Compiled by: Shu Yu
Before 2013, Fred Wilson, a venture capitalist, had always dominated the field of consumer technology, Twitter 、 Zynga , Etsy, Tumblr and other consumer Internet companies familiar with energy efficiency can see his figure. But in May of that year, he made some minor adjustments.
"We have been thinking about and looking for investment opportunities in the field of Bitcoin for several years." Wilson wrote on the official website of Heguang Investment, which he co founded at that time, "Today, I am very happy to talk about our first investment in this field."
That investment was Coinbase's round A financing. They invested $5 million in Coinbase at a valuation of $20 million at a price of 20 cents per share.
Coinbase at that time had just graduated from incubator Y Combinator and had only received seed round financing before. But eight years later, with Coinbase landing on Wednesday NASDAQ This company has changed from a platform that only provides Bitcoin trading for 100000 investors to a hot giant unicorn, and Heguang Investment has also gained a market value of about 4.6 billion dollars from it. At that time, the fund invested in Coinbase came from a fund with a volume of 20 million dollars.
(Note: Fred Wilson) Wilson has always liked to try various emerging technology products, and Coinbase has conquered this customer with high-quality services before obtaining his investment. "I have bought Bitcoin on Coinbase and still keep it," he wrote.
Coinbase opened at $381 after its listing on NASDAQ on Wednesday, with a corresponding market value of about $100 billion (based on full circulation calculation). Based on the closing price of $328.28, the market value also reached $85.8 billion. Compared with the last round of private market financing carried out by the company in 2018, its valuation has increased by more than 10 times, and more than 4000 times when Heguang Investment entered the stock market 8 years ago.
Thanks to the high valuation in the open market and the accelerated growth of the digital economy, Coinbase has become another technology company that has created huge profits for venture capitalists. After the game company Roblox was directly listed in March this year, Altos Ventures held shares worth more than $9 billion. Snoflake's IPO last September created an initial revenue of more than 12 billion dollars for Stutter Hill Ventures.
Meanwhile, Snowflake, Unity DoorDash The shares of Aribnb and Aribnb (all of which were listed last year) totaled US $33 billion. Surprisingly, before these dazzling IPOs, this star venture capital company warned in March last year that the "black swan" event of the COVID-19 epidemic would destroy commercial activities, interrupt the supply chain and hinder financing.
Andreessen Horowitz holds the most shares
(Note: Mark Anderson) Although Heguang Investment led the initial financing of Coinbase, the company is not its largest external investor. This title belongs to Andreessen Horowitz, who holds about 9.7 billion shares of this Bitcoin Exchange in total (all information comes from regulatory documents. As Coinbase is directly listed, allowing investors to sell shares immediately, some companies may have sold for cash as of the closing.)
Andreessen Horowitz (also known as a16z) is an American private venture capital company founded by Mark Anderson and Ben Horowitz for 200 years.
Shortly after Heguang Investment invested in Coinbase, Andreessen Horowitz also saw the potential of the company. Seven months after the completion of the A round financing of Coinbase, the company led the investment of 25 million dollars in the B round financing, and invested in the cryptocurrency exchange at the price of $1 per share. Andreessen Horowitz continued to buy Coinbaae shares through a $1.5 billion fund and a fund focusing on late stage investment established in 2012, and even served as the "receiver" of Heguang Investment.
According to the regulatory documents of Coinbase, Andreessen Horowitz bought Coinbase shares worth $57.1 million from Heguang Investment in October 2019 at a price of $23 per share. About a year later, Heguang Investment sold $30 million worth of Coinbase shares to Andreessen Horowitz at a price of $28.83 per share. In total, Heguang Investment realized 28% of its Coinbase shares through five transactions, and its accumulated 3.52 million shares transferred to Andreessen Horowitz, with a combined market value of $1.2 billion.
Ribbit Capital, which focuses on the field of financial technology, and Heguang Investment jointly led the original round A financing. Now it has become the third largest external shareholder of the company, with 12 million shares, worth 3.9 billion dollars. Tiger Global Fund Institutional Venture Partners、 De Fengjie Growth Fund also holds a large number of its shares.
Buying Bitcoin with Cash on the Street
When Barry Schuler of Defengjie Growth Fund decided to invest in Coinbase in 2014, cryptocurrency has been widely recognized by the venture capital community, and even some more traditional Dune Road companies are paying close attention to this field. Schuler is most famous for his time at the helm of AOL. In fact, he had already bought Bitcoin about one year before he invested in Coinbase. Schuler found a person on Reddit and arranged to meet him behind a convenience store. Finally, Schuler bought $500 Bitcoin from that person.
(Note: Barry Schuler) "I gave him a lot of cash, and he transferred some Bitcoin to my mobile phone," Schuler said in an interview on Wednesday.
When Schuler purchased Bitcoin for the second time, he remitted the money to a bank account through Western Union remittance according to the instructions of the other party. Under such a model, the trust between the two sides can only be supported by faith.
"Obviously, if Bitcoin can only be purchased in this way, it will never enter the mainstream." Schuler said, "There must be an entrance. After completing these early works and doing some research, the value of companies like Coinbase will undoubtedly be revealed."
Schuler said that he hoped to lead the investment in round C financing, but he needed to ensure that Wilson and Coinbase co founders Brian Armstrong and Fred Ehrsam were ready to set up a board of directors, and implement sound regulatory provisions to protect investors. Not long ago, Schuler had just witnessed the Bitcoin Exchange Mt Gox filed for bankruptcy after being invaded by hackers. The incident at that time caused heavy losses to investors.
"Our legal team was very worried about the responsibility problem because of all kinds of chaos in the early days," Schuler said. "We believe that the team attaches great importance to regulatory issues, which has finally been recognized by everyone."
De Fengjie Growth Fund finally led a round of financing with a total amount of $75 million at a valuation of about $500 million ($2.76 per share). According to the price at that time, it has increased nearly 120 times. Schuler became the first board member of the company, but he resigned last August. Wilson and Marc Andreessen remain directors of Coinbase.
For Heguang Investment, Coinbase is the company's first effort in the field of cryptocurrency, and they also made several investments later. According to the official website information, the company also invested in 15 cryptocurrency companies after Coinbase, including professional funds such as Polychain Capital and MetaStable Capital.
Heguang Investment and Andreessen Horowitz also supported Dapper Labs, the producer of NBA Top Shot, which is one of the pioneers in the field of NFT (non homogenous token). Before entering the field of basketball exciting videos, the most famous product of Dapper Labs was the Bitcoin based game CryptoKitties.
"What is CryptoKitties?" Wilson wrote about this investment in 2018, "It is actually a lovely electronic pet cat. The Heguang investment team raised one last December, and now our cat has grown into this."
Under this sentence, he pasted a blue cartoon cat with brown stripes.
"Heguang Investment believes that digital collections are one of the many miracles promoted by the blockchain. Before the advent of this technology, this could not be achieved at all." Wilson wrote, "At present, we do not have much to talk about this investment. As time goes on, we will have more and more information to exchange."
Wilson has not commented on this.
Market divergence
On Thursday, the second day after the listing of Coinbase, the stock rose 6.4% at the opening, but then fell in shock. It closed at $322.75, down 1.68% from the previous trading day.
Coinbase's valuation when it landed on NASDAQ on Wednesday was as high as US $100 billion, which was a milestone event in the cryptocurrency industry. The share closed at $328.28 per share on the same day, and the corresponding valuation was $85.8 billion based on the fully diluted share capital.
It is reported that Cathie Wood, founder and CEO of Ark Invest, bought Coinbase stock worth about 245.9 million dollars on the first day of listing of the company, which caused strong response from investors. Wood has always looked at Bitcoin and believes that this cryptocurrency and other digital tokens may eventually become part of the investment portfolio of ordinary investors.
Coinbase has long been questioned by Wall Street giants and global regulators before, so its final listing is known as the "watershed" moment of cryptocurrency. However, it is worrisome that the volatility of digital assets and regulatory uncertainty may put pressure on the company's long-term share price, while the fierce competition from other companies such as Yuan'an, Kraken and Gemini is also worrisome.
Carol Alexander, a professor at the Business School of Sussex University, said in an interview with the media on Thursday: "From the perspective of regulation and operation, the risk management of Coinbase is much better than that of competitors."
"They also get considerable income from transaction fees and custody services. They have no real competitors on the centralized trading platform, because I think there is a big gap between Kraken and Gemini.
Coinbase estimates that the revenue in the first quarter of 2021 will be $1.8 billion, a 9-fold increase over the same period last year, while the profit will soar from $32 million to $730 million to $800 million. The number of monthly transaction users of Coinbase also increased from 2.8 million three months ago to 6.1 million.
Analysts from BTIG, a securities firm, gave Coinbase a "buy" rating on Thursday and set its target price at $500, 50% higher than Wednesday's closing price.
The company wrote in the research paper: "Coinbase is the most popular consumer oriented cryptocurrency exchange in the United States. We believe that with the continuous expansion of Bitcoin and other digital assets in the U.S. and international markets, it is expected to become the main beneficiary of the growing popularity of Bitcoin and other digital assets."
As of March 31, Coinbase had hosted 11.3% of the world's encryption assets. BTIG analysts said that this market share was the "core" of the company's optimistic expectations. They believe that if the market value of all cryptocurrencies (currently $2.2 trillion) continues to grow, "the company's growth space will be very huge".
Investors who are bullish on Bitcoin hope that more mainstream investors will enter the cryptocurrency field. Tesla Buying $1.5 billion of Bitcoin earlier this year, Morgan Stanley and Bank of New York Mellon Other major U.S. banks are also providing cryptocurrency services for their customers.
As the most popular digital currency, Bitcoin hit a record high of more than 64000 dollars before the listing of Coinbase on Wednesday, but it has fallen back since then, and the current transaction price is about 62400 dollars. Nevertheless, the price of Bitcoin has more than doubled since the beginning of this year.
However, although supporters of Bitcoin believe that it has a value storage function similar to gold, critics believe that it may be one of the largest bubbles in history.
Who wins the most
Look back to Coinbase itself. The high-profile listing of this company has created huge wealth for the big name venture capital mentioned above. For Andreessen Horowitz, who bought the stock from Heguang Investment two years ago, the income is even more amazing.
Although Heguang Investment led the A-round financing and became one of its largest shareholders, when Bitcoin plummeted in 2018 and 2019, the company sold about 1/4 of its shares, and the current shareholding ratio is only about 5% (including options).
In contrast, Andreessen Horowitz was a late investor, leading round B financing in 2013 and participating in the next round of financing about two years later. However, in the bear market of Bitcoin in 2018 and 2019, Andreessen Horowitz made a rival bid with Heguang Investment and other venture capital firms, and acquired a large number of Coinbase shares from him, eventually becoming the second largest shareholder of Coinbase after CEO and co-founder Armstrong, with a shareholding ratio of about 11%.
However, both the two star venture capitalists who are major shareholders of Coinbase and other slightly less famous Coinbase investors have gained a lot in this listing transaction. They include many corporate executives, such as Apoorva Mehta, CEO of Instacart, Max Levchin, co-founder and CEO of Affirm, PayPal, Emerson Collective of Laurene Powell Jobs, and Thomas Glocer, former CEO of Thomson Reuters. De Fengjie Growth Fund and IVP also bought the stock at a price of less than $10 per share.
In addition, because Coinbase is directly listed, early investors can sell shares immediately on the day of listing without being restricted by the restricted period like IPO, which makes the trading on that day particularly attractive. In fact, Coinbase turned into a downtrend after a short upswing after opening, which is enough to highlight the strong selling pressure.
Although the trading situation of early investors on the first day of listing of Coinbase is still unknown, their approximate returns can still be calculated according to the cost of initial investment listed in the regulatory documents of Coinbase. However, since some shareholders may have sold or bought some shares through the secondary market, the following data can only reflect the situation at the last moment before listing.
Combating Coinbase Wealth List:
Andreessen Horowitz
Chris Dixon, the general partner of the company, led their first investment in Coinbase at the end of 2013. At that time, Bitcoin was still a marginal currency, which posed huge risks to investors. Dixon eventually led the company's extensive investment in cryptocurrency with Katie Haun. Andreessen Horowitz launched the company's first cryptocurrency fund in 2018, with a total size of $300 million, led by Dixon. Since then, another cryptocurrency fund with a volume of $515 million has been launched, and it has made direct investment in cryptocurrencies such as Tekin and Ethereum, and has also taken a stake in the cryptocurrency lending company Compound and security service Anchorage. Both Haun and Andreessen Horowitz co-founder Mark Anderson served as directors of Coinbase.
Cost estimate: between 150 million and 200 million dollars.
Opening market value: $11.2 billion
Accumulated income: $11 billion
Heguang Investment
Wilson, partner of Heguang Investment, jointly led the A-round financing of Coinbase in the spring of 2013, which also became the company's first investment in cryptocurrency. They also subsequently participated in Round B and Round C financing. However, in the past few years, Heguang Investment has sold about 5.3 million Coinbase shares at a price of $23 to $28 per share (adjusted by the 6-to-1 stock split on May 2019), and the offerees include Andreessen Horowitz and Paradigm Fund. It is worth noting that the company's selling price was lower than the selling price of Coinbase CEO Armstrong at the end of 2018, which also indicates that Coinbase's share price in the private market was in a state of fluctuation at that time.
According to the documents submitted by Coinbase, 13.9 million shares of Heguang Investment have entered the direct listing process, and the market value calculated according to the opening price of the day is about $5 billion. Since most of its shares were bought in the early days, when the share price was about 20 cents to 2.76 dollars per share, the profit of Heguang Investment was also close to 5 billion dollars. But if the company did not sell its shares, its earnings should be close to $7 billion.
Cost estimate: $14 million to $18 million
Opening market value: $5.2 billion
Early selling: $137 million
Accumulated income: $5.3 billion
Paradigm
Coinbase co-founder Fred Ensam left his post in 2017 to found Paradigm, a company specializing in investing in cryptocurrencies. Paradigm was officially established in 2018, when it launched an investment vehicle of 750 million dollars to buy the cryptocurrency in full when Bitcoin was at a historical low. This low-key company became a top investor in the cryptocurrency field and bought heavily when others sold. Nsam is still a director of Coinbase.
Shareholding scale: 2.57 million Class A ordinary shares, most of which were purchased through the private market in 2019, and about 60 million dollars last year.
Opening market value: $979 million
Initialized Capital
Gary Tan of Initialized made his first investment in Coinbase in 2012, and the company joined the Y Combinator incubator that year. Initiated Capital focused on early stage investment, and then continued to buy in Series C and E financing. Initialized also invested in the blockchain infrastructure platform Bison Trials, which was acquired by Coinbase earlier this year. Four of the company's seven funds have invested in Coinbase or Bison Trails.
Cost estimate: $1.3 million
Opening market value: $800 million
Ribbit Capital
(Note: Mitch Marka) Ribbon Capital was founded by Micky Malka and focuses on financial technology companies. So far, it has invested in Credit Karma, Affirm, Wealthfront and other enterprises. The company invested in Coinbase in the A round of financing in 2013, and then participated in the subsequent three rounds of financing. Ribbit reduced its stake in Coinbase in 2019, selling 2.3 million shares at a price of $23 per share, with a total amount of about $57 million. However, the company still holds about 12 million shares worth 4.57 billion US dollars. Ribbit is also a major shareholder of Robinhood, and is likely to gain rich profits when the zero commission stock trading platform goes public later this year.
Cost estimate: up to $48 million
Opening market value: $4.6 billion
Tiger Global Fund
Tiger Global Fund led the investment in the latest round of financing of Coinbase, namely round E financing, in 2018, and valued the company at $8 billion at that time. Although the time of equity participation is relatively short, Tiger Global Fund is also expected to obtain a return of $900 million, providing more funds for this hedge fund to participate in other transactions. The company has participated in more than 60 transactions this year, far ahead of investment institutions. They also recently announced the establishment of a $6.7 billion venture capital fund, which ranks first in the industry history.
Cost estimate: $95 million
Opening market value: US $1 billion
