I'm not sure the dip in interest from SV investors was really it. It's certainly true that investors won't throw money at bitcoin as easily as they would have in 2013-2014 when growth rates were off the charts. The past year or so has been slow for bitcoin from a consumer growth pov.

But that doesn't mean interest really dipped in absolute numbers, it's just different. Thing is, in 2013 the average quarter raised about $25m. In 2014 that went up to about $70m.

But guess what happened this quarter in 2015? Over $200m.

The difference is that in the past 2 years we saw lots of smaller seed/series a funding, lots of $1m, $5m, and a few $15-30m here and there. This quarter we saw a ton of <$2m, a single $15m, and two giant (for bitcoin) $75m and $120m investments. In other words we're already seeing some 'winners' and investors consolidating around those companies, and a lot of low-risk experimental seed rounds.

Buttercoin was never one of those winners. And in the exchange market, it's really hard to suddenly become one, when another company like Coinbase exists that's present in multiple markets, has engineers from places like Facebook and Airbnb, finance guys from Goldman Sachs, VPs from Paypal, $100m in funding and domination in various bitcoin product categories.

Especially when running an exchange, which is sort of a commodity. Branding etc aren't big differentiators. So let's look at what an exchange needs:

Bitcoin Exchanges need liquidity (uphill battle as a late-comer)

They need to allow buyers & sellers to easily move fiat money on and off the platform (uphill battle to convince a US bank to service you)

They need to comply with all the regulations (difficult for any money transmitter, as you need licenses in all but two states. Very hard to be a startup when you face $1-5m in legal costs to get licensed. Plus, states are coming out with Bitcoin regulations that double the regulatory load as they don't replace, but add to existing money transmitter regulations)

They need good security (this one ought to be a possibility for startups. But it's not easy, it slows you down and increases your costs to have expertise checking every part of your software. The old bitcoin companies could fall down and learn and iterate. The new startups have to get it right from day one.)

Buttercoin came a bit too late to the game, in a world with large existing exchanges, launched in one of the most difficult regulatory environments etc.

Beyond that, running a bitcoin exchange isn't very profitable at the moment unless 1) You're one of the big guys. 2) You're spending nothing on security, fancy ui, new products, customer service etc and run a 2-man show, where every dollar you earn is pretty much income. Problem is, becoming 1 can't be done anymore without 2, and doing 2 can't be done without large investments, and investors have no interest in backing Buttercoin over say Coinbase or Circle.

So Bitstamp is one of the larger exchanges in the world and has about 5k bitcoins in daily value. At a 0.25% fee (both to seller and buyer), they take half a percent on their volume. That's a little over $2m in yearly revenue. Now imagine that Coinbase has 60 employees, if you consider that the cost per employee (salary + office, equipment, training etc) in SF is $150k, that kind of budget just doesn't fly. Even with some investment your burn rate is too high.

I think Buttercoin must have had around 10 employees, $1.6m funding, less than $500k annual revenue and limited traction. Looking forward to what they'll do next because Buttercoin worked well and was a nice product, it must have been a good team.