Bitcoin Merchant Processor Raises Seed Capital

A group of angel investors including SecondMarket founder Barry Silbert has invested $510,000 in BitPay, a firm that processes payments for merchants in the digital currency Bitcoin.

BitPay says it plans to use the new capital to move its headquarters to Atlanta from Orlando and to hire up to five new employees. BitPay was self-funded during its startup phase and currently has two full-time employees, founders Anthony Gallippi and Stephen Pair.

Founded in 2011, BitPay lets businesses accept payments using Bitcoin, a decentralized, unregulated online currency that is an increasingly popular — and controversial — means of doing business online.

BitPay says its transaction volume has grown rapidly since its founding, with over $3 million processed in 2012.  The pace picked up after it signed WordPress, the blog publishing platform, as a customer.

"WordPress lit a fire, and we realized pretty quickly that we were going to need to expand," Gallippi says.

SecondMarket, which Silbert founded in 2004, is an online broker-dealer based in New York that creates markets for illiquid shares and alternative investments. This summer it launched a pilot program that lets community banks auction their shares.

BitPay's seed-capital investors also include Shakil Khan, who helped launch the tech startup Spotify. Roger Ver, who has backed several Bitcoin startups, made his investment in BitPay entirely in bitcoins, the firm says.

Gallippi cites Bitcoin's resistance to identity theft and online payment fraud as one reason the payment system is becoming more popular. As with cash, Bitcoin allows users to send money anonymously, and the transactions are irreversible without the receiver's consent.

"Businesses that do a lot of card-not-present transactions, especially over international borders, have a real incentive to use Bitcoin to prevent fraud," Gallippi says. "I think you're going to see Bitcoin and BitPay adopted by businesses first, like email was."