of the coins, along with his
significant Bitcoin holdings.
His work at Coinbase was
primarily due to his desire to
help bring virtual currencies
into the mainstream.
Charlie saw that Bitcoin
had done similarly good
things for Bobby. Despite all
the
long
hours
and
uncertainty
Bobby
had
endured over the last few
months, his position as a
CEO, after years in middle
management, had given him a
confidence and self-assurance
that seemed to outweigh the
stresses of the job.
Bobby had spent much of
his time in the United States
looking for new investors and
partners for BTC China. But
he was still trying to figure
out what the People’s Bank of
China statement on December
5 would mean for his
company moving forward.
On Bobby’s exchange, the
price of Bitcoin had fallen
from the all-time highs, but it
stabilized at around 5,500
yuan, or $875, on Western
exchanges. Bobby learned
from his staff that the
December 5 statement had
come
about
after
the
enormous price spike in
November. Several reports
had gone up to the State
Council,
the
highest
administrative authority in
China, and one of the four
vice premiers of the council
had ordered the People’s
Bank to do something about
the situation. As is generally
the case in China, the whole
process was enshrouded in
secrecy and seemingly driven
by officials trying to protect
their backs.
On Bobby’s last night in
the
United
States,
his
government-relations
guru,
Ling Kang, called again. The
payment processor Tencent
had just called BTC China to
explain that Tencent was
going to stop doing business
with Bobby’s exchange in the
next few days. Bobby was
furious.
Tencent
had
previously agreed to provide
at least a ten-day notice of
any changes. That night, he
called everyone he could
think of to argue his case. But
he and Ling heard back that
Tencent had gotten orders
directly from the local branch
of the People’s Bank and
there was no fighting it.
When Bobby flew back to
China the next day, everyone
at
his
company
was
scrambling to get a new
payment processor set up
before Tencent shut the
company off on Sunday at