Venture capitalist guru eyes bitcoin boon

The man credited with kickstarting some of the web's most successful startups has told CNBC that he is growing increasingly excited by the financial services sector, paying particular attention to the future of virtual currency bitcoin.

Saul Klein played a key role in starting up Lovefilm International, which has been dubbed the "Netflix of Europe", becoming the company's original CEO before it was acquired by Amazon in 2011 for a reported $317 million. He's also held a position at Skype, acquired by eBay, and was co-founder at startups Kano and Seedcamp.

But now, Klein told CNBC, he is being increasingly drawn to the world of virtual currencies and the potential they have for disrupting the mainstream with the advent of the smartphone.

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"It's very, very transformational," he said of bitcoin - the virtual currency which has already received attention from central banks, policymakers and regulators from around the globe.

"Bitcoin has its own ecosystem...(and) is light years ahead of the other (payment) networks."

Bitcoin is a "virtual" currency that allows users to exchange online credits for goods and services. While there is no central bank that issues them, bitcoins can be created online by using a computer to complete difficult tasks, a process known as mining. The digital currency has sparked interest by venture capitalists on both sides of the Atlantic despite running into regulatory issues and high volatility with its price.

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Klein admits to being "really fascinated" by bitcoin and its potential to offer little or no processing costs compared to mainstream payment firms such as Mastercard and Visa – although he concedes that it might take a long time for the currency to be as accepted as the credit card companies.

While Klein admits that it took a while for him to take the plunge in the world of cryptocurrencies, Index Ventures, the venture capital company he has recently joined as a partner, has already taken its first tentative step. In May, Index Ventures led a $30 million funding round for Atlanta-based bitcoin merchant processor BitPay.

And it won't stop there, Klein told CNBC, despite not being able to name the companies he is currently considering.

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There have been several venture capital companies that have already invested in bitcoin. Fortress Investment Group, a global investment firm based in lower Manhattan, acquired a stake in a bitcoin fund Pantera Bitcoin Partners back in March, along with California-based venture capitalists Benchmark and Ribbit Capital. In total, $113.2 million has flowed into bitcoin businesses in 2014, according to new data by industry website CoinDesk, which it says is 29 percent greater than the total amount for last year, which stood at $88 million.

And that 2014 number could grow significantly if Klein has his way. Index Ventures announced a new early stage $550 million fund on Wednesday, with the aim of building iconic companies in Europe, the U.S. and Israel.

As well as financial services, Index Ventures says the fund - the seventh early stage fund it has launched - will focus on the mobile consumer, enterprise infrastructure and self-generated content and marketplaces. Klein told CNBC that the fund would be looking to find and nurture the next Fortune 500 companies that would rise to prominence in the next 20 years.

"Entrepreneurs can come from anywhere," he said. "We're building the next generation of companies...which will have a transformational impact."