At Menlo Ventures, we seek to invest in companies leveraging disruptive technologies (internally, we call them “ingredients”) to offer high utility services to the world. In that vein, we have been spending a lot of time in “crypto”—trying to understand the implications of ledger technology, cryptocurrencies, and token offerings. As with any technological or process breakthrough, we see a lot of hype and uncertainty surrounding the space, but beneath the confusion, there exists significant utility.
We believe cryptocurrencies could prove to have enduring value for a sizable portion of the world economy, where financial institutions are underdeveloped or there is little confidence in governments’ management of fiat currency. Additionally, in transforming the way value is stored and transmitted, cryptocurrencies have potentially massive implications on how businesses make and receive payments.
Among Menlo’s most recent investments, BitPay is enabling thousands of merchants – from small businesses to Microsoft – to accept cryptocurrencies for both online sales and B2B payments. Its treasury management solution also allows businesses that hold funds in foreign currencies to repatriate those funds almost instantly, and for a fraction of the price that they would otherwise face. For consumers, BitPay makes spending on international products and services that much easier, either through online checkout or a prepaid debit card. The user can load cryptocurrencies through one of these mechanisms, then spend the funds in USD for free. This process not only saves foreign travelers from expensive FX fees, but also gives cardholders the ability to spend their funds anywhere merchants accept Visa.
Crossborder e-commerce is growing more than 30 percent annually, while global crossborder B2B payment volume exceeds $160 trillion per year; yet, businesses involved in crossborder trade face several barriers to making and receiving payments. Accepting credit cards is expensive, typically costing at least 3 percent. Crossborder transactions are even more expensive and insecure thanks to additional FX costs, and fraud and chargeback risk. Wires and checks are not much better: international wire costs can easily reach $50 for the sender, while receiving merchants can get hit with potentially several hundred basis points of FX conversion fees along with the cumbersome process of a wire transfer through a banking system. Indeed, these costs amount to more than $360 billion in annual revenue for correspondent banks.
At the end of the day, what merchants want is simple: to be able to sell products to their customers and get paid quickly and cheaply. BitPay lets them do just that. As a firm, Menlo loves the stickiness of payment service providers, and BitPay is perfectly suited to grow as a market leader alongside the merchants it’s helping power. We’ve been very impressed by CEO Stephen Pair, and his team’s ability to profitably grow through the roller-coaster ride of Bitcoin over the past several years. We are also excited about the company’s ambition. BitPay is not betting on any one currency—it is already supporting Bitcoin Cash payments, and will strategically support additional cryptocurrencies, giving promising new currencies a broad market for acceptance and concurrently increasing BitPay’s own addressable market.
Menlo is proud to back BitPay’s mission to make crossborder payments faster, cheaper, and more convenient for consumers and merchants. And we look forward to continue investing in crypto companies that are solving real world pain points or expanding the cryptocurrency ecosystem.