Katie Haun on saying yes to Coinbase and where a16z’s crypto fund is placing its bets now – TechCrunch

Coinbase, the newly public cryptocurrency alternate, has had it share of ups and downs. Still, the almost nine-year-old, San Francisco-based outfit received so much proper forward of its extremely profitable direct listing this week, together with, seemingly, inviting in former federal prosecutor Katie Haun to be part of its board in 2017.

At the time, Haun had simply spent 11 years working for the Justice Department, dealing with instances relating to violent murders and organized crime and, later, the fast-growing world of cryptocurrencies. In reality, as a part of her job, Haun had gotten to know Coinbase and different up-and-coming startups to higher perceive digital currencies and decentralized techniques. Because Haun, who received each case she argued, was prepared for a change, when Brian Armstrong reached out a couple of formal function, she mentioned yes. (A 12 months later, Andreessen Horowitz, which wrote its first verify to Coinbase in 2013, individually introduced her aboard because the enterprise agency’s first woman general partner.)

The mixture has proved highly effective and profitable. As an unbiased board member on the outset, Haun was given shares for her service which might be reportedly now price roughly $150 million (a16z’s stake is valued at greater than $11 billion). Meanwhile, Haun — who just lately renewed her board time period — says the corporate’s most impactful days are nonetheless forward.

We talked yesterday with Haun about Coinbase’s valuation, its evolution from right here and her work with a16z’s crypto fund, which she co-leads with longtime common companion and fellow Coinbase board member Chris Dixon, and where the staff has doubtless “seen and done more deals in the last couple months than in the last couple years,” she mentioned. She additionally famous that a16z has been pouring nearly all of its cash into tokens. Our chat has been edited frivolously for size and readability.

TC: You have been working on these intense instances, together with homicide trials and sooner or later, your superiors on the Justice Department give you the possibility to work out what Bitcoin is all about. How did that lead you to Coinbase?

KH: I truly got here to know Coinbase by a few of the work I used to be doing on crypto instances within the authorities within the early days. I based the U.S. authorities’s first cryptocurrency activity pressure out of the Justice Department and a part of our job was to go meet with corporations or entrepreneurs within the area and get to know what they have been up to and how we may work with them. Of course, as with all business, the federal government’s aims didn’t all the time align with the crypto business’s. But typically there have been synergies [and] typically they could want to attain somebody within the authorities at one in all these corporations. Coinbase was not the one crypto firm that I used to be interfacing with in these authorities days. There have been many others. But that’s how I first got here to understand it.

TC: Because not everybody is going to know the specifics of your profession, you performed a task in prosecuting Silk Road founder Ross Ulbricht and additionally discovering two corrupt federal brokers concerned in that case. Is that proper?

KH: I truly didn’t prosecute Ross Ulbricht, I didn’t prosecute the Silk Road case. What I did prosecute is what we’ll name the twist to the Silk Road case, and that was that a few the brokers on one of many activity forces that was investigating Ross Ulbricht and the Silk Road truly turned out to be double brokers working each towards the federal government whereas being federal brokers. When I [first received] a tip that we had a rogue federal agent, I believed it was a conspiracy concept. So I believed I might go look into that, principally to simply clear this particular person’s title.

TC: Was this a profession federal worker?

KH: Yes, this was a federal agent for properly over a decade, and it turned on the market have been two, and they weren’t working collectively–

TC: Which is even weirder!

KH: Right? The different one was additionally a profession federal agent, which is extraordinarily uncommon. It occurs on TV, where you’ve gotten corrupt police or legislation enforcement. But I can inform you that in actuality, having been a federal prosecutor for over a decade, this was definitely a primary for me. And so I seemed into the excessive stage, and what we discovered was that, let’s simply say tons of of hundreds of {dollars} on the time — now it will be tens of tens of millions and even tons of of tens of millions of {dollars} at right now’s costs of cryptocurrency — shifting round. When we seemed into it initially, we thought it should simply be some poorly backstopped undercover operation. But the extra we checked out it, the switch patterns weren’t making sense, and they turned out to be going to private accounts, which then actually piqued our curiosity.

[In fact] corporations like Coinbase [and] different exchanges that saved compliant information have been instrumental to our means to clear up that case due to the information that we have been getting from these exchanges, but additionally, the blockchain itself. Without the blockchain, I can definitively say we by no means would have solved that case. Those brokers would nonetheless be federal brokers right now. Had they only been utilizing wires or fiat, we’d by no means have been in a position to clear up the case as a result of they have been going to monetary establishments throughout the globe and flashing the badge and saying ‘delete these records.’ They couldn’t try this on the blockchain.

TC: In phrases of traceability, a16z has investments in some NFT corporations, together with Dapper Labs, a blockchain firm working with the NBA and others to create NFTs, and, extra just lately, OpenSea, which is itself an NFT market. Can I ask what you consider the potential for folks to use NFTs to transfer cash illegally from level A to B? It’s one thing I wrote about just lately. 

KH: Money laundering is one thing I prosecuted on the Justice Department; I prosecuted one of many largest ever, if not the most important ever, online cash laundering case: the case against BTC-E. We additionally led an investigation into the Mount Gox hack and we harnessed blockchain expertise to assist clear up these instances, sarcastically.

I did learn your article, Connie, and I discovered it actually fascinating, as a result of at first I believed, ‘Oh, yeah, NFTs’ and ‘let’s see how may criminals exploit this,’ as a result of the factor about felony actors is they’re usually early adopters of latest applied sciences. I’ve mentioned earlier than, they’re beta testers.

I believe when you concentrate on cash laundering, the factor you’ve gotten to step again and notice is that 99.9% of cash laundering crimes with fiat right now succeed, which is staggering. I believe there’s this notion on the market that ‘Oh, when wires or fiat money or physical goods are used, money launderers can’t do their factor,’ and that’s simply utterly opposite to actuality.

What I might say is that crypto is a step-level operate enchancment. The cause I say that is as a result of it leaves these what I name digital breadcrumbs in a method that the bodily world or your money, even wires, by the best way, although wires are considerably digital, money, bodily items don’t fairly go away. With NFTs, I believe that in the end truly it makes it simpler for investigators to hint due to these digital breadcrumbs.

TC: Speaking of NFTs and a few of your firm’s deals, how would you describe your pacing proper now?

KH: We’re deploying at present out of our second crypto fund. And I believe it’s actually thrilling to begin seeing plenty of this stuff work and seize mainstream consideration. And simply frankly, there’s been plenty of launches additionally within the final six months. So that’s additionally been actually thrilling. So though the tempo is positively frenetic, it’s an extremely thrilling time within the area. Obviously, yesterday was a milestone for Coinbase but additionally only for the complete crypto ecosystem.

In phrases of tempo and what number of offers we’re seeing, I might say that we’ve seen and executed extra offers within the final couple months than within the final couple years, and keep tuned for a few of our bulletins there, as a result of we’ve executed so much on this final quarter and they haven’t all but been introduced. There’s actually an explosion of exercise within the area.

We’re additionally doubling down on investments we’ve made years in the past. You talked about Dapper Labs. The Andreessen Horowitz Crypto Funds have invested in Dapper Labs a number of occasions through the years, together with out of our first crypto fund, so it’s simply actually thrilling to see now all the progress that staff has made.

TC: How does the method of evaluating these crypto offers differ compared with conventional startups?

KH: Some classes are the identical and some are utterly totally different. One factor we all the time search for is a founding staff  that has an actual imaginative and prescient and that may execute; Coinbase is an incredible case examine in that. We additionally contemplate the entire addressable market. And we have a look at not simply the product and tech but additionally its defensibility. Could others come alongside and rapidly take over this concept? Those are a few of the traits which might be the identical.

What’s totally different in crypto is first, regulatory and compliance. Have code audits been executed, [have] vulnerabilities [been] discovered? What’s your plan for safety, notably in case you’re speaking about areas like decentralized finance.

We’re additionally [focused on] token economics. What we’re investing in at Andreessen Horowitz Crypto now largely is tokens. Because we’re a [registered investment advisor], we’ve got that flexibility. We nonetheless suppose there are many [opportunities] that advantage fairness funding; Coinbase is a major instance of an fairness funding, not a token funding, however we’re more and more doing so much within the token area. I might say, nearly all of our funds are deployed in tokens. And whenever you’re speaking about tokens, you need to have actually thought by token economics on the outset. Has the staff put aside sufficient tokens for the group? Once the protocol is dwell, what does that seem like? Are they going to Airdrop tokens? What’s their go-to-market technique? Are they incentivizing early staff with tokens? So I might say the token financial mannequin is one thing that we have a look at very closely.

TC: Are you saying that the agency is wanting to buy tokens, that means shopping for slugs of forex, versus investing in foundational expertise?

KH: We see tokens as foundational expertise as a result of we see these protocols, in lots of instances, as foundational expertise.

I believe what you may be asking me is, are we investing within the tokens versus the fairness of a selected firm, and the reply is very a lot yes. I may say the overwhelming majority of our crypto funds are deployed into the tokens themselves, the belongings themselves now [including] Bitcoin or Ethereum, for instance. Then other than that, we maintain tokens in various totally different protocols that we acquired simply by buying tokens — not as a result of we owned fairness in an organization that distributed the tokens.

In some cases, we’ve got owned fairness, where a staff has then created a token, and we get token rights as a part of our authentic fairness funding. But more and more, what we’re seeing is the flexibility to simply go purchase tokens. We should buy them over-the-counter and we’re positively doing that.

TC: What proportion of the crypto fund’s belongings are invested instantly in Bitcoin and Ethereum? Is it a large proportion?

KH: We’ve by no means disclosed an precise proportion, however we positively have a large place in each Bitcoin and Ethereum, which I can say as a result of we’ve disclosed that earlier than. So that’s actually all I’m comfy saying.

TC: That Bitcoin is now so precious has been a boon for Coinbase, which makes most of its income off transaction quantity. Can you assist readers perceive how this firm is price $87 billion right now? Presumably it received’t be as reliant on these charges going ahead (owing to stress from rival corporations).

Sure, it’s positively true that the corporate has plans to diversify from simply purely transactional income, though make no mistake, transactional income continues to be an vital section of the enterprise now but additionally sooner or later.

However, I believe we see diversification away from that when it comes to recurring subscriptions or providers. The finest method to take into consideration Coinbase is that it’s on the floor flooring in some methods, as a result of proper now you’ve gotten 56 million folks on the Coinbase platform however properly over 100 million folks across the globe doing issues proper now with crypto: shopping for it, promoting, even holding crypto belongings. And we actually see that as the bottom flooring as a result of we’re seeing tasks which might be enabling totally new industries.

Within crypto, we’ve talked about one already: NFTs. There’s [decentralized finance]. But there’s simply a lot extra on the market, like digital id.

One of the issues we’ve seen with crypto is that we are able to’t all the time predict where these new behaviors or merchandise and providers will lead. I imply, when the iPhone got here out, did we predict that might lead to behaviors like journey hailing, the gig economic system, TikTok streaming? One of the issues that we see for Coinbase is that it’s very well-positioned — as a result of it’s a crypto-first firm — to capitalize on every kind of various behaviors within the crypto economic system that we don’t even but learn about.

TC: A number of wealth was generated inside Coinbase this week, with presumably a significant divide between the haves and have nots. How does an organization on this place cope with that difficulty?

KH: People who’re attracted to Coinbase are attracted for various causes. Economics is definitely one in all them. But the candidates I see coming by Coinbase, there’s one thing in regards to the imaginative and prescient that pulls them to the imaginative and prescient of the corporate and to crypto as a motion and as a expertise.

I may also inform you that the administration staff is very a lot right here for the lengthy haul and is very a lot invested in constructing the longer term. At 7:22 a.m. the morning after the providing, [Coinbase sent out an email] saying: “Okay, on to the next thing, let’s keep the focus.” And by the best way, the identical factor was true when the value of Bitcoin hit $10,000. I simply occurred to be within the Coinbase places of work and the temper was, let’s maintain constructing.

TC: Can you remark on whether or not Andreessen Horowitz bought a part of its shares on this week’s providing and if that’s the case, what proportion? I’m assuming that the agency took some cash off the desk.

KH: Unfortunately, I can’t remark on any of that.

Note: Because a16z is an RIA, Haun made clear throughout our interview that she wasn’t providing funding recommendation or directing her statements at any investor or potential investor in a16z funds.

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