Company Building in Crypto [Dec 2018]


Chris Dixon + Brian Armstrong

How did Coinbase start?

  • Armstrong Studied CS and Economics

  • Saw hyperinflation in Argentina 

  • Worked at AirBnB

    • Front row seat to international commerce at scale

    • Saw a lot of broken things 

  • 2010: read Satoshi’s white paper 

  • Decentralized protocol for moving value, along with information 

Even in 2011, felt like he might be too late 

  • Worked on Coinbase prototype on nights/weekends 

  • Got into YC

  • Andreessen felt he might’ve missed the internet revolution in ’93 🙃

Dixon considers himself an innovation maximalist

  • Thinks VR is about to come back 

  • Crypto feels like one of the big paradigms; few come along in a career

  • Time is tough, though

  • Nerd energy (nights/weekends) still funneling towards ML and Crypto 

A16Z invested in Coinbase in 2013 

  • Series of run-ups, and declines

  • Challenge for Armstrong in managing his psychology, his team’s psychology

  • Friends and family could be tough; “you’re working on the scam thing?” 

  • People who make companies successful need passion that transcends 2-3 years

  • Those initial years are full of setbacks; maybe you see success after 8-10 years

Most initial activity was in one protocol: Bitcoin

  • Scaling concerns started to bubble 

  • Realized that Coinbase couldn’t just be a Bitcoin company; might just be digital gold 

  • ETH, then expanded to 5.  More coming

  • Not going to be like TCP/IP, where it’s one protocol to rule them all

  • Handful will likely succeed; e.g. JPEG, PNG for images

    1. Traded risk for complexity in the landscape 

  • Aiming to be the most trusted, and easiest to use, in the crypto world 

Ethereum’s appeal

  • JS-like, Turing-complete language that’s relatively easy to use 

  • Enabled a new set of tokens; comprehensive smart contracts; etc

  • Half a developer maintained SSL; there was no money for funding it 

  • ETH has inspired a renaissance in protocol development

    • ..and maybe there’s a business model for maintaining them 

  • New design space unlocked, where you can't assume that you have total control over the distributed computer

Coinbase is a little over 500 people, now

  • Things like mission statements, OKRs start to feel necessary when you cross Dunbar’s number

  • Executive coaching has been really helpful 

  • Armstrong wants to run a big, public company someday

    • Keen to learn / professionally develop 

    • Does NPS feedback after every big meeting 

What is crypto useful for, beyond speculation?

  • Access to financial services in emerging markets

  • Recipients can verify payment with just math; not third party

  • Prediction markets

  • Wisdom of the crowds 

  • Social apps, decentralized 

  • Endorsements and up-voting resulting in payment

    • Can you reduce the friction with moving little amounts of money around?

    • Putting in a credit card is still very high friction

    • (Armstrong doesn’t know who PewDiePie is)

  • Dixon: the idea that we’re only 20 years into the internet and compensation modalities are done?

  • Feels short-sighted; ads not likely to be the end-all-be-all

  • Quality of crypto teams is a high quality as any other types that A16Z sees

A16Z’s initial foray into Crypto

  • 2013; was a contrarian move to dive in

  • Dixon was in the security space; has always found it interesting 

  • HashCash was interesting, in the context of surmounting spam 

  • You can always find reasons to be a detractor, but on net, there’s much to be excited about