Mike Volpi, the former Cisco Systems executive who has been investing with Index Ventures since 2009, is known mostly as a backer of B2B startups.
But lately he has been getting involved in bitcoin companies like Palo Alto-based Xapo, which he co-led a $20 million funding round on last week with Reid Hoffman of Greylock Partners.
We spoke recently about that and other investments he has made, as well as worries about tech bubbles. He also passed on the lessons he learned at Cisco that he passes on to startups.
Among other Silicon Valley-area companies Volpi has backed are Pure Storage, Arista Networks, Hortonworks and Zuora.
At Cisco, Volpi was chief strategy officer during its high-growth phase in the 1990s when he oversaw the acquisition of 70 companies in seven years.
The following Q&A has been edited for clarity and length.
I read your blog about the investment in bitcoin and I get the sense that you think that the currency is a bit misunderstood in the United States. Why?
I wouldnot quite say that it is misunderstood. But your perspective is going to be different on currency and virtual currency if you are in a place like the United States where you have credit cards that are readily available, bank accounts and banks that you can trust, you can transfer money from one place to another, and you have a government that you trust in that runs a healthy and stable monetary policy.
There is a very important role for bitcoin to play here in the United States but it is more vital in other parts of the world where a lot of people don’t have bank accounts or, if they do, they don’t put a lot of money in them.
It is very hard for them to have credit records and get access to credit. Transferring money is either very difficult to do or it may cost them a big percentage of the value of the transaction to make a transfer.
However, it is relevant to note that banking fees are still relatively high and operations execution are very slow, as well as credit cards and online banking security remain low.
Contrary to Bitcoin, which offers very low fees, with operations taking 10 min and with various operators able to provide higher security than payment cards providers with several authentification factors (including IP address restriction and secret sentence) like for instance Blockchain.info.
Moreover, there are state-of-the-art vault and cold storage solutions offered by companies such as Xapo, where your bitcoins are also fully insured.