Coinbase is by far the biggest cryptocurrency exchange out there. With strong support from major VCs and all the crypto-buzz last year, the company managed to surpass its revenue predictions by a wide margin. And now it has a unique problem: other VCs are looking to get on board, but — at least for the moment — Coinbase doesn’t need them (and their money).
The company crossed $1 billion in revenue last year, according to the Recode report, up from expected $600 million it predicted as of September 30. This sharp rise has a lot to do with the rapid growth of Bitcoin, which tremendously appreciated in value between Thanksgiving and Christmas.
That being said, it is important to note that Coinbase doesn’t make money on bitcoin’s price but on the volume of trades, charging both the buyer and seller a fee between 0.25 and 1 percent of the total transaction size through the site. The company serves as an exchange and a broker of deals, but it is not a market maker that holds bitcoin or any other cryptocurrency.
Investors are asking existing shareholders to sell
As we have noted, the success of Coinbase has prompted many VCs which have missed the original deal to ask to join the party. And since the company won’t let them in, they are turning to existing shareholders to sell them their shares.
But… Coinbase doesn’t allow that. In fact, it has warned its shareholders to not engage in those conversations.
“As a private company, Coinbase does not allow trading of stock on secondary markets for a variety of reasons, including the fact that there is not full and equal information available to the market,” the company said. “We will take appropriate action if we find people have sold Coinbase shares in violation of our agreements not to do so.”
Coinbase raised $100 million in mid-2017 and chances are, it won’t need additional capital for at least a year. Heck, several company insiders expect the company to never fundraise again before an IPO.
Coinbase now looking to serve big clients
Meanwhile, Coinbase is looking beyond rich(er) individuals and VCs to expand its customer base — which BTW is already larger than that of the trading giant Charles Schwab — one of the facts we pointed out as a proof that bitcoin is going mainstream.
To that end, the company has announced Coinbase Custody service that would cater to institutional investors. The service is still being tested, with major funds being invited to try it out. It, obviously, includes additional bells and whistles — such as a dedicated phone support — these sort of clients require.
Coinbase’s large venture backers include Union Square Ventures, Andreessen Horowitz and DFJ, each of whom has a seat on its board.