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A Coinbase IPO in the post ICO landscape will be the AOL moment in a good way

By Bernard Lunn.

Bernard Lunn
Bernard Lunn
There is no announcement yet about a Coinbase IPO. This is science fiction for now based on reading some trends and some PR teasing; but when you read the announcement remember that you read it here first.

Before it is news, read about it on Daily Fintech.

The “Netscape moment” is an old journalistic convention. I have used it here for LendingClub and here for Zhong An and the Coinbase CEO has evoked it.

The Crypto early adopters - the cool kids in Crypto School - look down their nose with disdain at Coinbase. It is all so simple. Oh and it is centralised, which is like drinking chamomile tea at psychedelic rave up. So one is likely to hear the comparison to AOL. That is meant as a put down, but all of us should have a failure like AOL. AOL went through decline after dial up modems went to the tech museum, but in its day….(cue soundtrack = Glory Days by Springsteen).

If this follows the AOL trajectory:
- Bull market
- Buy a big bank (Jamie Dimon tries not to look sheepish at the press launch)
- Mega crash, everything crypto is rubbish. Banks breathe a sigh of relief.
- The equivalent of Facebook and Google appear and most banks disappear or become a shadow of their former selves and Coinbase goes to the old tech retirement home (it’s a value stock!).
- Yes, I do love science fiction.

First Crypto IPO in the post ICO landscape

IPO is so 1999 darling, today we do ICO. An IPO today is like wearing flared trousers in the 1980s.

At least the Coinbase IPO won’t be the Trezor moment. This will be a “real” IPO on a “real” exchange overseen by very serious regulators. The fact that many ICOs raise more money at far lower costs should not be mentioned. Actually I expect the Coinbase CFO to negotiate hard with the bulge bracket i-bankers as he/she will have alternatives. It is no longer about saying to Goldman Sachs, “if you don’t agree to my terms I will take this is to Morgan Stanley”, which is pretty ineffective as there is not much price competition among the majors. Now the i-bankers know that an ICO (to accredited investors, like Filecoin) is a real alternative.

Despite the lure of an ICO, particularly for a crypto venture, I expect Coinbase to do ye olde IPO.

The Tapscott Blockchain IPO debacle shows the hunger of investors for anything crypto. A Coinbase IPO will be more credible and will serve the same hunger.

Ye olde IPO makes perfect sense for Coinbase from a branding point of view, because they want the mainstream user to pay attention and don’t care so much about the early adopter. Back in March 2015, before a long period when everything Bitcoin/Crypto was out of fashion, I opined that “a bitcoin IPO such as Coinbase could trigger mainstream merchant adoption”. I would class that now as directionally right but hopelessly wrong on timing. An extended Bitcoin bear market in 2018 will kill any plans for a Coinbase IPO (said Captain Obvious).

Two real stories (anonymized to protect reputations) tell the difference between early adopter and mainstream and why Coinbase matters.

The Early Adopters are fundamentally different

Story 1: an early adopter, rich from getting early into bitcoin, stores his bitcoin wealth in a hardware wallet with a long private password. He/she likes to travel and has not invested in a powerful safe at home, but does not want a security check official at an airport knowing what a hardware wallet is and then asking him/her to open it up and taking it. So he/she commits the long private password to memory and logs out. The hardware wallet is now a useless electronic device and if he/she forgets the long private password all his/her wealth is gone. Back outside the airport on landing he/she searches his/her brain for the long private password and his/her wealth is restored. For 99.99% of the world, much as we may grumble about our banks or how uncool Coinbase is, we don’t want that kind of hassle.
Story 2: a wealthy Wall Streeter asks me how to buy some bitcoin. After the obligatory “I am not a financial adviser and be careful” statement, I suggest Coinbase (he/she is in America). I am conscious that this is not a sophisticated answer, because Coinbase is like AOL ie uncool, and the person asking is a sophisticated investor. Yet Coinbase - the obvious answer - may well be the best answer.
Coinbase has worked hard to be reliable and up to date through all the storms in the anarchic world of cybercurrency. That makes them the on ramp for mass market adoption - in short, the AOL of cybercurrency.

Bernard Lunn
Founding Partner, Daily Fintech Advisers

Bernard Lunn is a serial entrepreneur, senior executive, adviser and a strategic dealmaker. He worked in Fintech before it was called that with startups, growth stage and turnaround ventures (incl. Misys, Temenos, IMS, ITRS). He has lived and worked in America, India, UK & Switzerland and is adept at cross border deals.

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Mardi 14 Novembre 2017