In 2012, investor Garry Tan got an e-mail. A young Airbnb engineer named Brian Armstrong had sent him a tiny fraction of a bitcoin, worth just a few cents. But this message piqued his curiosity. How many people send you money for nothing?
Tan happened to be one of the few people other than Armstrong paying attention to bitcoin at the time. The digital currency had only been in use since 2009. Tan had actually bought some before, using a janky website called Mount Gox. The process was frustrating. He knew there had to be a better way.
So Tan tried Armstrong’s new system. He found buying and selling bitcoin a breeze, and happily wrote a $300,000 check to Armstrong’s nascent company, Bitbank. That company became Coinbase, which went public today on the Nasdaq. Its current market cap is nearly $100 billion.
Tan’s initial investment is now worth $2.4 billion, making him one of the wealthiest men in America. But why did he spot Coinbase when other investors turned them down?
Tan’s familiarity with cryptocurrencies and the problems in buying and selling them was a major factor. He could see Coinbase’s technology was better than what he and other users had had to put up with, so using it would be a no brainer for others. He had also studied the removal of the gold standard in 1971 and was convinced fiat money was risky.
What do I take from this experience, as an investor? It tells me to look for products in sectors I’m familiar with, and use the product myself if possible. And if a product solves a problem for me, it’s likely to solve it for others as well.
It also makes me want to read widely and keep up with current technologies as much as possible. The more familiar I am with the new technologies businesses are using, the more good shots at a great investment I will have.
I hope to have my own 6,000x bet some day!
For more on startups, venture capital and crypto, check out these posts:
- NBA Top Shot: An Overnight Succcess 8 Years in the Making
- Venture Funding Just Doubled in 1 Year
- Key Metrics for Startups: Consumer vs. Enterprise SaaS
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