Tuesday, March 2019
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Coinbase founder is almost a billionaire now
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Coinbase founder is almost a billionaire now

If this is a gold rush, Armstrong, 35, is the guy making the big money selling the pans. He founded Coinbase, the nerve center and most popular entry point for cryptocurrency trading in the U.S., in 2012. There are two main parts to the business: a brokerage side, where retail customers can buy Bitcoin, Bitcoin Cash, Ether and Litecoin using a bank account, and an exchange, where big traders can make bids and offers on cryptocurrencies.

The company has gone through some growing pains. There have been outages and a legal battle that it lost with the Internal Revenue Service, which successfully demanded customer records so the government could figure out the capital gains owed by Coinbase’s customers. But through it, all Coinbase’s customer base has continued to surge and the company has continued to charge fees that are high, at least by traditional brokerage standards.

In August, Coinbase raised $100 million at a valuation of $1.6 billion from six firms, including the prestigious Greylock Partners. The company offered a share buyback, and almost no employees took it–a nearly unprecedented situation in Silicon Valley. Smart move: A month later, Coinbase told its investors that it was on track to generate $600 million in annual revenue at its current pace. As Bitcoin mania continued, Coinbase became the most downloaded iPhone app in the U.S., and its monthly unique users grew to 4.3 million, according to Verto Analytics. Coinbase generated $1 billion of revenue in 2017.

What’s even more remarkable are its pretax margins, which exceed 70%, according to industry insiders, compared to 40% for Schwab. According to one person privy to the transaction, shares of Coinbase recently traded on the secondary market for a valuation of about $4.5 billion. It’s not hard to make the case the company is worth much more.

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