Early Coinbase investor explains why it's much more than an exchange

let's get more reaction to this landmark listing joining us now is steve jang founder and managing partner kindred ventures and an early coin based backer steve great to have you with us thanks for having me uh first of all did you sell did you sell any any shares no i did not you did not why not yeah you know i think this uh this company uh coinbase so we invested in 2014 and um the the diligence and the discipline that they've shown in building the company up even building the institutional aspects of their platform uh when it was uh crypto winter uh was impressive and i think that uh brian armstrong emily choi and team have created a company for the long haul now unlike other tech ipos that we've seen more recently including uber which uh we were an early investor in a lot of ipos are going public when uh they're at the maturity stage of their business i think coinbase is actually at the beginning of their journey still look they have 56 million user accounts but have a 7.2 billion annualized run rate on revenue there's so much headroom to this business and there's a decade or two ahead for them and i wanted to address um something that i heard uh brian uh bring out which is you know the question of whether you buy uh bitcoin or crypto versus coinbase and and my my short answer to to you is that do both uh in 2014 we bought uh bitcoin and we bought uh we invested in uh coinbase when it was uh not it was a non-consensus industry sector and the reason why we did that is that you know as venture investors we want to learn and we want to meet engineers and we want to get deep in the technology but from a purely investment perspective you want to invest in software companies as well that create platforms that that attack and transform so many different sectors so the question of whether or not it's an exchange or a brokerage or an asset manager or a lender or a crypto wallet company it's all of the above and that's the beauty of investing in software platforms was apple just a computer company was amazon just an online bookstore these companies for the long haul over two or three decades become so much more than that and that's why i think uh coinbase you know for us we look at this as a as a long-term journey with the company hey steve does this um you know this liquidity event whether it is an event or not obviously the company did not sell shares and taking cash but think about all the insiders or think about a lot of early investors who maybe this caps the end of their journey um in this investment do you think that there is the opportunity for just a whole host of new innovation in this crypto ecosystem to be unlocked and if so where are you looking in particular absolutely i mean like i said this is the very beginning of the crypto industry this direct listing you know it's it's monumental for for several reasons one i think it's the third largest tech public listing ever i think alibaba and facebook um one of the only two larger ones they didn't raise any capital for this direct listing uh they didn't need to they're deeply profitable and so i think one of the things that i'm excited about is this company is going to invest in not just a lot of the investment use cases but they're going to continue to push forward in enabling other companies and other startups in the sector we're investors in a bunch of ex coinbase uh uh employees that have created their own startups in d5 uh in nfts in uh uh crypto protocols as well and so there's a spawning of new entrepreneurship and new startup innovation that's happening just out of the coinbase employee base and what you're going to see moving forward as people you go through the natural cycle of liquidity and leaving off to do their own thing there's so they're already thousands of crypto startups with really talented people building amazing innovation right now but imagine over the next five years those people that will come from that coinbase platform that learning and it's been incredible for us to watch as investors to back them but it'll be incredible for the consumer and the institutional market to see all the products in decentralized finance nfts uh also in digital gold right bitcoin is digital gold essentially for the investor there's so many more use cases for bitcoin that haven't been delved into hey steve it's bk so i'm curious about coinbase right i listed off a whole bunch of different businesses that are in that they need to execute on and grow from your perspective watching them grow which of the sectors custody staking asset management lending what's the most promise for them and what do you think is going to be the kind of their breakout business over the next two years sure so all of those businesses you just described um uh are linked to each other right uh what what's underpinning that is assets under management having that trust and that security and also the software scale to manage all of that and if you look at what they did leading up to this they bought a prime brokerage they bought bison trails which was a node infrastructure company that allows other companies and other protocols uh to be able to manage blockchain uh technology uh so i think that they're going i think they're going into all of these areas because it's just additional product lines off of the same base they have 200 they have a quarter of a trillion dollars under management right now half of that is institutional now a lot of that is because of price appreciation and cryptocurrencies but if you want to have a platform that normalizes and abstracts away all the complexity of crypto coinbase is the only platform on the planet that does that even their competitors will tell you they owe it to coinbase that the crypto industry and their up their opportunity in their world is even possible and if you look at the assets under management coinbase is managing 10 of the totality of all crypto value on the planet today and so uh this is not only an important company for the industry but it's also one that's paving the way for the entire industry moving forward and that's what i'm i'm frankly interested and excited about is what comes after for the company sure uh a direct listing by nature is going to be it's like after a lot right after a six-month lock-up in a classic ipo there's going to be a lot of up and downs while you know people are uh fighting diversity and there's a lot of trading but long-term the long journey i think is is up into the right for this company um we're we're just about out of time and the producers are going to kill me but i want to ask you this one last question steve as it relates to coin base the stock and that is you know you had mentioned uh that a lot of the competitors or some similar platforms out there saying you know thanks to coinbase you made this all possible et cetera i mean is isn't that isn't that like what what robin hood robin who would have said oh thanks to fidelity or schwab for making it possible for us to be here robin hood ended up being a disrupter to other similar platforms um it can it came on the scene from out of nowhere from not traditional finance it managed to compress fees very rapidly and really change the way the industry does business and i wonder if you if that's a concern at all when it comes to coinbase i think it's a different analogy i think coinbase one uh is a software company first um it's it's a software platform that moves holds invests stakes lens against crypto all of these things uh you know it's an api driven company as well in terms of storage uh application development on on-ramping so what they're doing is they're working with the ecosystem not sort of in their own silo and so many of the startups many of the innovators that would disrupt an incumbent uh are actually working together independent upon coinbase and moving forward coinbase has ambitions to embrace the developer community and be a part of that and so i see it more as like a foundational platform for the industry rather than a silo to be disrupted i think it'll be a little bit different because they also are investing in a lot of startups so coinbase ventures which we partner with closely and co-invest with uh they're they're nurturing that ecosystem as well so i think it's a different mindset in this in this very special company steve great to get your thoughts thank you so much thank you steve jang of kindred ventures uh tim seymour where do you go with that and now by the way i i asked that same question to alexis ohanian this morning who is also an early coinbase investor co-founder of reddit uh he had a he had a very similar sort of answer he had diamond hands he said when it came to coinbase what do you think what do you think well it was a really thoughtful discussion and it kind of sounds a little bit like other big you know mega cap tech companies that have also i mean let's think of google think about uh you know laboratories and sidewalk labs and think of all their ventures and and and uh you know i i google is a lot more than just a search engine and at times i've seen major compression in in in that business or at least challenges to that business from other players so um you know what i'm hearing is is that this is a company that's going to continue to be again i think the quote was nurturing the uh the the digital ecosystem and the vc community within it um there's an incredible amount of intellectual uh call it capital within the firm and and that's moving on in some cases but not really um so i mean the argument here is that this is not just an exchange that this is part of the ethos of of uh and part of the highway of of the digital world and and i i think it remains to be seen that's obviously a vision um right now we have profitability we have metrics we have multiples that we we cling to as investors um that we try to drop companies in a particular box and i think people are struggling with this but clearly uh i think there's plenty of folks who think there's significant upside from here yeah i mean the metaphors to a google or an amazon are are fascinating and would imply you know blue skies for this company anyway brian kelly our thanks to you for joining us appreciate it my pleasure shepherd smith here thanks for watching cnbc on youtube

Channel: CNBC Television

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Id: KnWFhrhXlhE

Length: 10min 48sec (648 seconds)

Published: Wed Apr 14 2021