Even if you’ve been trading cryptocurrencies and studying blockchain technology for years, you may not have heard of David Marcus until just recently.
However, when the history of this still brand-new industry is written, he’s going to go down as one of the more important behind-the-scenes power brokers.
Last month, you see, Marcus was promoted at Facebook Inc. (Nasdaq: FB) to head the social networking giant’s “experimental” blockchain unit. (I’ll tell you more about Marcus’ background in a moment.)
There’s more going on here than just a nice promotion in a hot new field. Facebook’s move comes several months after Marcus joined the board of directors at Coinbase, an online exchange I’ve used more many years.
And I’m sure many of you use Coinbase as well.
After, the number of Coinbase users jumped exponentially throughout 2017 – from 400,000 in January to 4.3 million in December. Just check out this chart.
Marcus joined the board in that busy December – when Bitcoin and other e-currencies were reaching their all-time highs. Not so coincidently, shortly after that, Coinbase started an acquisition spree, pulling off four so far, and began reaching out to big-money institutional investors.
To me, while from the outside Coinbase may look like a new form of company, it’s really a classic Silicon Valley startup.
It’s even based in San Francisco – for why that’s important, take a look at this recent report.
And this post-Marcus series of moves tells me Coinbase is looking to go public.
Today, I’m going to show why these moves are so important for the future of crypto trading.
Today’s Startups Are Key to Tomorrow’s Profits
Let me explain why I pay so much attention to the world of startups. Fact is, the next generation of market leaders comes from that universe, especially when it comes to high tech.
Silicon Valley is famous as the place where companies can go from the drawing board to the public markets in just a few years’ time, minting plenty of new millionaires along the way.
Not only that, but I can use my experience with startups in finding market-crushing tech winners.
See, during my nearly 35 years in and around Silicon Valley, I’ve served as a strategic consultant to a dozen high-tech startups. And I sat on the advisory board of a respected venture-capital firm. Having lived in this world for many years, I continue to track VC funding to stay on the lookout for the Next Big Thing.
When I saw that Marcus had joined the Coinbase board, my VC “alarm” rang – and hard.
I knew right away the company was in good hands.
Before joining Facebook, Marcus held a series of senior management positions at fintech leader PayPal Holdings Inc. (Nasdaq: PYPL). He joined the firm after PayPal bought a mobile-payments startup that Marcus had founded.
He even served as PayPal’s president from 2012 to 2014. But then he joined Facebook as vice president for Messaging Products. He took over Facebook’s blockchain efforts last month.
And as it turns out, Marcus was one of two seasoned tech veterans to join Coinbase in December…
The COO Moves In
The firm also hired Asiff Hirji as president and chief operating officer.
Prior to joining Coinbase, Hirji was serving as an advisor/CEO coach at one of the startup’s VC backers, Sand Hill Road legend Andreessen Horowitz. But he’s best known for leading TD Ameritrade Holding Co. (NYSE: AMTD), the world’s largest online broker, from 2002 to 2007.
Now, I’ve not been privy to any specific talks at Coinbase. But from many years in Silicon Valley, it looks to me like the firm’s private investors have big plans for the crypto startup.
Bringing in a veteran tech leader to become COO is a clear sign of an intent to beef up operations with an eye toward a profitable exit. That could come as a decision to either go public – or be acquired by a much larger firm.
I also believe Coinbase’s recent mergers means its VC investors still, at this point, have plenty of faith in Brian Armstrong, Coinbase’s CEO and cofounder.
I first met Armstrong in 2013, during a series of visits with Bitcoin pioneers. I liked him – and knew he would make a big splash in the industry.
And that’s just how things have turned out. Coinbase now ranks as the largest crypto exchange and online wallet in the world. Armed with at least $250 million in venture funding, it has handled $150 billion in crypto trades in 32 countries and served 20 million users.
Put in that context, the four acquisitions Coinbase has made so far this year shows how much it wants to improve operations and scale up.
Of course, we can’t be certain when any such exit would take place. But we do know that Coinbase is making some savvy moves that will improve the company’s operations – and value.
Coinbase’s Four Big Buys
Let’s start with the May 23 news that Coinbase bought decentralized exchange platform Paradex for an undisclosed sum. Paradex offers users the ability to trade cryptos directly from their wallets, giving them full custodial rights over their digital coins and fiat capital.
Then on April 16, Coinbase said it had acquired Silicon Valley startup Earn.com, which offers Bitcoin payments to users who respond to emails and take on small tasks. Trade journals put the value of the merger at between $100 million and $120 million.
Coinbase says Earn.com will continue as a standalone business. It appears much of the motivation here was the chance to hire more talent – namely Earn.com’s cofounder and CEO, Balaji Srinivasan.
Also a former Andreessen Horowitz banker, Srinivasan became Coinbase’s chief technology officer.
Again in April, Coinbase bought Cipher Browser, a decentralized app browser and wallet for the Ethereum blockchain, for an undisclosed sum.
And in January, Coinbase bought Memo.AI to gain access to its engineering team of experts in online notes and instructions.
Plus, last month Coinbase announced that it’s launching new services designed to help institutional investors with one of the key issues keeping them back from jumping in to crytpos: asset custody. Called Coinbase Custody, it will allow investors to store a $10 million minimum investment with the exchange.
Coinbase is also partnering with a regulated broker-dealer to add a layer of financial reporting validation to meet U.S. Securities and Exchange Commission (SEC) requirements.
As you can see, Coinbase has no plans at all to rest on its laurels. In fact, this series of changes means the company is simultaneously beefing up its management, technology, and global online reach.
These are the kinds of moves savvy startups make so they can exit at a huge premium for their founders and early private investors.
Even better, Coinbase is literally becoming an institutional grade leader among crypto exchanges.
I believe the money and talent pouring into the startup shows the entire crypto sector is moving steadily higher and is destined to become a major part of mainstream financial services around the world.
It’s also one of the reasons I continue to enthusiastically recommend that tech investors should put at least some of their risk capital in such cryptos.