Coinbase: A New Beginning

Congratulations to Coinbase co-founders Brian Armstrong and Fred Ehrsam and the entire Coinbase team on their Direct Listing (Nasdaq: COIN). Today’s monumental listing represents a watershed moment not only for an incredible company but also an entire industry as Coinbase is the first major crypto company to go public.

Coinbase’s success is culminating as the largest US company opening in exchange history as well as one of the largest capital markets transactions in history. However, this is not an end; this is a new beginning. Moments like these, where an individual company’s success can also usher in new waves of innovation by unlocking the power of new protocol layers to billions of potential users, are few and far between in the technology industry. It’s been a thrill and an honor to support the Coinbase team in building such an amazing company. The most exciting part of working with Coinbase is knowing we are still in the very early days. There is so much more to do.

It has been said that great startups and venture investments are at the intersection of contrarian and right, that most tech breakthroughs start off looking like toys, and that you can’t divorce risk from reward. The story of crypto and Coinbase certainly embodies all three of these tech venture maxims.

When we initially invested in Coinbase, leading the $100M Series D in the summer of 2017, we wrote, “It’s difficult to predict precisely how digital currencies will evolve over the coming years, but we believe the existential question of whether digital currencies will flourish and grow around the globe has been answered. Digital currencies are here to stay.”

Our investment thesis was: Coinbase is and will continue to be the clear, well-regulated market leader and digital currencies are here to stay. It was simple. It was contrarian. It was risky. It turned out to be right.

As we look to Coinbase’s hypergrowth, we wanted to applaud several outstanding decisions management made that propelled the company to great heights:

Building a World-Class Leadership Team, Urgently and Patiently

Coinbase was already an incredibly high functioning team of 170 employees when we invested. But capturing the company’s market opportunity would require the company to scale in new directions. Brian, his team and the board worked to anticipate the future management needs of the company. Brian opened search processes with urgency but allowed them to play out patiently. Some roles were filled relatively quickly, while others required immense effort and ran longer than anticipated. One of the most awe-inspiring aspects of watching and helping Brian and the team build Coinbase was their consistency and dedication to a company-first mentality. Executives and managers at all levels often raised their hands to suggest narrowing their own responsibilities and augmenting the team with greater experience at scale.

Staying True to the Mission

Coinbase’s mission “is to increase economic freedom for the world.” While some companies lose their focus on their mission as they see commercial success, Coinbase’s clarity of vision has made it easy, even during their hypergrowth, to remain on course for True North. As a diversified crypto financial technology and consumer internet company, options for expansion are limitless and thus the tougher decisions have always been more about what not to do versus what else to do. This missionary focus is a meaningful competitive advantage. On Coinbase today you can invest, earn, send, pay, spend, save, stake, build, borrow, lend, vote and generally utilize crypto—all in a simple and approachable interface for consumers and institutions alike. As is often the case for transformational technology companies, simplicity hides massive complexity (e.g., the Google search bar). Coinbase is crypto-native but is not, and never has been, simply about buying and selling Bitcoin or other cryptocurrencies. It is about the future of crypto and the future of economic freedom. To think about the competitive advantage of being crypto-native, e-commerce is a good analogue. In the late 90s and into the 2000s, many brick and mortar retailers viewed e-commerce as simply adding a website to their existing operating models. Jeff Bezos and Amazon were driven by the specific opportunities presented by the internet and thus created the first internet-native retailer and as a result, competitors are still playing catch up, nearly 30 years later. Coinbase’s focus and crypto-nativity is a sustainable competitive advantage because the bleeding edge of technology, generally, and crypto, specifically, moves so quickly.

Investing for Growth

It’s no secret that crypto has been through bull and bear markets. While the industry is highly cyclical, the underlying trajectory is clear and each cycle brings new highs and more users. It is easy to seem bold in a bull market, but what one does during bear markets (“crypto winters”) is much less obvious. The safe and easy thing to do during these winters would have been to pull back from a growth orientation. That would have also been absolutely the wrong thing to do. While competitors’ commitment to crypto waxed and waned with crypto asset prices and press sentiment, Coinbase forged ahead undeterred. As a mission-driven company, Brian and the team maintain deep conviction in their work and have continuously invested for long-term growth, regardless of cycles and asset prices.

Under Brian’s leadership, Coinbase has flourished and is blazing trails for an entire global industry. It has been our privilege to partner with him and yet we know the entire team at Coinbase will continue to reach new heights in the years to come. We’re excited to help Brian continue to build the company and welcome new shareholders to the company. Here’s to new beginnings!

Tom Loverro, Todd Chaffee and Eric Liaw are Partners at IVP, a later-stage venture capital firm based in Menlo Park, CA.