Coinbase’s direct listing alters the landscape for fintech and crypto startups

Coinbase’s direct listing was a massive finance, startup and cryptocurrency event that impacted a host of public and private investors, early employees, and crypto-enthusiasts. Regardless of where one sits in the broader tech and venture world, Coinbase storming north of a $100 billion valuation during its first day of trading was the biggest startup happening of the year.

The transaction’s effects will be felt for some time in the public market, but also among the startups and capital that comprise the private market.

In the buildup to Coinbase’s flotation — and we’d argue especially after it released its blockbuster Q1 2021 results — there was a general expectation that the unicorn’s direct listing would provide a halo effect for other startups in the space. Anthemis’ Ruth Foxe Blader told The Exchange, for example, that “the Coinbase listing shows this great inflection point for crypto,” with another “wave” of startup work in the space coming up.

The widely held perspective raised two questions: Will the success of Coinbase’s direct listing bolster private investment in crypto-focused startups, and will that success help other areas of financially focused startup work garner more investor attention?

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Presuming that Coinbase’s listing will positively impact its niche and others around it is not a stretch. But to make sure we weren’t misreading sentiment, and to get deeper into the why of the concept, The Exchange reached out to venture capitalists who invest in the broader fintech world to get their take. We even roped in an analyst or two to round out our panel.

The answer is not a simple yes. There are several ways to approach investing in the cryptocurrency space — from buying coins themselves, to investing in mainstream-ish institutions like legal exchanges, to the more exotic, like supporting efforts on the forefront of the decentralized blockchain world. And while it is somewhat clear that most folks expect more capital to be available for crypto projects, it’s not clear where it may end up inside the market.

We’ll wrap by considering what impact Coinbase’s direct listing will have, if any, on non-crypto fintech venture capital investing.

After yesterday’s examination of how blazingly hot the venture capital market looked in the first quarter, we’re again trying to gauge the private market’s temperature. Let’s talk to some folks on the ground and hear what they are seeing.

Are crypto startups less risky now?

Coinbase’s direct listing floated a company that is worth more than all but two major blockchains, namely Ethereum and Bitcoin. Several other chains have aggregate coin values in the 11-figure range, but a 12-digit worth is still rare among crypto assets.

The scale of Coinbase’s valuation post-listing matters, according to Chainalysis Chief Economist Phillip Gradwell. Gradwell told The Exchange that “Coinbase’s $100 billion valuation today demonstrates that venture investors can make great returns from putting money into crypto companies, not just cryptocurrencies. That proof point is good for the entire ecosystem.”

More simply, it is now eminently reasonable to invest in the companies working in the crypto space instead of merely putting capital to work hard-buying coins themselves. The other way to consider the comment is to realize that Coinbase’s share price appreciation is steep enough since its 2012 founding to rival the returns of some coins over the same time frame.

Cleo Capital‘s Sarah Kunst expanded on the point, telling The Exchange in an email that “it’s now credible to say you’re a crypto startup and plan to IPO [versus] having acquisition or ICO be the only proven exit paths in the U.S.”