📈 Coinbase’s $100B+ public debut


March 4, 2021

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The Hustle

A cautionary meme stock tale: Last year, car rental company Hertz was on the brink of bankruptcy. Robinhood traders backed the stock and pushed its value up 9x.

Hertz capitalized on the rise by issuing stock. That stock is now worthless after Hertz announced a bankruptcy reorganization. Two private equity firms will invest $4.2B to take over, wiping out existing equity holders.

The Big Idea
Coinbase's $100B public debut

Coinbase’s $100B public debut, explained

Bitcoin recently hit the $50k milestone. If that feels pricey, how about a share of the largest US cryptocurrency exchange?

Presenting Coinbase (ticker: COIN). The company has been valued at  $100B+ in private secondary trading, which would make its direct listing the largest tech debut since Facebook.

For comparison, its last funding round (2018) valued it at a slightly lower number… $8B.

The business of Coinbase

According to Coinbase’s S-1, the current financial system is an inefficient and costly patchwork of intermediaries. There’s a need for a new, digitally native financial system — AKA the crypto economy.

Coinbase has built an end-to-end infrastructure to enable a safe and user-friendly platform to buy, store, and use crypto assets:

  • Cryptocurrency exchanges: There’s a regular and a pro version for more sophisticated investors.
  • Wallet service: Where customers can safely store their cryptocurrencies.
  • Coinbase commerce: Online retailers can use this software to accept cryptocurrency. Think Paypal, but for crypto.
  • Coinbase card: A physical debit card allowing people to spend cryptocurrency in the physical word.

Why the potential $100B valuation? 

Coinbase is one of the largest global cryptocurrency exchanges. Its strengths include:

  • Flywheel effects: As more products develop and more consumers join the platform, more retail users, institutions, and other partners (developers, merchants, etc.) will come to the site.
  • Huge industry growth: The market cap of crypto assets went from $500m in 2012 to $782B by 2020 — 150% growth per year.
  • Rapid revenue increase: Coinbase more than doubled its revenue in 2020 to ~$1.3B. There are 43m retail users, mostly from word-of-mouth marketing.
  • Steady profitability: Unlike many high growth tech companies, Coinbase has been largely profitable in recent years — ending 2020 with $322m in net income.

A watershed moment for crypto at large

Beyond a lucrative exit for founder Brian Armstrong (who already made a cool $60m in 2020 alone), a strong IPO would be a large step for legitimizing the crypto.

Critics view the industry as risky and experimental at best, lawless and illicit at worst. Even tech behemoths like Square and Tesla are just starting to buy Bitcoin.

Successful or not, Coinbase’s IPO is going to make history. No pressure, mate.

(Read our full Coinbase breakdown here)

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Snippets
  • Fashionable unicorn: French startup Vestiaire Collective announced a $216m funding round. The company runs an online marketplace for pre-owned luxury and fashion goods.
  • Okta Auth0rizes a major deal: Okta, whose software allows secure access to apps, purchased cloud identity startup Auth0 for $6.5B in a bid to strengthen its position in the identity management space. Markets where meh, with $OKTA down 10%+ after hours on the news.
  • Singapore-based SEA is Southeast Asia’s leading super app. Its value has increased 7x in the past year to $130B and, now, it’s creating a $1B investment fund (we wrote more on Southeast Asia super apps here).
  • Google promised it has no plans to build alternate identifiers once it phases out 3rd-party tracking cookies. Instead, it’ll use privacy-preserving APIs that are (supposedly) equally as valuable to advertisers.
  • Semi-truck, semi-stuck: GM is extending temporary plant shutdowns and expects to lose billions in earnings this year as a result of the global semiconductor shortage.
  • Made in the USA: Walmart committed to spending an additional $350B over the decade on US products.
  • Flying taxis are 2 years out, according to the CEO of Volocopter, a German startup that this week raised $241m to develop its urban transport helicopters.
  • We lovin’ it: Mobile game developer AppLovin filed for an IPO, with 2020 revenues hitting $1.45B.
Do the floss
Beam raises $80m

That molar money (Source: Amend Nimani / Getty Images)

Beam raises $80m to disrupt dental insurance

You know when the dentist puts 15 tools in your mouth, and you drool a little? That’s probably how investors looked when they saw Beam’s financials.

This week, the Columbus, Ohio-based insurtech startup announced an $80m Series E led by Mercato Partners and joined by Nationwide.

Beam will likely use the capital for product development and growth

The company, founded in 2012, is taking on the $83.6B dental insurance market with a good ol’ software-hardware combo move:

  • Software: Beam’s IP mimics the best dental insurance underwriters, but works faster and at scale, enabling low rates even for small companies.
  • Hardware: Members are incentivized to use Beam’s connected toothbrush to earn lower rates. To date, the program has recorded 100m+ brushing minutes.

The setup runs like a flywheel: Beam reduces claims by incentivizing preventive care, uses the connected data to improve underwriting models, then lowers costs.

The economics seem to work, too

Beam reportedly has gangster loss ratios, spending less than $0.70 for each dollar it gets from claim premiums.

The company grew revenue 600% over the last 3 years and boasts a net revenue retention rate of 100%.

Beam’s network reaches 400k dentists in all 50 states, and the company doubled its member base in both 2019 and 2020.

One question we have for the Beam team: Do you dance the floss to celebrate occasions such as this?

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New Tech
Microsoft gets Mesh-y

Microsoft gets Mesh-y with the future of mixed reality

Microsoft this week released a new mixed reality platform called Mesh, rolling the product out at its Ignite 2021 virtual conference.

The conference was itself a demonstration of the technology, with Cirque du Soleil co-founder Guy Laliberté appearing alongside Microsoft’s Alex Kipman, the brains behind Mesh, as 3D holograms on a virtual stage.

Mesh is basically a suite of development tools that will allow developers to build collaborative VR and AR — or mixed-reality (MR) — experiences that work across devices, not just Microsoft’s HoloLens. If the concept video tells us anything, strap in, this could be big.

Mesh isn’t just some Zune or Windows Phone gamble… 

… it’s a bet on the future of computing. According to Microsoft’s technical explanation, MR is a “4th wave in computing” following innovations in mainframes, PCs, and smartphones.

Microsoft sees Mesh as the toolkit to make MR a consumer reality. Think Zoom meetings where hologrammed co-workers just “holoport” to your home office. Bold… and unsettling.

Creating hologrammed co-workers is really effing hard

So Microsoft is leaning on its cloud computing platform Azure to help pull it off.

Recently, Azure has been a bright spot for the ol’ ’Soft. Over the past 10 quarters, revenue has climbed by 50%+, and Azure sits squarely in the No. 2 spot for cloud infrastructure providers.

Think of Mesh as another holographic feather in Microsoft’s Azure cap. They’re in the business of setting up the pipes for a MR future. Sure, it’s a big, fluffy vision that we may or may not want — but has that ever stopped Microsoft?

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Meme of the Day
Dogecoin meme

The dog in the “doge” meme is the mascot for the cryptocurrency Dogecoin. Makes Sense. (Source: Wikipedia)

Dogecoin was created as a joke in 2013. Invented by software engineers Billy Markus and Jackson Palmer, the cryptocurrency was based on the dog from the “doge” meme.

This market cap of this “joke” coin was worth less than $100m at the end of 2020. The coin has since exploded in value — today worth $6.5B — as one South African entrepreneur has repeatedly posted Dogecoin memes on his Twitter account:

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