FORTUNE -- Andreessen Horowitz is buying into the growing market for bitcoins.
The prominent Silicon Valley venture capital firm co-led by Marc Andreessen, the Netscape co-founder, is investing about $20 million into Coinbase, which provides "wallets" for the digital currency. The wallets allow users to buy and sell bitcoins as well as spend them.
The firm is the lead investor in a "Series B" round funding for Coinbase. Other investors, including Union Square Ventures and Ribbit Capital, are kicking in an additional $5 million. Coinbase is getting a total of $25 million in new funding.
Union Square was part of an earlier round of financing that raised $5 million for Coinbase. As part of the current deal, Andreessen Horowitz's Chris Dixon and Union Square's Fred Wilson will be joining Coinbase's board of directors.
MORE: Bitcoin's tipping point
Coinbase marks Andreessen Horowitz's first major investment into a bitcoin-related company. Dixon said the timing of the investment was in part motivated by a recent Senate hearing that produced statements from Fed Chairman Ben Bernanke and other regulators that seemed to back the virtual currency. But Dixon said he has been watching the bitcoin market for a while.
Back in October, Andreessen said that the firm was scoping out investments. At Fortune's Brainstorm Tech this summer, the VC firm's other co-founder Ben Horowitz said he thought bitcoins would go mainstream.
"The existing way to pay for things online is broken," says Dixon. "It has high fees, and the fact that fraud is such a problem shows that the technology that banks, credit cards, PayPal, and others use is based on antiquated technology."
Coinbase has 600,000 users, who can link their bank account to a virtual wallet to buy bitcoins. Other services require users to wire cash to foreign countries in order to buy the digital currency. The company has also signed up 16,000 merchants that will accept bitcoins through Coinbase's payment system.
Dixon says Coinbase has worked with regulators and banks to ensure that its system is safe. Dixon says the company is an example of how the bitcoin marketplace is maturing. "Lots of hobbyists have been interested in bitcoin for a while, but what you are seeing now is a more professional class of Silicon Valley-style entrepreneurs getting involved," says Dixon. "I expect and hope to see more companies started."
More and more people appear to be betting on the success of bitcoins. The value of the currency has recently soared. But Dixon says his firm is excited about bitcoin as a technological advance, not as a currency play. Dixon says Andreessen Horowitz hasn't put money into actual bitcoins.
"We don't think people should be putting their savings in bitcoins."
The stock market has gotten too efficient for small caps to thrive, and it's costing America jobs. But there is a solution.
By Scott Kupor
FORTUNE -- As Americans, we love efficiency. In huge numbers, and with our wallets wide open, we rush toward anything that drives lower cost, highly liquid markets. Think about it. McDonald's, Amazon and Costco dominate their industries with some combination of huge choice, overall lower prices MORENov 11, 2013 1:51 PM ET
Head of Andreessen Horowitz's seed program sets out on his own.
FORTUNE -- Ronny Conway is stepping down as a partner with venture capital firm Andreessen Horowitz, Fortune has learned. He is expected to begin raising his own venture capital fund, focused on early-stage tech investments.
Conway is the son of legendary Silicon Valley angel investor Ron Conway, and was the first outside employee hired by Andreessen Horowitz after raising its inaugural MOREDan Primack - Sep 26, 2013 4:00 PM ET
Larry Summers is a special advisor to Andreessen Horowitz. So how did it fare today?
FORTUNE -- There has been lots of talk today about the Summers Rally, with the stock markets spiking on word that former U.S. Treasury Secretary Larry Summers has removed himself from consideration to be the next Federal Reserve chairman.
Things have cooled off a bit this afternoon, but the Dow still ended up 118 points.
So I was MOREDan Primack - Sep 16, 2013 4:12 PM ET
Car-sharing expands to the enteprise.
FORTUNE -- Clément Gires believes the company car model is broken, and he's hoping that former Microsoft Windows boss Steven Sinofsky can help him fix it.
Gires is co-founder of Local Motion, a Silicon Valley startup that was originally formed to develop shared electric cars (i.e., ones sold to places rather than to people). When the team began to realize how long it would take to manufacture their vehicles MOREDan Primack - Aug 28, 2013 12:36 PM ET
What startups should do if the environment is worse than expected
By Ben Horowitz
"Hope that you feel this Feel this way forever You can plan a pretty picnic But you can't predict the weather."
--Outkast, Ms. Jackson
FORTUNE -- If you run a startup and are currently raising money, you probably planned for a somewhat different fundraising environment than the one you find yourself in today. You probably thought that valuations would be roughly MOREJul 15, 2013 2:29 PM ET
FORTUNE -- Ride-sharing service Lyft today is announcing $60 million in new venture capital funding led by Andreessen Horowitz. So I spent some time on the phone with Andreessen Horowitz partner Scott Weiss to learn why the firm is putting so much money into a company that faces so many challenges.
What follows is an edited transcript of our conversation:
FORTUNE: There is a lot of money going into this general space MOREDan Primack - May 23, 2013 12:02 PM ET
Startup crowdfunding is due to change drastically this year. Here's advice from Ronny Conway, Ben Horowitz, Kevin Rose, and others.
By Kurt Wagner, reporter
FORTUNE -- Investing successfully in startups takes more than a pocketful of cash. That's the message venture capitalists and securities regulators hope to transmit to those interested in equity-based crowdfunding, a new form of investing currently awaiting regulatory approval. Ordinary investors will soon have the opportunity to invest MOREFeb 25, 2013 10:30 AM ET
DataGravity wants to automate big data for small companies.
FORTUNE -- The hottest big data startup may not be in Silicon Valley. Or New York or Boston.
Try Nashua, New Hampshire.
That's the home base of DataGravity, which today announced $30 million in new VC funding led by Andreessen Horowitz. The company is basically designing an automated platform that would help small and mid-sized businesses get value from the reams of incoming data. MOREDan Primack - Jan 29, 2013 12:26 PM ET
Physical retailers aren't long for this world
By Jeff Jordan, contributor
If you're a physical retailer and you sell the same SKU's as Amazon, you will not have a Happy Holiday this season.
Starting with the hoopla around Black Friday and Cyber Monday, the media has been full of stories on how physical retailers plan to beat back the competitive pressure from online retailers. They detail a number of strategies, such as expanding their MOREDec 13, 2012 2:23 PM ET
|Light bulb ban set to take effect|
|Netflix finds plenty of binge watching, but little guilt|
|Military retirees: You betrayed us, Congress|
|Military families worry about skyrocketing grocery bill|
|Average American inheritance: $177,000|