Brian Armstrong on Coinbase's Echo acquisition, on-chain IPOs, and the future of crypto capital formation

Palmer, for joining. That was a fantastic conversation. Uh we'd love to have you back. We'll talk to you soon. How you guys doing?

Good to see you, Palmer.

Yep.

Uh we'll see you later, Palmer. Have a good one.

Awesome. Thanks for coming on. Cheers.

Live long and prosper.

Live long and prosper. That is correct.

Brian, welcome to the show. Double Brian. As you can see, I've already achieved all my life goals.

Yes. Yes. No hair whatsoever. None left.

Uh, you look fantastic. Welcome back to the show. Thank you so much.

How's your 24 hours been? You guys have been dominating uh the timeline.

This acquisition of Echko

out there. You know, Kobe's just such a legend. He's an OG in crypto.

He's been giving us good advice for a long time, whether it was whether we wanted it or not. and he was he was right. Um, every time he put out some stuff. So, I every time I'd call him, I you know, I DM'd him on on X a while back and was like, "Man, you you keep lighting us up on on X, but you're right every time." And uh he always had good suggestions. So, I was trying to court him for a while to see if we'd get him in the company.

Fantastic. Uh I mean, I went on this little emotional roller coaster. Maybe it's just because I'm a little bit of an outsider, but uh when the story broke that you'd purchase the NFT, uh everyone, you know, I was seeing, oh, this is so much to spend on a podcast. This is so ridiculous. And I was kind of falling into that trap. And then when the acquisition happened, it felt like a brilliant way to kind of actually draw more attention and even just share a little bit more of like the road map of what's happening here. They're obviously connected, but talk to me about like how you decided to parcel out the information and why. Yeah. Well, I wish I could take credit for that, but um we actually have some really great people on our our team that are, let's say, a little more um internet native and in the a little DGEN. And uh we've been,

you know, we've been hiring some folks that really are following this. So, yeah, they actually came up with the idea of like, let's bring his podcast back. That would be that would be awesome. It had a it had a cult following. I think everybody loved it, the UP Only podcast. So,

really, as part of this deal, we decided to have some fun with that. And the real news of course is we're acquiring the company, but if we can get this podcast back up and running, I think that would be really fun at the same time. So yeah, and then I just the broader story is just like we're really excited about capital raising coming on chain. I mean that can make the whole process more efficient, more fair, more transparent. Every entrepreneur who I know finds the fundraising process to be pretty ownorous, right? It usually takes like two to three months where everything else that you're focused on has to stop. you go do tons of pitch meetings, you get told no 19 out of 20 times. It's you get you get punched in the gut over and over with these smart people telling you that you know your idea sucks. And then um if you're lucky, you manage to get this thing over the finish line and it's always a very tenuous process with tons of legal fees. And so yeah, we really think that capital formation can be just much more efficient on chain and Echo is leading this space. you know, they've helped over, I think, maybe two or 30 hund projects now raise money. Um, over $200 million. And so, it's not just going to be like token sales, like I think other startups.

Yeah.

What What keyword did I hit for that?

Uh, 200 million.

200 million. We got to ring the gong.

Yeah. Get that gong. Let's do it for the echo team.

Um, I love it.

Yeah. And I guess like dive into that a bit further. My my understanding is like they're a platform but they have uh the there there's some editorial approach there right you're not just for now it's not any company coming on Echo and spinning up or or is it it's communityled is that it it's like you they have to have

yeah the idea is you can raise from your community and they are curating it a bit right because I think if it's totally open-ended you could have an adverse selection problem but um yeah they're bringing on really high quality projects and you can imagine that, you know, Coinbase has about half a trillion dollars in custody from our retail and institutional customers. These people want access to great assets and investments. So, Coinbase is really building a network effect here. If we can have great builders come in who want to raise money and connect them with investors who have the money, you know, we're the perfect platform to help accelerate this and give Ekko even more distribution. So, first when they come in, they're they're going to keep Echo standalone, just make sure it continues to operate and do great. But over time, you can imagine us integrating this tokenization fundraising platform into Coinbase and really distributing it to all of our customers.

Is there can you walk me through some of the more like life cycle of a modern crypto startup? Like imagine if I incorporate raise money on Echo, but then is there a world where I'm in an ecosystem of like Coinbase B2B products or I'm building on top of base or I'm custodying my treasury with you? like ho how many how many different products can I pull off the shelf if I'm building a crypto startup in 2025?

Yeah, that's exactly right. I mean, you're you you're pitching the vision better than I could, but yeah, let's say that you're it's the full life cycle. You know, you're two kids with a laptop and a dream or whatever. You want to start something.

Um you can go in there and open a Coinbase account for your your startup. Um maybe we even help you incorporate on chain at some point with like a, you know, a DAO or these kind of things. And then you need to raise your first bit of capital, like a seed round, you know, press the raise money button and put it put your pitch deck together, make a video, like we'll distribute it to some of our early or some of our customers that are interested in these kind of assets. We help you raise money. Now you've got kind of a business bank account equivalent open where the funds just arrive instantly with USDC from people all over the world. You don't have to be tracking down these like wire transfers and lawyers and all over the world. we just kind of, you know, it's all raised on chain in a smart contract. So you your capital arise arrives immediately. Now you can um actually start to generate revenue as well as you're building your product like crypto payments are another button click away. Maybe financing is involved there and eventually someday you're want to going to you're going to want to go public right and have your company be traded by everyone every retail customer out there. We can help you do that on chain as well. So you can imagine this whole life cycle coming on chain and I think the goal is this will just increase economic freedom. It'll increase the number of companies who go raise capital and get started out there in the world.

Yeah. uh

what what what is the uh uh process for the private markets coming onchain like it seems like there's now enough momentum right uh echo is is one version of this did you know did you know onchain companies raising onchain that makes sense but how how do we get to the point where uh companies that uh maybe aren't aren't cryptonative are are able to utilize these rails and then particularly you know tokenize as their equity and and make use of uh you know crypto's full potential.

Yeah. So, it's starting with token sales, more crypto companies, but you're right. I we're eventually going to get this, I think, to be every company just raising money this way if it's more efficient. They shouldn't really even have to care if it's crypto underneath. They're just, you know, they're raising dollars or with stable coins, whatever that they want to actually raise. So, you know, there are currently some exemptions which allow this to happen under the SEC um both for crowdfunding or, you know, having accredited investors uh raise it. But we're actually we're spending quite a lot of time with the SEC to try to get the next generation of this working that would allow retail to participate under certain conditions.

You know, the accredited investor rules are there for a good reason. They want to protect people the unacredited investors but it also prohibits uh people who are not already wealthy from gener you know participating in these kinds of upsides. So in many ways the accredited investor rules are kind of unfair. We're hoping that we can find the right balance of consumer protection and also making these available to retail and yeah it'll level the playing field democratize access. It's what crypto is good at.

Do you do you uh has this happened yet for a company to go effectively go public on chain? Do you expect to see that in the near future? There's so much capital on chain that would love to invest in, you know, that loves to invest in all types of different opportunities, but do you see that

is that not just dropping a token? Like, do you not think of Ethereum as the first company or

Yeah, in some ways, but I'm talking about like a company that, let's say, you know, we had Figma IPO this year. They could put a they could leave an allocation like an onchain allocation.

Yeah. Interesting.

And so some would go through to to traditional brokerages. And I just feel like you'd be getting the first calls for serious companies that that wanted to explore something like that.

Yeah. So, there's been lots of precursors to this, you know, the whole ICO craze and everything. It just showed the amount of demand for this or like the Ethereum launch or anything, right? But there's no there's hasn't been anybody who's done it yet with like a traditional IPO like you said with an allocation in the onchain category. And actually, when Coinbase went public in 2021, I really wanted to do this. We spent a bunch of time with the lawyers trying to figure it out. And unfortunately, like the SEC at that time was not the kind of it wasn't ready, let's put it that way. And um so now we have an SEC that's much more engaged and willing to innovate on this frontier. And they really want the US to be the crypto capital of the world. So I think that we will see hopefully in the next 2 3 years the first company go public on chain you know and could be in parallel with a traditional IPO but over time I think you'll eventually see like a marquee blue chip company go public entirely on chain and um that's where that's the direction this is heading you know crypto is eating financial services and hopefully Coinbase can be the primary account for people in that new economy

how much uh are stable coins an important piece of this narrative. I imagine that even crypto founders who are super bullish on crypto are still not in the world where they say I want 100% of my raise to be denominated in Bitcoin or Ethereum because

I have a funny I have a funny story from from uh 2021. I built a company called Party Round back in the day and we had a fundra fundraising software that uh some

uh variety web 2 web3 companies were using and we had a big web 3 company you fund raise with our product and we had the functionality to raise in stable coins and they say we actually don't want to offer this because it's really kind of complicated to try to c like they weren't set up like custody the USDC and so they were like no we'll just use fiat rails

uh because I mean the variety The tech's obviously come a long way since then, but um

but I Yeah, but I'm I'm wondering like are are modern crypto companies thinking 10% in crypto or bit Bitcoin and ETH or something like that? Or are there companies that are like 50/50 or are they like uh I want to use crypto rails but it's got to be all in stable coins. Is it all over the place? like what's the current mood around like just if you're building a startup and you want to build a product and you need to pay you know employees the same amount every every month like yeah how do people think about that?

I think most companies are going to raise using stable coins just because it's stable to price the the terms in that but then right away they're going to want to keep a percentage of their yeah treasury in something that's more inflation resistant like Bitcoin. You know, we we're seeing even large public companies like Coinbase and you know, others use Bitcoin on their balance sheet. So, it's becoming more acceptable to have Bitcoin on in the treasury for as part of treasury management. It's almost becoming like a best practice if you want to hedge against inflation. Yeah, but the just to actually get investment terms done. Yeah, we that's probably going to happen in USDC with people just clicking a button to sign sign the terms, agree to the safe, and then the money is instantly transferred as part of that.

Yeah. Yeah. No, that makes a lot of sense. Um uh we're having Brian Chesky on in just a few minutes. Uh I don't think we ever got your full uh take on founder mode. like you've been through uh so I I feel like you're in the in in like the the the best example of like a founder who's been at the helm through so many cycles. Uh how have you distilled your philosophy, your operating philosophy on like keeping the team aligned, uh keeping focus, agility, uh keeping new ideas flowing through the entire Coinbase journey.

Yeah. Well, you know, I actually started my career at Airbnb and I got a chance to work with Brian and Joe and Nate and so

um you know, I'm a big fan of of Airbnb and everything I learned there before going on to Coinbase. But yeah, I'm a big fan of founder mode as well. I think Brian struck a chord with that when he put it out. I mean, I'll tell I'll tell you one of the things actually we adopted from his founder mode talk and subsequent content that came out is like we're now doing product events twice a year where we go out and just package up everything we've been building and communicate it to the world. That's just one small example, but I think the core message of it is like don't apologize for running the company how you want to run it. And so there's definitely times every week where I have to jump down into the weeds and be like look, we're we're we're not hitting the bar here. Like let's let's level it up. let's go in this this direction. And so you're constantly as a founder sort of making those edits in the room, editing people's thinking, editing who's in charge of that team, editing the road map to get it all moving in the direction you want. So yeah, um sometimes micromanagement is

underrated and necessary.

Sometimes to be a dictator by Kobe DM as well. If he DMs you something, you got to bring it to the team. Uh well, I think we have Brian Chesy joining just now. Uh thank you, Brian Armstrong, for hopping on the stream. Look, it's your old boss.

It's your old boss.

Hey, bride.

Hey,

strong black t-shirt game today. I like it. Yeah, looking good, guys.

You both look fantastic. Uh, thank you so much for hopping on the stream.

Congratulations to uh the Coinbase and the Echo teams. Awesome moment.