Whether Bitcoin really is a digital cash revolution or just a fad, it has been intensely lucrative for a Stockholm-based company called KnCMiner.
KnCMiner makes specialized computers that create bitcoins, a process known as mining. The company burst onto the scene in the spring of 2013 and it just raised a $14 million Series A investment led by Nordic VC firm Creandum.
This puts KnCMiner in the rare camp of Bitcoin-related companies that have raised over $10 million in VC funds. It joins others like BitPay (32.5 Million in 3 rounds), Coinbase ($31.7 Million in 3 rounds) and Xapo ($60 Million in 2 rounds).
Mining these coins involves solving a series of difficult cryptography math problems. The typical home PC doesn’t have the computational power to do that. You need a specially designed computer. These computers do only one job: mine for coins.
And they cost a pretty penny (payable in Bitcoin of course!): $3,500-$7,000.
We were surprised to learn that KnCMiner sold a stake of its company for $14 million (it wouldn’t tell us how big of a stake) because the company seemed to be rolling in cash from its own operations. In November, when it launched a new mining computer, that computer sold out in four days, generating $3 million in revenue, the company told us.
In April, when it launched a new incarnation of the machine, one capable of mining digital currency alternatives like Dogecoin, those sold out in a month and generated $12 million.
All told the company had sales of $45 million in 2013, with total revenue of about $110 million since it launched less than two years ago.
But it had good reason to raise the cash. It’s trying to move from selling PC hardware to creating a cloud computing service. This makes mining more affordable for the little guy/gal that can’t continually buy new $5,000 machines every few months as technology improves.
People can instead contract for hours of bitcoin mining on a subscription service. Prices start at $2,000 for a six month subscription. In theory, that will pay for itself with bitcoins mined.
The company is also offering a cloud bitcoin wallet service that manage transactions, and it has plans for more such services.
“We are building the payment processor of the future. It’s a global marketplace now and we are on our way to be able to provide a wealth of new services. Also, we are already exploring a Series B because here at KnC we operate at Bitcoin speed,” says Sam Cole, KnCMiner co-founder.