Who got rich on Coinbase's first day of listing?

Coinbase went public today through a direct listing on the Nasdaq exchange, becoming the first US cryptocurrency company to go public, a milestone for the cryptocurrency industry. Meanwhile, the price of Bitcoin, the world's most popular cryptocurrency, hit a new high, breaking through $64,000.

Follow the editor’s steps and let’s take a look at who got rich from Coinbase’s debut.

Fred Wilson

By 2013, venture capitalist Fred Wilson had established himself as a prominent investor in the consumer technology sector. “For several years, we have been considering and looking to invest in the Bitcoin ecosystem,” Wilson wrote on the website of his firm, Union Square Ventures. “Today, we are excited to talk about our first investment in the space.”

The investment he was referring to was Coinbase, which raised $5 million at a price of 20 cents per share, a first-round round that valued the company at about $20 million.

With Coinbase’s Nasdaq debut on Wednesday, Union Square’s bet on a web service that, at the time, had just over 100,000 members using it to buy and store bitcoin is now worth about $4.6 billion.

Wilson, an avid user of emerging tech products, said he was a happy customer before becoming an investor. “Coinbase is where I buy and keep my Bitcoin,” he wrote.

Coinbase opened at $381 per share, giving the cryptocurrency exchange a market cap of about $100 billion. By the close, the stock fell to $328.28, valuing it at $85.8 billion. That’s ten times more than the company’s last private fundraising in 2018, and more than four thousand times more than a round led by Union Square eight years ago.

Coinbase became the latest tech company to generate outsized returns for venture investors, thanks to huge public market valuations and accelerating growth in the digital economy. Following Roblox’s direct listing in March, Altos Ventures owns a stake in the gaming company worth more than $9 billion. Snowflake Capital’s September initial public offering generated more than $12 billion in initial proceeds for Sutter Hill Ventures.

Meanwhile, Sequoia Capital owns a combined roughly $33 billion in stakes in Snowflake, Unity, DoorDash and Airbnb, all of which went public last year.

Andreessen Horowitz becomes largest investor

Although Union Square led Coinbase’s first round of funding, the firm is not the largest outside investor. That honor belongs to venture capital firm Andreessen Horowitz, which owns a stake in the crypto exchange worth about $9.7 billion. (The ownership stake is all based on information in the prospectus. Because this is a direct listing, investors will be able to sell immediately, and some have already done so.)

Seven months after Coinbase’s Series A, the firm led a $25 million Series B round, buying shares at $1 per share. Andreessen Horowitz, which invested from a $1.5 billion fund raised in 2012 and a later-stage fund, continued to build its stake in Coinbase, even buying some shares from Union Square.

According to Coinbase's prospectus, Andreessen Horowitz purchased $57.1 million worth of shares from Union Square at $23 per share in October 2019. About a year later, Union Square sold another $30 million worth of Coinbase shares to Andreessen at $28.83 per share. In total, Union Square sold about 28% of its shares in five separate transactions, and the 3.52 million shares sold to Andreessen are now worth a total of $1.2 billion.

Ribbit Capital, a fintech-focused venture capital firm, is Coinbase’s third-largest outside investor, holding 12 million shares worth $3.9 billion. Other backers include Tiger Global, Institutional Venture Partners and DFJ Growth.

Barry Schuler

Cryptocurrency was already widely accepted in late 2014 when DFJ Growth’s Barry Schuler joined the fray. Schuler was previously chairman and CEO of America Online. He is best known for leading the AOL team. He said he first bought Bitcoin a year before backing Coinbase. He found a guy on Reddit and agreed to meet behind a convenience store. Schuler paid him $500. “I gave him a lot of cash and he put some coins in my phone,” Schuler said in a video interview on Wednesday.

“It was clear to me that if this was the way to buy Bitcoin, this wasn’t going to be mainstream,” Schuler said. “Through early work and exposure to the space, the value of a company like Coinbase became apparent.”

Schuler, who recently watched bitcoin exchange Mt. Gox file for bankruptcy after revealing hackers had breached the site and stolen customer funds, said he wanted to lead the Series C round, but he needed to make sure Wilson and Coinbase co-founders Brian Armstrong and Fred Ehrsam were ready to form a board and put all the oversight in place to protect investors.

“Our legal team is concerned about liability issues, and we believe the team there is taking regulatory issues seriously,” Schuler said.

DFJ Growth ultimately led the $75 million round at $2.76 per share, valuing the company at about $500 million. The investment is now up nearly 120 times. Schuler became the first board member, though he resigned as a director in August. Wilson and Marc Andreessen remain on the board.

For Union Square, Coinbase is the firm’s first crypto investment, with many to come. On its website, the firm lists 15 crypto companies that have joined its portfolio since Coinbase, including several dedicated funds such as Polychain Capital and MetaStable Capital.

Union Square and Andreessen Horowitz also backed NBA Top Shot creator Dapper Labs, which is helping pioneer NFTs. Prior to this, Dapper Labs was best known for its blockchain-based game CryptoKitties.