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Coinbase is the Microsoft of crypto, early investor argues

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Garry Tan, Initialized Capital Founder & Managing Partner joins the Yahoo Finance Live panel to discuss Coinbase's direct listing.

Video Transcript

AKIKO FUJITA: Bitcoin hitting a new high in the session, although we've seen it pull back since. Ether also touching that $2,400 level for the very first time. Let's turn our attention to that NASDAQ board, though, as we await that first trade. Direct listing here for Coinbase, the reference price was set at $250 a share. Now we're looking at $366 a share.

And let's bring in our first guest for the hour. We've got Garry Tan, Initialized Capital founder and managing partner. Garry, you were on board with Coinbase very early on. So certainly a big day for you as well. What did you see back then? And when you look at just how much the space has grown, how does it compare to the expectation you had back then?

GARRY TAN: Oh my goodness. Well, you know, I think the thing to really realize-- and it's hard to sort of believe here today. But if you go back to 2011, 2012, Bitcoin was really a fringe thing. And what it took was a visionary founder like Brian Armstrong. I mean, he was a software engineer working for Airbnb, which itself is a revolution in software eating hospitality, one of the biggest industries on the planet.

And so the cool thing to think about is, like, he took that and combined it with reading the Satoshi Nakamoto white paper. And then he said, what does the world need in order to get to this sort of vision of crypto being in the hands of everyone? And to me, I mean, it's just amazing how clear the story was back then. And but nobody believed. And the crazy thing is 10 years later, now we're starting to get it. You know, the world is starting to get it. And sitting here on IPO day, it's such an incredible feeling to see his journey.

ZACK GUZMAN: Yeah, it seems so obvious for people who might have already bought into the Bitcoin story or the crypto story out there that you might need something like a Coinbase to come along and be the on-ramp for people who had never heard about it before. I mean, that's what it was. My brother helped me get on board through Coinbase. I didn't have a Coinbase account. You didn't need to. You could send it to people who had never heard of Coinbase or Bitcoin before. I mean, talk to me about how important that might have been in kind of launching all of the adoption that we've seen in the last decade.

GARRY TAN: Yeah, you know, thanks for indulging the stroll down memory lane, honestly, because it's important to think through where we came from in order to know where we're going, especially for such a big story as cryptocurrency. I bought Bitcoin first on Mt. Gox, which was a terrible experience. It was scary. It was not a clean, well lit place. And I think that if you were really into crypto back then, it was fringe enough that the dominant narrative was that you wanted it to be a shadow realm almost. It wasn't something that you wanted to put your name on, let alone work with banks or work with the government.

And I think Brian, you know, from the Airbnb experience, saw shades of this, where, you know, you had to bump up against regulation to try to push forward a thing that was good for human beings, right? You had to bump up against both the government and, you know, frankly, existing markets, right? And that's what's played out since. You know, what software is doing is now eating all of finance. And, you know, the coolest thing to think about is, like, he walked away from a guaranteed basically eight figures at Airbnb to make 11 figures as a founder.

And I think that's one of the things that really gets me up in the morning. You know, I woke up, and I was like, this gets to be my job. I get to fund people who are the earliest possible person. Like, they have a demo and they don't have any users yet. And Brian came to me and gave me 5-- 0.05 Bitcoin on Bitbank.is, which was his first demo. And this was before he raised money. So this is such a magical moment.

ZACK GUZMAN: Yeah, people have-- a lot of people probably understand what a lose-lose is. It's tough to think about a win-win, where you're choosing between 8 figures and 11 figures. But when we talk about the threats now facing Coinbase, right, if you can kind of step back and look at your investment and cutting the check to this company back in 2012, and now, when we think about other threats-- and a lot of people focus on the other competitors out there that might also be on-ramps to newbies in the crypto space.

But I'm increasingly looking at decentralized finance, DeFi applications that kind of do what Coinbase does. It's their bread and butter on the transactional fees here. What are you looking at, at new threats in this space in ways that could potentially slow down? I don't think anyone expects them to continue growing at nine-fold year over year rates when you look at sales. So what do you identify as those risks out there right now for a Coinbase?

GARRY TAN: Yeah. Well, you know, I really think of Coinbase as the Microsoft of crypto. You know, the personal computer revolution was itself a crazy fringe idea. You know, it took people very early to say that you wanted to bring a computer into every home and on every desk. That was, at one point, a revolutionary idea and now it's commonplace. And that's what's going to play out again with crypto in society.

And so, you know, I think that Coinbase in the future as that keystone, you know, what you need is a magnet for capital. Not just money from the public markets per se, but also human capital. And that's where I think, you know, what Coinbase is going to face is not different than what Microsoft faces every day, what Google faces every day. There's always going to be an upstart. And that's healthy for the economy and healthy for society.

You know, why I think Coinbase has a chance in the long term to continue to grow is actually that the boats are still rising, right? I think that, you know, everyone focuses on the price, and they focus on the Bitcoin price. But that is actually only one of a whole bunch of different use cases that I'm very excited about as an investor. You know, I think if you zoom out, I was one of the first investors in many other companies that are touching every other industry, you know, Instacart in grocery, Flexport in logistics, Opendoor in real estate. We were as early in those companies as we were in Coinbase.

And the key thing to remember here is that I think that crypto is going to play an increasingly large role in all of these other narratives in these other markets. You know, I think there's a chance that in 10 years, every single company we fund, because software is eating money and software is eating every other business, it will just sort of be in the water. And I think that that goes back to the credit that Brian Armstrong and the early team at Coinbase really deserves here, where they realized, hey, this is only useful when it touches the real world. And Coinbase is that on-ramp, as you said.

AKIKO FUJITA: So Garry, does all that mean that you're holding on to your shares long term? Or are you actually selling into the listing?

GARRY TAN: Well, I can't really comment on that. This is one of the biggest wins that I have ever had and ever potentially will have. So, it makes sense for people to diversify. On the other hand, I anticipate holding the absolute majority of, you know, frankly, this and my crypto. Because we're in the early stages. We're in the earliest possible stages, like, sort of the bottom half of the first inning of the game. You know, there's eight more innings here.

AKIKO FUJITA: Eight more innings. Garry, it's great to have you on today. I really appreciate your time. Garry Tan, Initialized Capital founder and managing partner.