Wednesday, April 4, 2018

Crypto M&A: "Three Startups Coinbase May Have Its Eye On"

As we've noted* elsewhere, this is Andreessen Horowitz's 'good' cryptocurrency investment (at least in comparison with, now renamed which just seems sad) and could go public pretty much any time they choose to.

From PitchBook, March 28:
Coinbase, the cryptocurrency trading startup that brought bitcoin to the masses, looks ready to rev up its M&A activity with the recent hiring of Emilie Choi, who joins the first unicorn in the crypto space after an eight-year stint at LinkedIn as vice president and head of corporate development—a period that included its $26.2 billion acquisition by Microsoft in 2016.

Coinbase has raised $225 million in equity funding to date and was valued at $1.6 billion following its $108 million Series D last August. Choi has herself said that, in addition to cash and equity in the company, Coinbase could also throw cryptocurrency assets into the acquisition financing mix. Indeed, 40% of its current employees already get a slice of their compensation package meted out in bitcoin.

Earlier this year, Coinbase picked up most of the Memo engineering squad that created a Slackbot used by product development teams to organize notes and directives. Little wonder, then, that Choi (pictured) has floated further acqui-hires as her primary mandate. So, who might she have her eye on?

Past is prologue
The first two options could well be a pair of companies—dYdX and Basecoin-creator Intangible Labs—backed by former Coinbase product manager and Runa Capital principal, Nick Tomaino. His fund, 1confirmation, launched last summer and secured buy-in from Mark Cuban to back cryptographic assets. The third possibility, Radar Relay, provides a decentralized trading platform for Ethereum tokens.

When it comes to M&A, the general rule of thumb is to buy what you know. In the rapidly evolving world of crypto, that makes it more a matter of buying who you know, with the assumption that acquiring the right experience can lead to unlocking the mysteries of what the industry's future might look like.

For Choi, Tomaino's pair of investments could make for enticing purchases on that front.

In December, 1confirmation joined the likes of Chris Dixon at Andreessen Horowitz, Olaf Carlson-Wee at Polychain Capital and Coinbase's own CEO Brian Armstrong to back a roughly $2 million seed round for dYdX, which is looking to create the first-of-its-kind decentralized derivatives exchange. Among their goals for the funding: hiring engineers, designers and business operators. Leaving it to dYdX to positively ID talent in those areas could complement Choi's acqui-hire mission.

Earlier last year, 1confirmation joined a16z along with Bain Capital Ventures, Digital Currency Group, MetaStable Capital, Pantera Capital and Polychain Capital to back the startup behind the Basecoin token. The aim: Bake in central bank-like policy supports to create a crypto free from the notorious volatility of bitcoin and others. Access to that asset, and the team behind it, is likely too good to pass up. ...MUCH MORE
"Coinbase Strategy Teardown: How Coinbase Grew Into The King Midas Of Crypto Doing $1B In Revenue"
"Chaos Ensued. The Masseuse Panicked and Jumped Onto the Jet Ski with the Captain."