CC#26: Brian Armstrong on Clubhouse talks Coinbase: from start to IPO

Why nobody believed in Coinbase at the start and how Coinbase's first investor, Garry Tan, turned $300,000 into over $2b.

After wrapping up a momentous day with the Coinbase IPO, co-founders Brian Armstrong and Fred Wilson joined the Good Time Show on Clubhouse to talk about how they made it to this historical moment.

Sriram & Aarthi kicked it off by asking Brian to walk us through his emotions throughout this experience of taking Coinbase public.

Brian: “Fred and I just wrapped up a celebratory dinner. There’s so much that goes into becoming a public company. The IPO really took our time away from building great products which is what we love to do. I really didn’t think there was anything special about this compared to the other times we’ve raised capital—I was just thinking the old sayings “Stay hungry, stay foolish.” and “It’s always day one.” But because this was such a big moment for early employees and all of our investors, a lot of whom had been calling me throughout the day, it made it a big moment in my mind. It is the end of a chapter and the start of a new one. I’m glad we were able to safely do this during COVID, I’m especially glad we were able to take a minute to celebrate and I’m excited to get back to building tomorrow morning.”

Sriram: “Why does this feel historic and momentous?”

Brian: “So many people thought crypto was offensive and that it was a scam. I remember calling banks and having them hang up on us after saying “We do not work with bitcoin companies.” I remember hearing about people laughing behind my back saying “Omg, this guy thinks bitcoin is actually going to be a thing.” I remember even my own friends saying “I just don’t get it.” Now this is a moment where the bluest of the blue chips are calling us and saying: “How do we get involved.” and “How do we work with you.” The government is taking this more seriously because of us, and Fortune 500 will too. Basically, bitcoin has become a lot closer to shaping the future of the financial industry on a global scale.”

Sriram: “Brian and Fred—when was the first time you remember hearing about bitcoin / Satoshi Nakamoto?”

Brian: “For me it was in 2010, I just remember seeing the bitcoin white paper pop up on hacker news while I was home at my parents place over thanksgiving. I thought this could create more freedom in the world and that really spoke to me and got me started on this journey.”

Aarthi: “Also, how did you guys first meet and what was that like?”

Fred: “We met on the internet. I found Brian through a reddit post of a bitcoin wallet prototype. At the time, I was a trader at Goldman Saks. Prior to that when I was in college, I was a semi-pro gamer; I really enjoyed that and always through “How can I do something similar to this and make a career out of it.” After deciding to get into trading, I quickly became bored and realized this was definitely not it. I went on the internet and stumbled upon a blog from a professor at Georgetown about bitcoin in 2011. I had studied Computer Science in undergrad so reading about bitcoin really spoke to me. I had also played a ton of World of Warcraft where there’s digital gold. One day, I saw this prototype that Brian posted on reddit and I thought it was awesome. At the time, the closest way you could buy crypto was by wiring money to this highly unstable exchange called Mt. Gox in China. I thought wow, this is a really Silicon Valley consumer experience. Brian, you can tell the story of our first meeting.”

Brian: “We met at this little coffee-shop called the Creamery and we were trying to size each other up. We eventually opened up. What I quickly realized during that meeting was that Fred is driven and wants to change the world, which I also did. He’s also really sharp. After this first meeting we went to a bitcoin meetup and then we tried working together for 2-4 weeks. One of the things I noticed about Fred was that he was kind of intimidating but in a good way. I was afraid of saying something stupid around him. I remember working on the first ‘buy’ feature at the time with him, and he came to me in the first month and said “I think we’re losing money on every transaction.”

Fred: “Brian would go on Mt. Gox every 3 days and place a huge order to fill all orders we had during that period of time. So we’re literally buying exactly what the customers bought but we’re buying it 3 days later, where the price was typically higher.”

Garry Tan, the first investor in Coinbase & the managing partner at Initialized Capital, who notably turned $300,000 into over $2 Billion according to a video he uploaded earlier today, chimed in: “Weren’t you guys doing like 15% of all Mt. Gox transactions at the time?”

Brian: “We were doing a significant amount of transactions with Mt. Gox and it got to a point where we just thought this was unacceptable. It was too much risk. This is what lead to the creation of an exchange in 2015.”

Sriram: “Can you walk us through the early days: getting accepted into YC, raising capital, and what the early days were like?”

Garry: “I was a YC partner at the time and I remember a recommendation letter for Brian came in from a guy named Jason, who was the founder of a cyber-security company that had been working with Airbnb. The letter said that he was the best customer to work with and that this was great news for YC and the worst news for Airbnb. It also said that Brian would stay up till 2am with him on the phone working on implementing their software. I remember hearing this and thinking that Brian would be the perfect person to build Coinbase.”

Sriram: “I saw that you posted a video of you practicing the pitch for YC demo day in 2012. Why did you post that and what do you remember from these days?”

Brian: “Back to Garry’s comment—the reason I stayed up late is because I had no social life and I just liked staying up late. But the reason I shared that video is because it wasn’t very polished and I just wanted people to see that and think “I can do that” and “it’s not that hard.” I think when people see a public company or a successful startup, they automatically think it’s impossible to build something like this and that the people who did it are some super geniuses. That pitch was my third iteration. I had previously tried to start a startup and failed. The most important thing is you just need to start. Sometimes it works and sometimes it doesn’t.”

Sriram: “Garry, you gave them an application score of infinity. By the way, everyone should check out Garry’s video about this. Can you walk us through your thought process?”

Garry: “The coolest thing to me is he had actually built something. The biggest thing I learned while at YC is everyone has an idea and when an idea has the right founder behind it, you can see a demo and you can see the craftsmanship behind it. Thats what Brian had done really well. He had built and you could buy bitcoin and send it to people. When you actually take a look at the product and the engineering behind it—if it’s great you will attract great people like Dan Romero, Chris Dixon and Katie Haun.”

Here’s an email thread between Garry and Brian in 2012, published on Forbes:

Sriram: “Marc, when was your first time hearing about bitcoin and Satoshi Nakamoto?”

Marc: “We’re very fortunate to have Katie who was really involved early on before she joined us. I was super lucky to be surrounded by someone like Chris Dixon.”

Katie: “Chris Dixon lives and breathes bitcoin. I remember his very first blog post was “Why I love bitcoin?” One of the reasons Fred and Brian resonated so much with Chris, was because he truly believes in the benefit to society that bitcoin brings.”

Brian: “This is a common theme, these really smart people all had blogs and I almost felt like I knew them before I met them. Marc Andreessen with pmarca, Paul graham with his essays, and Chris Dixon with his blog.

Marc: “If you’re in the venture business you see a lot of these people with dreams. I’m old enough to remember that back in the 80s, David Chaum tried to create a digital currency, digicash, and there were a bunch of other digital currency startups in the 90s that I remember quite well that didn’t work. Bitcoin was 1 of these things that the idea itself wasn’t new and it had been tried several times before. Thats what often confuses people. Theres this 30 year track record that wasn’t exactly successful. The thing that became clear to me was that bitcoin was a legit computer science breakthrough, with digital consensus on a decentralized blockchain. As soon as I figured that out, I thought now it’s more in my world. Coinbase itself was always impressive for all the reasons. There was a critique early on that it was a bit too obvious. “How about a website that allows people to buy and sell bitcoin?” And the problem with things that seem like too good of an idea early on is that the market will fragment because too much competition enters the space. What Brian and Fred educated us on is that this is not so obvious. Most VCs have not invested in bitcoin. Understanding bitcoin is not that obvious. And what it takes to build Coinbase is not that obvious either. Having a company that’s conservative enough to go through regulatory compliance but also be able to focus on innovation was a huge differentiator. Once we figured that out the decision became easy.”

Sriram: “Balaji, when was the first time you heard about bitcoin?”

Balaji Srinivasan, the founder of, which was acquired by Coinbase in 2018 which then became Coinbase Earn, was also on the panel. He answered: “After the financial crisis, I was thinking a lot more about the root operating system. Things such as the nature of money and how banking worked. In 2010 or 2011, I remember talking with Patri freedman, I was interested in the idea of an absolute price for something. Imagine pricing something in joules; Imagine the actual earth elements that go into something and determining the price through the those elements. When bitcoin came out, I was interested because it violated some of my thinking. In just about everything else, the more computers you threw at something, the more problems you typically had. But for bitcoin, the more computers that were involved, the more secure it became. After the crash in 2011, I got heavily into it. I even taught a course at Stanford on bitcoin. I believe it was in January 2013, when I first met Brian and Fred.”

Sriram: “What was your reaction when first meeting Balaji?”

Brian: “He was so intelligent—I remember he would ask me about some random historical event and I would almost always say I’d never heard of it. When he came into Coinbase after we acquired, it turned out to be a huge revenue driver for us. He ended up solving the challenge of adding more assets to Coinbase. I remember hearing his original talk about Silicon Valley’s greatest exits at startup school. I thought that was one of the best talks I’d ever heard and I thought that I would love to one day work with this guy.”

Sriram: “Dan, talk to us about running around Europe trying to get banks in Europe to work with you?”

Dan Romero was an early employee who quickly became the VP of International Business at Coinbase. He joined in 2014, just as Coinbase was about to go through one of its toughest times. Dan replied: “In 2012 bitcoin was unregulated, nobody really cared about it. Then in 2013, FinCEN, the Financial Crimes Enforcement Network, released new guidelines on the legal status of bitcoin. It was a tough sell, especially because money service businesses are the least appealing customers for banks. They don’t make them any money and require a ton of work. Brian and Fred did a really nice job building the relationship with the bank they had prior to the regulatory oversight. In Europe there was no regulation for bitcoin which seemed super scary. One thing came to another and I ended up in Estonia. They had a bank that was kind of forward thinking, I believe one of the co-founders of Skype was plugged in there. Once we got in with this small bank in Estonia, we were off to the races in Europe!”

Sriram: “How was it to live through the ‘dark winter’ that was 2014-2015 at Coinbase?

Dan: “I’m just gonna say it was like being on a battlefield and losing 1/3 of the force so I became an executive because there was nobody else who could possibly fill the role at the time. We never lost the focus on the mission and I give a lot of credit to Brian and Fred. A lot of the companies in the space moved to enterprise blockchain. When everyone joined in 2014, we got up to 60 people. And then the rest of the year and 2015, all the numbers were just flat. It’s almost better in a sense to be going down hill than flat. It became a period where everyone kinda lost faith. However, the group that stuck around really believed in what bitcoin meant for the world in the longterm.”

Sriram: “Katie, as an investor, how was that experience from your vantage point?”

Katie Haun, a former federal prosecutor at the Department of Justice, GP at Andreessen-Horowitz and a board member for Coinbase also joined on the panel. She responded: “The thing is I actually got to know Coinbase pretty well when I was working at the federal government. I could’ve easily fallen victim to all the rumors going around about bitcoin. When the IRS subpoenaed every account of every customer who had ever bought bitcoin, they fought back because the supposition was that all bitcoin customers had committed fraud. It was funny because we found out even the US attorney had a Coinbase account. One of the things that stood out kinda early was I noticed whenever we would send out a process request in regards to Mt. Gox, Coinbase answered way quicker than everyone else and it was actually very helpful for the government when they did get back to us. That’s how I first got to know Fred and Brian. I joined in 2013. As Dan said, we were moving flat for 2 years and Fred and Brian were instrumental in keeping employees motivated. There was a lot of turnover in those days, but the people who stuck around had a deep sense of mission.”

Sriram: “By the way, I highly recommend reading about Katie’s history & listening to her podcast with Tim Ferris. Brian I remember hearing you say that going through the “crypto winter” made you a better leader. Can you explain this?”

Brian: “In the midst of those hard times, I had many moments where I needed to go in front of the company and put on a good face to inspire everyone, while carrying all this weight on me. I had to figure out a way to be more real and more authentic. So I said “let’s get a group together and discuss what’s not going very well.” I had to learn how to be a bit more vulnerable in front of the company. I didn’t want to get up and sob in front of the company without any plan, so I said let’s create a plan and began asking for their input instead of just listing a bunch of solutions myself.”

Aarthi: “Balaji, what does the future of crypto look like?”

Balajis: “The Coinbase recruiters asked me how I had pitched crypto. I had made this graph: The % of the world that held crypto over the % of their time spent on the internet. A large majority of the people who held crypto also spent a lot of their time online. Now most of our waking time is spent on the internet. The same thing is going to happen with crypto. Coinbase only has 50 million users. There are almost 3.5 billion people with smart phones, so there is room for about 20-50x growth available in terms of number of people. One of the things I’ve been doing is working hard on getting crypto into India.”

Balaji: “Indians have been into gold for a long time. Every Indian gets gold for their wedding. So they should be able to understand digital gold. I’ve written a series of essays, why India should buy crypto, how we can add crypto to IndiaStack, and more. Most people in the world don’t know about IndiaStack, but it’s as if stripe was ran by the government in a sense. IndiaStack works great for domestic stuff, but what about international payments. Crypto gives a really good solution to this that is neither Chinese nor Indian. The CEO of Infosys is one of the most respected folks in the India tech ecosystem and he came out and Retweeted a post I collaborated on with the IndiaStack people, and just like an Indian can now access millions of sources of info because of the internet, they should also be able to access millions of sources of capital because of crypto.”

Sriram: “Fred, I heard you speaking this morning and one of the things you said that you thought was really important such as working with billion dollar brands was actually not very exciting. Can you elaborate on this?” 

Fred: “I think one of the truisms of new tech, is that there are things that are not possible in the current world until a new tech comes out. The 2 obvious things were invest it and use it for payments. Bitcoin today is still known as digital gold and that store of value that works really well. The thing that didn’t go so well was the payments thing. We tried to get all these online merchants to take bitcoin in 2014 and succeeded in our goal of signing brands up but nothing happened. People didn’t have any bitcoin to spend and didn’t care to use it. There was also something that happening that made us realize bitcoin could be more than just money. All of a sudden in the past couple years you had Ethereum come on the block and create the opportunity that blockchains can be programmable. Our number one is DeFi (decentralize finance); think of things like trading and lending where you don’t need a centralized entity. You’ll be able to borrow and trade against other peoples assets. I think people greatly underestimate the impacts of this over the next 50 years. If you think of these 3 stages: Digital money, financial systems, and decentralized applications. We are super early.”

Sriram: “I love this theme you have all shared in common—that today in some ways is just the beginning. Dan I like how you still say you were late to crypto.”

Dan: “I stole that from Marc who says he was late to the internet.”

Katie: “As Balajis said, there’s only 56 million on Coinbase. With 3.5B people with smart phones, we have a lot of opportunity for international expansion. As Fred said, we’re really bullish on things such as NFTs. We’re proud investors in OpenSea, an NFT Marketplace. The most exciting thing of all is what applications do we not know about yet? Balajis had a whole presentation at an off-site just on nouns and verbs of the crypto economy. This is such an exciting space, it just makes me think what’s next?

Sriram: “Brian, if you met Satoshi Nakamoto today, what would you want to tell him?”

Brian: “You’re a genius. I would not have been able to come up with this on my own. I was just able to understand it and understand the potential of it. The world really needs scientists who do this kind of thing. I’m just really grateful that Satoshi decided to put that out there. It definitely changed my life and the lives of so many other people out there.”

Satoshi Nakamoto is the alias of the creator of Bitcoin, which still remains a mystery to this day. If Satoshi is out there, I’ll bet he is extremely proud of Brian and Fred, as well as the rest of the Coinbase team. The reference price of Coinbase was listed at $250, and within hours of going live it shot up to around $430 before dropping back down. It is set to open today around $330, which puts Coinbase at a market cap of over $65b.

In the tweet below, Rolfe Winkler outlines what different investors / firms paid for Coinbase when they first invested:

You can read the original bitcoin white paper published by Satoshi Nakamoto here.