The recent developments with Buttercoin, a Bitcoin trading platform last week caught everyone by surprise. The company backed by heavyweights like Google Ventures, Y Combinator, Rothenberg Ventures etc. was forced to shut down its operations due to what they claim to be lack of funding. Bennett Hoffman and Cedric Dahl founded the Palo Alto, California based company in 2013. The company attracted a lot of attention and funding to rise through the ranks of Bitcoin based startups. Buttercoin later went on to become the first Bitcoin business to raise investment form a prominent Wall Street instruction – Wedbush Securities.
After reading all these things, one would wonder what could have possibly gone wrong with the company that had good things going for them. Ironically, those are the very things that forced Buttercoin to go under.
READ MORE: Buttercoin to Close its Doors next Friday
According to one of the founders Cedric, the company’s affiliation to big investment firms brought in too much structure into the company’s operations that it could not be flexible enough to adapt to the constantly changing Bitcoin ecosystem. In an interview with one of the publications, he confesses that raising venture capital to the tunes of $1.3 Million during the initial stages was a big tactical mistake on the startup’s part. He outlines the obvious problem with venture funds, where if the company can’t get something right the first time, then there won’t be any more funding whereas angel funds and seed funds are much more favorable for a startup dealing for a market filled with uncertainties.
Even though the company was doing great in terms of user acquisition and traction within a span of five months since it launched its services to the public, it was not enough to keep everyone satisfied and the company afloat at the same time. The huge drop in the Bitcoin value from over $1000 to less than $250 since the company’s fundraising rounds also added to the burden.
Learning from the Buttercoin’s Experience
In that candid interview, he cautions other Bitcoin startups from committing the same mistakes they did and to learn from Buttercoin’s experience.
Buttercoin shut down its operations on April 10. For those who have not removed Bitcoins from their account, will receive its worth in dollars. It will be transferred to the bank accounts linked to their respective Buttercoin accounts.
