The U.S. is one of the leading countries that are fast-adopting cryptocurrency and facilitating the growth of the newfound industry, but it also requires every crypto entity to comply with the law as well as the policymakers. This makes the U.S. the go-to destination for every crypto entrepreneur.
Coinbase is the best and fastest gateway for crypto outsiders to access the U.S. market. Its venture arm, Coinbase Ventures, plays as the crypto hunters in the forest. And in this article, we will walk you through Coinbase Ventures, including the overview, the portfolio, the thesis, and all about its investments.
What is Coinbase Ventures?
Coinbase Ventures is the venture investment arm of Coinbase company that seeks and invests in crypto-related startups around the globe. It was founded in Q2 2018 and its first investment was Compound in May of the same year.
Coinbase is the largest centralized crypto exchange in the U.S by trading volume that only allows U.S. citizens to register the platform. The exchange was founded in 2012 by a former Airbnb engineer, Brian Armstrong. A while later, Fred Ehrsam joined as the co-founder of Coinbase, but then he decided to start a VC named Paradigm. Notably, it is the first company that operates remotely without an HQ in the U.S, and it got listed on Nasdaq in 2021.
Unlike independent venture capitals, Coinbase Ventures gets funded by Coinbase which generated $7.4B+ in net revenue in 2021. As a result, it’s more similar to Binance Labs backed by Binance.
Moreover, Coinbase Venture broke the investment record since it invested in nearly 150 companies only in 2021, outpacing the number of investments in the last 3 years (2018 - 2020) in operation.
Coinbase Ventures Team
Brian Armstrong is the CEO and Co-founder of the top-leading crypto exchange in the U.S.Coinbase. He plays an omnipresent role in the company, responsible for all activities related to the exchange. The goal is to introduce cryptocurrency to every U.S. citizen.
Before starting Coinbase, he worked at various tech companies such as IBM, Airbnb, and Consultant at Deloitte while studying for three degrees (2 Bachelor's and 1 Master's). In February 2021, his name was on the #1 in the Crypto Rich List by Forbes with a net worth of $6.5B.
Shan Aggarwal is the Head of Corporate Development at Coinbase Ventures and is also responsible for M&A. Before joining crypto in early 2017, he spent time working for Greycroft - a venture firm looking for early-stage startups.
Emilie Choi works as COO at Coinbase and is also known as Angel Investor. She shared on Forbes about how Coinbase Ventures, without any full-time staff, emerged to be one of the most active and aggressive VCs in crypto. As mentioned before, Coinbase Ventures went on an investing spree in 2021, and Emilie Choi believes the Ventures could possibly be a massive opportunity.
Coinbase Ventures Portfolio
Before slicing the portfolio into many categorized sectors, let’s take a look at the two dedicated infographics. Over 200 investments across the crypto land were made by Coinbase Ventures. We believe that the investment number in later years will increase since Coinbase plans to hire 2,000+ people in 2022 to stride ahead to the Web3 vision.
Investment niches of Coinbase Ventures:
- Infrastructure: Terra, Blocknative, Covalent, Matter Labs, Vega, ImmuatbleX, Moonbeam, Starkware, Polygon, Mina, Near, The Graph, Celo, Alchemy, Biconomy, Umee, Aztec, Connext, etc.
- DEX/Liquidity: DODO, Orca, Saddle Finance, 0x, pSTAKE, LIDO Finance, Slingshot, TOKEMAK, etc.
- Wallet/Payment: Torus, Casa, Linen, Liquality, MobileCoin, Authereum, etc.
- Lending: Xmargin, Ledn, Compound, Tesseract, Goldfinch, etc.
- Analytics: Metrika, Dune Analytics, Messari, Nansen, Flipside Crypto.
- NFT/Gaming: OpenSea, Dapper, Bitski, Animoca Brands, Rarible, GuildFi, etc.
- Other sectors: Tool, Dashboard, Storage, Privacy, Derivatives, Synthetic, Stablecoin, Options, Insurance, Security, Social, etc.
To maintain the top-leading position in crypto, Coinbase Ventures tirelessly invests in every corner of the land. For in-depth assessments of Coinbase’s portfolio, we will go through the investment details, the current stage, and the outcome of each investment.
- Terra (LUNA), with its decentralized stablecoin UST, has been emerging to be in the top 10 crypto projects in terms of market cap. In January 2021, Coinbase Ventures, along with big venture capitals, funded $25M to Terraform Labs building DeFi using the decentralized stablecoin UST. Mirror Protocol and Anchor protocol are the two names being built by the Terraform team. Notably, Anchor Protocol gives UST suppliers the yield of nearly 20%, making a competitive flywheel to get traction.
- Covalent, a decentralized data API network, closed $2M in a strategic round led by Hashed, followed by Binance Labs, Coinbase Ventures, Delphi Ventures, and many other investors in March 2021. Prior to the $2M round, it raised $3.1M in the summer of 2020.
- Matter Labs, the team behind the ZK-rollup scaling solution zkSync, raised $6M from Union Square Ventures, joined by Coinbase, Aave, and Curve Finance in February 2021. All investors want to make the scaling solution a reality for Ethereum. Later in November 2021, the team raised $50M in a funding round with new investors such as a16z, ByBit, Crypto.com, etc.
- Vega closed a $5M funding round investment led by Arrington Capital, Cumberland DRW, and Coinbase Ventures with the participation of top VCs such as ParaFi Capital, CMS Holding, etc. in March 2021. The project is deploying APIs for builders looking for a solid infrastructure for the derivatives market.
- immutableX, an L2 solution using ZK-STAKRs for NFT scalability on Ethereum, was invested $2.4M by Coinbase Ventures and other investors in the seed round in 2018. Later on, it also raised funds in a Series A and B round in 2019 and 2021, bringing a total of $77.5M for the project. This makes immutableX the first and leading NFT-specific scaling solution for Ethereum.
- Aztec, an L2 solution focusing on privacy on Ethereum, was invested by Coinbase Ventures in 2019. This is another L2 solution backed by the largest CEX in the U.S.
- Moonbeam (GLMR), a parachain built by Purestake on Polkadot mainnet, concluded a funding round led by Coinfund and joined Coinbase Ventures, Binance Labs, IOSG Ventures in March 2021. Its GLMR token rallied by 3,000%+ after the Binance listing.
- Celo raised $20M from a16z and Electric Capital in Feb 2021. The startup disclosed that it had raised $65M+ from top-tier crypto VCs, including Polychain Capital, Coinbase Ventures, and the former Twitter CEO Jack Dorsey. The Celo team aims to build a mobile-orientated blockchain payment platform on top of Ethereum.
- Umee concluded a $6.3M seed round led by Polychain Capital and other investors (Coinbase and Alameda Research participated) in June 2021. Umee is a Cosmos-based platform that utilizes the IBC protocol to connect Cosmos to Ethereum and other EVM blockchains.
⇒ Coinbase Ventures heavily invested in the infrastructure sector in crypto as it acknowledges that the foundation of any newfound industry needs to be well-built for stable growth. It speculated many blockchains and L2 solutions in 2019, giving them high returns.
- Blockchain/Chains: Terra, Umee, Celo, Moonbeam, etc.
- L2 solutions: ImmutableX, Aztec, zkSync by Matter Labs, etc.
- API/Infrastructure: Covalent, Alchemy,...
⇒ In 2022 and many years later, Ventures expects those infrastructure investments to mature at their finest state. They all have long-term development plans that need years to get done.
However, led by the largest CEX in the U.S., Coinbase Ventures often joined the investment as a participant, not lead one. This is the primary strategy of Coinbase’s venture arm, which is easy to notice. We will see the popular trademark of Coinbase appearing in numerous new investments.
- DODO raised $5M from top venture capitals, including Three Arrows Capital, Pantera Capital, Binance Labs, Coinbase Ventures, and other investors in late 2020. The project developed a new market-making algorithm, “Proactive Market Making” (PMM), which fuses the operational functions of AMM and order book to facilitate lower slippage and cheaper gas fees.
- Orca has raised $18M from Three Arrows Capital, Polychain Capital, Coinbase Ventures, and other investors in a Series A round in September 2021. They are trying to build an AMM decentralized exchange for this recently emerging blockchain platform. Orca has reached a milestone as the ATH TVL is over $1.4B.
- pSTAKE concluded a $10M strategic funding round by Galaxy Digital, Coinbase Ventures, Alameda Research, Spartan Group, Sino Global Capital in November 2021.
- LIDO Finance raised a total of $51M from Paradigm via an LDO token sale in May 2021. And another $22M was from top-tier VCs such as Coinbase Ventures, 3ac, Alameda Research,...
- TOKEMAK, a liquidity “reactor” for DeFi applications, closed a $4M investment led by Framework Ventures with Coinbase Ventures, Electric Capital, Delphi Ventures and ConsenSys as participants.
⇒ Since late 2020, Coinbase Ventures has stepped into the DEX/Liquidity sector in the DeFi space. They speculated DODO with the new market-making algorithm and Orca on Solana. Both investments have yielded good results. In the present, Orca’s TVL was leading the Solana ecosystem.
pSTAKE, LIDO, TOKEMAK, and other liquidity protocols got invested by Coinbase Ventures to accelerate the DeFi adoption in crypto. Despite being a CEX, Coinbase understands that liquidity is the key driver, circulating across DeFi protocols. This empowers DeFi protocols with more abundant and healthier sources of liquidity.
- UMA (Universal Market Access) closed a $4M seed round led by Placeholder with participation from Bain Capital Ventures, Coinbase Ventures, Dragonfly Capital, and others in December 2018.
- DerivaDEX, a derivatives market, raised $2.7M from top venture capitals such as Polychain Capital, Dragonfly Capital, 3ac, Coinbase Ventures, and others in July 2020. However, it has not released the derivatives market mainnet.
⇒ Coinbase Ventures did not spend too many resources on the derivatives market since it’s not the moat. As a result, it invested in UMA and DerivaDEX as a participant to grow the exposure of the trademark.
Wallet and Payment
Dharma, Torus, Casa, Multis, Liquality, Authereum, and Linen have been in the Coinbase Ventures’ portfolio for a while now. They are built for crypto storage only on one specific blockchain, such as Bitcoin and Ethereum. Furthermore, payment wallets also accept a few cryptos as well as limited by countries.
⇒ In the era of multi-chains, it’s inevitable that there will be hundreds or thousands of blockchains that are willing to interconnect to realize the cross-chain reality. The dearth of multi-chain wallet projects in the portfolio will be a huge missing part.
Coinbase Ventures strongly funded over 7 projects related to crypto wallet and payment. On the flip-side, Coinbase also released a crypto wallet application named Coinbase Wallet, creating an arguable conflict of interest between Coinbase and invested projects.
This wallet/payment sector will be a winner-takes-it-all game in the long term. Therefore, Coinbase Ventures should retailor the portfolio to fit in the current meta.
- Notional Finance (NOTE) closed a $10M Series A investment led by Pantera, ParaFi Capital, Spartan Group, Nascent, and other venture capitals in May 2021 after successfully raising funds from Coinbase Ventures in a seed round. The platform delivers fixed lending rates on stablecoins on top of the Ethereum blockchain, having nearly $1B ATH TVL.
- Compound (CMP) is a Defi startup in 2019 that raised $25M in a Series A funding round led by Andreessen Horowitz a16z, Paradigm, Bain Capital Ventures, etc. In 2018, it was the first investment of Coinbase Ventures in the seed round to raise $8.2M. The investors planned with Compound to dominate the crypto market with full support. The investment turned out to be successful since the market cap of CMP reached $4B in ATH value.
- Goldfinch raised $25M in a Series A extension round led by a16z crypto fund with the participation of Coinbase Ventures and others in January 2022. Previously, a16z also led an $11M funding round for Goldfinch to realize the idea. In fact, before founding Goldfinch in July 2020, the two founders worked at Coinbase. All investors might aim for a bigger target for Goldfinch than it might with Compound.
⇒ Coinbase Ventures selected Compound as the first investment, giving a tremendous return to the VC as it’s now one of the top biggest collateral lending protocols in crypto after 3 years. Goldfinch and Notional Finance are just in the midway of the development process.
Besides the mentioned investments in lendings, Xmargin, Ledn, and Tesseract were also backed by Coinbase Ventures in the early stage. The experienced VC has a special interest in the lending sector since they picked out the investments.
Synthetix was the only synthetic asset investment of Coinbase Ventures. The synthetic trading protocol can now be considered profitable in top DeFi protocols since it generated over $28M in revenue. The VC allocated its resources across DeFi layers. This means Coinbase invested in only a few projects in each sector, but the success rate is surprisingly high.
- Dune Analytics, the top on-chain analytics for the Ethereum network, raised $2M from investors in the seed funding round led by Dragonfly Capital with the participation of Multicoin Capital, Coinbase Ventures, Alameda Research, etc. in September 2020. The latest Series B investment of Dune was worth $69.42M, making the project valued at $1B.
- CryptoQuant closed a $3M investment in a funding round led by Coinbase Ventures, joined by Galaxy Interactive, Mirae Asset Capital, and Youbi Capital as strategic investors in August 2021. The platform focuses on providing on-chain data services to users via vivid and robust graphs such as inflows and outflows of Bitcoin on exchanges.
- Flipside Crypto, a paid-to-learn platform, was invested by Coinbase Ventures and other investors in 2018-2019.
- Metrika, a platform that provides tools for blockchain networks, raised a total of $17.7M in funding from investors, including Coinbase Ventures. It has partnered with many top-leading customers such as Solana, Dapper Labs, Algorand, etc.
⇒ Dune Analytics, CryptoQuant, and Metrika are providing useful analytics tools to retail investors to enterprise-grade customers. Furthermore, Messari and Nansen are the two crypto-research units that gained their reputation for in-depth market analyses. They serve every customer from individuals to institutional-grade enterprises.
Coinbase Ventures have top-leading analytics units in crypto in its portfolio. These platforms monetize to gain revenue mostly via subscription to their services. Furthermore, they contribute to the crypto community with valuable insights and in-depth knowledge about this newfound market.
- OpenSea was invested by Coinbase Ventures in 2018 and many investment rounds later. The NFT platform is now generating millions of dollars of revenue day by day, making it the most profitable
- Animoca Brands, a game-focused VC, has raised a total of nearly $140M in funding from Coinbase Ventures, Samsung Venture, Korea Investment Partners, and many other VCs. It invested in NFTs and blockchain games across the crypto ecosystems.
- Rarible, the Uniswap for NFTs, has raised $1.75M from Coinbase Ventures, ParaFi Capital, CoinFund, and others in February 2021.
- GuildFi (BF) raised $6M in a seed round co-led by DeFiance Capital and Coinbase Ventures, joined by Pantera Capital, Coinbase Ventures, Alameda Research, Animoca Brands, Coin98 Ventures,... in November 2021. The project is building a Web3 infrastructure to facilitate NFTs and NFT-based games. This will help create a shared community among players for mutual benefits across the games.
- Nifty’s, an NFT project backed by Mark Cuban, raised $10M in a seed funding round from investors including Coinbase Ventures, Dapper Labs, etc in July 2021.
- Dapper Labs, the builder of CryptoKittes and the Flow blockchain, raised $11M in an investment round led by a16z with Coinbase Ventures and others to collaborate with Warner Music to build a scaling blockchain Flow. The target of Flow is to reach out to tens of millions of users to have access to decentralized games.
- Dapper Labs, Coinbase Ventures, and other investors (Polychain Capital included) also joined a $65M investment in an NFT-based Avatar Startup Genies.
⇒ Coinbase invested in NFT and blockchain games aggressively. The strategy of the VC is to select builders or VCs that are capable of seeking and investing in the NFT/Gaming sector. This somewhat means it outsources the investments to other players to get the investigations done.
However, it’s shifting to the “utility” phrase of NFT/Gaming. In simple terms, more projects in the application layers are getting noticed by Ventures to catch the ongoing meta such as Metaverse, GameFi, Interactive NFTs, etc.
Since it’s backed by the largest CEX in the U.SCoinbase Ventures distributed the investments vastly across NFT/Gaming projects.
In which ecosystem Coinbase Ventures invested?
As broken down in the previous sections, Coinbase Ventures’ portfolio contains projects across almost every ecosystem, ranging from Ethereum, Solana, Terra, Celo to L2 solutions such as zkSync, immutableX, Aztec. Its goal is to help Coinbase’s trademark exposure in every corner of the crypto land.
However, BNB blockchain is apparently not invested by Coinbase Ventures since Binance and Coinbase are confronting the same exchange frontier. Coinbase is the king in the U.S. and Binance is the emperor outside the U.S. It’s almost impossible for Binance to access the U.S. crypto market only via a separate company Binance US.
Every ecosystem loves collaborating and getting supported by Coinbase Ventures since it’s like a ticket to the U.S. market. As mentioned, the country has stringent regulations for cryptocurrency. If projects overcome all the regulatory requirements, they will receive a huge boost to grow further.
Should we follow the Coinbase Ventures portfolio?
Coinbase Ventures Performance
Let’s review the performance of those project tokens that were invested in by Coinbase Ventures (ATH prices with prices at the beginning of 2021) as follows:
As we can see, Coinbase Ventures has a humble investment performance when compared to other top-notch portfolios of Paradigm, Spartan Capital, 3ac, etc. And we think Coinbase Ventures only participated in the investments with a small fraction of the total deal. The reason for this is it has to allocate the positions in over 200 crypto projects.
As a result, Coinbase mostly captures value from the well-built network of partnerships and invested projects rather than gaining massive returns on the investments.
Coinbase Ventures - The Fastest Gateway To The U.S.
The power of Coinbase Ventures is completely derived from the largest centralized exchange in the U.S., Coinbase. But whether every startup backed by Coinbase Ventures is certain to have a ticket to be listed on Coinbase?
In fact, not all tokens invested by Coinbase Ventures get listed on Coinbase. As shown in the infographic above:
- 18 projects are listed on Binance.
- 8 projects are listed on other exchanges.
- 10 projects are listed on Coinbase.
Road to the U.S. market might be long for some projects that don’t meet the requirements. Only a few qualified projects are able to go into the U.S. market.
It can be said that listing on Coinbase is way harder than listing on Binance. Coinbase has to follow the customer-protected regulations in the U.S. as well as many high standards like other financial institutions/companies. As a result, being listed on Coinbase is like a visiting card, which will tell a lot about the project.
Coinbase Ventures Investment Thesis
Coinbase Ventures, without a doubt, plays as a strong arm of Coinbase to accelerate the rapid growth around the globe. Its moat is the trademark Coinbase, building up a firm foundation to walk abreast with high-profile VCs such as Paradigm, 3ac, Polygon Capital, ParaFi Capital,... What’s the secret behind the fast expedition of Coinbase Ventures? Let’s explore patterns in the following highlighted bullets:
- As many as possible (but not on BNB): As statistics, Coinbase Ventures invested in nearly 150 crypto-related projects only in the massive 2021 crypto bull run. As mentioned, Coinbase is expanding its influence beyond since it’s a CEX winner in the U.S.
- Candidate for listing on Coinbase: All investments by Coinbase Ventures aim to ultimately launch their tokens on Coinbase in the U.S. They’re throughout assessed and investigated by top-tier researchers and security companies. As a result, projects backed by the VC can be considered eligible enough to have our trust.
- Abundant funds for seed rounds: Coinbase Ventures has aggressively invested in numerous seed rounds since 2018 until now. The company often invests $50k-$250k in the seed and many later rounds. It often lets other VCs lead the round since the investment volume is insufficient.
- More projects on the application layer than infra one: The Ventures was previously focusing on infrastructure/tool projects in crypto since they play as the backbone for the entire industry to grow. L1 blockchains had staggering growth in 2020-2021, outperforming other DeFi protocols on the application layer. In our opinion, more high-growth opportunities are lying on the top layers of blockchain.
Coinbase Ventures in 2022
Before 2022, Coinbase Ventures mostly focused on infrastructure projects for Dapps in crypto with an aim to widely spread the influence. In 2022 we think it will spend more resources on application layers in Web3 and NFT/Gaming.
In simpler ways, Coinbase Ventures will add more projects across the blockchain ecosystems where users can directly go to and interact with. This will help the company have a connection with a wider user base via invested companies.
To reiterate, it still keeps using its proven strategy that engages more and more deeply into the crypto space. Akin to Coinbase Ventures, Binance Labs is doing the same strategy to horizontally spread out the influence of the centralized exchange Binance.
We’ve been through the detailed information about Coinbase Ventures and its well-built portfolio. Furthermore, the relationship between Coinbase Ventures and Terra is also significantly discussed in the article.
We hope you’ve gained the overview, and our well-thought insights will be helpful to you. There will be more articles for other VCs. Stay tuned!
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