Coinbase wants to put startup fundraising on chain

Transcript

From the transcript TBPN publishes with the episode.

1. 1:52:47

   And then I just the broader story is just, like, we're really excited about capital raising coming on chain. I mean, that can make the whole process more efficient, more fair, more transparent. Every entrepreneur who I know finds the fundraising process to be pretty onerous. Right? It usually takes, like, two to three months, where everything else that you're focused on has to stop. You go do tons of pitch meetings. You get told no 19 out of 20 times. It's you get you get punched in the gut over and over with these smart people telling you that, you know, your ideas sucked. And then if you're lucky, you manage to get this thing over the finish line, and it's always a very tenuous process with tons of legal fees. And so, yeah, we really think that capital formation can be just much more efficient on chain, and Echo is leading this space.

2. 1:53:31

   You know, they've helped over, I think, maybe two or 300 projects now raise money over $200,000,000, and so it's not just gonna be like token sales like I think other startups. Yeah. What what keyword did I hit for that? 200,000,000. 200,000,000. We gotta ring the gong.

3. 1:53:47

   Yeah. Get that gong Let's do it. For the Echo it. Yeah. And and I guess, like, dive into that a bit further. My my understanding is, like, they're a platform, but they have the the there there's some editorial approach there. Right? You're not for now, it's not any company coming on Echo and spinning up or or is it it's led? Is that it? It's like you they have to have

4. 1:54:14

   Yeah. Yeah. The idea is you can raise from your community and they are curating it a bit. Right? Because I think if it's totally open ended, could have an adverse selection problem. But, yeah, they're bringing on really high quality projects. And you can imagine that, you know, Coinbase has about half a trillion dollars in custody from our retail and institutional customers. These people want access to great assets and investments. So Coinbase is really building a network effect here. If we can have great builders come in who wanna raise money and connect them with investors who have the money, you know, we're the perfect platform to help accelerate this and give Echo even more distribution.

5. 1:54:50

   So first, when they come in, they're they're gonna keep Echo standalone, just make sure it continues to operate and do great. But over time, you can imagine us integrating this tokenization, fundraising platform into Coinbase and really distributing it to all of our customers.

6. 1:55:04

   Is there can you walk me through some of the more, like, life cycle of a modern crypto startup? Like, imagine if I incorporate, raise money on Echo, but then is there a world where I'm in an ecosystem of, like, Coinbase b to b products or I'm building on top of base or I'm custodying my treasury with you? Like, how how many how many different products can I pull off the shelf if I'm building a crypto startup in 2025?

7. 1:55:30

   Yeah. That's exactly right. I mean, you're you're pitching the vision better than I could. But, yeah, let's say that you're it's the full life cycle. You know, you're two kids with a laptop and a dream or whatever. You want You to start can go in there and open a Coinbase account for your your startup. Maybe we even help you incorporate on chain at some point with like a, you know, a DAO or these kind of things. And then you need to raise your first bit of capital, like a seed round, you know, press the raise money button and put it put your pitch deck together, make a video. Like, we'll distribute it to some of our early or some of our customers that are interested in these kind of assets. We help you raise money.

8. 1:56:06

   Now you've got kind of a business bank account equivalent open where the funds just arrive instantly with USDC from people all over the world. You don't have to be tracking down these, like, wire transfers and lawyers and all over the world. We just kinda you know, it's all raised on chain in a smart contract, so you your capital arrive arrives immediately. Now you can actually start to generate revenue as well as you're building your product. Like, crypto payments are another button click away.

9. 1:56:32

   Maybe financing is involved there. And eventually, someday, you're gonna wanna gonna you're gonna wanna go public, right, and have your company be traded by everyone every retail customer out there. We can help you do that on chain as well. So you can imagine this whole life cycle coming on chain, and I think the goal is this will just increase economic freedom. It'll increase the number of companies who go raise capital and get started out there in the world.

10. 1:56:53

    Yeah. What what what is the process for the private markets coming on chain? Like, it seems like there's now enough momentum. Right? Echo is is one version of this. Did, you know, did, you know, on chain companies raising on chain, that makes sense. But how how do we get to the point where, companies that, maybe aren't aren't crypto native are are able to utilize these rails and then particularly, you know, tokenize their equity and and make use of, know, crypto's full potential?

11. 1:57:29

    Yeah. So it's starting with token sales, more crypto companies. But you're right. I we're eventually gonna get this, I think, to be every company just raising money this way if it's more efficient. They shouldn't really even have to care if it's crypto underneath. They're just, you know, they're raising dollars or stablecoins, whatever that they wanna actually raise. So, you know, there are currently some exemptions which allow this to happen under the SEC, both for crowdfunding or, you know, having accredited investors raise it. But we're actually we're spending quite a lot of time with the SEC to try to get the next generation of this working that would allow retail to participate under certain conditions. Mhmm. You know, the accredited investor rules are there for a good reason.

12. 1:58:10

    They wanna protect people, the unaccredited investors, but it also prohibits people who are not already wealthy from, you know, participating in these kinds of upside. So in many ways, the accredited investor rules are kinda unfair. We're hoping that we can find the right balance of consumer protection and also making these available to retail. And, yeah, it'll level the playing field, democratize access is what crypto is good at.

13. 1:58:33

    Do you do you, has this happened yet for a company to go effectively go public on chain? Do you expect to see that in the near future? There's so much capital on chain that would love to invest in, you know, that loves to invest in all types of different opportunities. But do you see that

14. 1:58:49

    Is that not just dropping a token? Like, do you not think of Ethereum as the first company?

15. 1:58:54

    Yeah. In some ways, but I'm talking about, a company that, let's say, you know, we had Figma IPO this year. Sure. They could put a they could leave an allocation, like an on chain allocation. Yeah. Interesting. And so some would go through to to traditional brokerages. And I just feel like you'd be getting the first calls for serious companies that that wanted to explore something like that.

16. 1:59:14

    Yeah. So there's been lots of precursors to this, you know, the whole ICO craze and everything. It just showed the amount of demand for this or like the Ethereum launch or anything. Right? But there's no there's hasn't been anybody who's done it yet with, like, a traditional IPO, like you said, with an allocation in the on chain category. And actually, when Coinbase went public in 2021, I really wanted to do this. We spent a bunch of time with the lawyers trying to figure it out, and unfortunately, like, the SEC at that time was not the kind of it wasn't ready. Let's put it that way. And, so now we have an SEC that's much more engaged and willing to innovate on this frontier, and they really want The US to be the crypto capital of the world. So I think that we will see, hopefully, in the next two, three years, the first company go public on chain, you know, and could be in parallel with a traditional IPO.

17. 2:00:02

    But over time, I think you'll eventually see, like, a marquee blue chip company go public entirely on chain. And, that's where that's the direction this is heading. You know, crypto is eating financial services, and hopefully, Coinbase can be the primary account for people in that new economy.

18. 2:00:18

    How much, are stablecoins an important piece of this narrative? I imagine that even crypto founders who are super bullish on crypto are still not in the world where they say, I want 100% of my raise to be denominated in Bitcoin or Ethereum because Well,