Coinbase already established itself as one of the biggest cryptocurrency exchanges in the world. It palace as the #2 option on the CoinMarketCap list shows that quite well - as does the company’s successful debut on the NASDAQ exchange earlier this year.
However, Coinbase has now started on an even bigger trend - using strategic investments to grow connections across crypto and the broader tech space.
When Coinbase grew into the limelight years back, many saw the company as nothing more than a crypto exchange. However, the San Francisco-based company understood that growth didn’t need to be just internal - it had to expand to other corporations as well. So, Coinbase Ventures was formed.
Coinbase Ventures was created in 2018 as a venture capital arm for the large exchange. At the time, crypto was still coming off its 2017 winter and trying to stabilize again. The exchange knew that the market would grow significantly, and placing itself at the forefront of things will help improve its influence even more.
Emilie Choi, who had only worked for Coinbase as an executive for a few months, drew up the idea and presented it to company chief executive Brian Armstrong. The idea was immediately accepted, and the venture capital arm was born.
Interestingly, Coinbase Ventures differs from other VC firms because it barely has any staff. Choi oversees the endeavor, but most of its operations are still run by Coinbase staff. Many of Coinbase Ventures’ investments also come from the activities of the company’s staff in the broader crypto ecosystem. Some could even be from Coinbase employees who decide to leave the company and do their own thing.
No Longer a Fringe Project
In the years since it launched, Coinbase Ventures has become more than just a side project for the exchange. Today, the VC firm has invested in over 150 companies, many of which are now going on to revolutionize the crypto industry as a whole.
This year alone, Coinbase Ventures has been on a tear. It especially gained prominence when it participated in the Series B funding round for FTX - a cryptocurrency derivatives exchange run by Sam Bankman-Fried. FTX has become one of the most popular exchanges in the industry, and it raised a stunning $900 million in a funding round in July with a valuation of $18 billion. Bankman-Fried himself is now a billionaire.
Besides FTX, Coinbase Ventures also participated in the funding round for CoinDCX - an Indian exchange. CoinDCX raised $90 million in its Series C funding round, becoming the first crypto business in India to become a unicorn. It is interesting as India is currently a country treading the “unfriendly” path for crypto. Regardless, companies like CoinDCX have been able to survive and are now raising massive capital.
If CoinDCX continues down this path, it could become one of the only few exchanges in India to be able to operate. Considering that the country has one of the largest populations in the world, CoinDCX could be on the groundwork of some serious growth - and Coinbase Ventures will see its bottom line surge with it.
There have been several other companies taking money from Coinbase Ventures. In the past week alone, names like Livepeer (an EThereum-based streaming network), MakersPalce (a nonfungible token market dedicated to digital art), and Alethea AI (a nonfungible token protocol) have all seen Coinbase Ventures’ cash as part of their funding rounds.
An Interesting Approach to Investments
So far, Coinbase Ventures has shown a willingness to invest in any area where money can be made. The company invests in its competitors, as well as aspects of the crypto market where it currently doesn’t have a stake.
The VC firm could also end up buying companies it invests in. Coinbase acquired Bison Trails, which focuses on building the right blockchain infrastructure for financial institutions.
"[The deal] will help drive one of the greatest transformations in finance in the last hundred years and will drive us closer to achieving our mission of creating an open financial system," Coinbase said, with sources claiming that the entire deal was worth about $80 million. Now, Coinbase has the infrastructure to deploy blockchain architecture and boost their operations.
For now, it seems too early to point out how Coinbase Ventures has performed in its investments. For one, many of the companies that it has backed have yet to publish their numbers - we also don’t know much about how much the company put into the investments in the first place.
Choi has also pointed out that Coinbase Ventures doesn’t track investment performance as a single factor. However, the numbers seen so far have been “incredible.” Of course, this doesn’t mean much without the numbers. However, Coinbase has managed to stand uniquely among crypto exchanges. No one handles investments as it does.