Coinbase is a prominent cryptocurrency exchange and digital wallet platform. It provides an accessible entry point into the world of cryptocurrencies for both individual investors and institutions and has become the market leader in what it does.
Coinbase has played a pivotal role in popularizing cryptocurrencies and facilitating their adoption by offering a reliable and regulated platform for users to engage with digital assets.
A short history of Coinbase:
- 2012: Founded by Brian Armstrong and Fred Ehrsam in San Francisco, California.
- 2012: Launched as a Bitcoin wallet service to simplify cryptocurrency storage and transactions.
- 2013: Introduced the Buy/Sell feature, allowing users to purchase Bitcoin with bank accounts.
- 2015: Expanded its services to include Ethereum (ETH) trading.
- 2017: Became the first cryptocurrency "unicorn" with a valuation of over $1 billion.
- 2018: Introduced Coinbase Pro, a platform for advanced traders.
- 2019: Expanded its cryptocurrency offerings with the addition of various altcoins.
- 2020: Went public through a direct listing on the NASDAQ stock exchange, valued at $85.8 billion (market cap at IPO). At the time of writing (2023) its market cap has fallen to $18.38B.
This pitch deck was used successfully back in 2012 shortly after the founding of the company to fundraise a $600k seed round by Y Combinator and 5 other investors. Here are a few lessons we can learn from it.
1. Clear Problem & Solution
At its core, Coinbase set out to solve a pressing problem in the cryptocurrency space: making Bitcoin accessible and user-friendly. In 2012, cryptocurrency adoption was still in its infancy, and the process of acquiring, storing, and transacting with digital currencies was complex and fraught with security risks. Coinbase's founders, Brian Armstrong and Fred Ehrsam, aimed to provide a solution that would make cryptocurrencies more approachable for the masses.
The problem and solution are visualized simply but very clearly in slide 6.
2. Timing and Validated Potential
Coinbase's seed round took place at a time when interest in cryptocurrencies, particularly Bitcoin, was gaining momentum. The potential for digital currencies to disrupt traditional financial systems was becoming increasingly evident. Investors recognized that Coinbase was well-positioned to capitalize on this growing interest and saw the long-term market potential of a user-friendly cryptocurrency platform.
One crucial argument in support of that favorable hypothesis for the startup is the rapid user adoption that Coinbase was facing shortly after it went live. Slides 9 and 10 visualize that adoption with data, and even though Coinbase was in a very early stage, this data makes the investment in the project seem like much less of a gamble.
3. Use Shorthands To Make Complicated Concepts Simple
One of the biggest problems of innovative tech startups is that their exact offerings, features, and overall value propositions are hard to understand for investors who are not active users in the space the business serves. This is why it is common to see sentences like “We are the Uber of X” or “the AirBNB of Y” in startup pitch decks.
After slide 7, which shows and explains what Coinbase is in technical terms (a hosted Bitcoin wallet), the deck follows up with slide 8:
This comparison with something with something familiar to the investors who are the audience of this pitch makes the idea much easier to understand even for people who are not intimately familiar with the crypto space.
Moreover, the comparison is favorable, because iTunes was one of the platforms/tools that mainstreamed the MP3 technology - the same thing Coinbase is trying to do with the new blockchain (and more narrowly Bitcoin) technology.
If they are successful, then the upside potential for the project could be considerable.
In summary, the early-stage Coinbase pitch deck tells a simple but very convincing story:
- Bitcoin is rising, and the potential for the space is huge
- We have a solution for a clear problem that every person in the space has.
- Our solution is already seeing considerable traction despite the project being brand new.
With such a narrative, it’s hardly a surprise that they fundraised successfully.