In continuing my PSA on well funded bitcoin startup valuations (reference Imy valuation estimate of Bitpay, a rapidly growing payment processor), I bring a forensic analysis and valuation of Coinbase, likely the 2nd largest money exchanger in the bitcoin business.
Valuation Case 2- COINBASE
Revenues for Coinbase is calculated based on global monthly transaction size (US$) of the company. Annualizing the transaction resulted in Total transactions for 2014
As per the information available, Coinbase charges 1% as transaction fee resulting in the revenue of the company.
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Table 3- Revenue Forecast, US$ |
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2014F |
2015F |
2016F |
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Annual Transactions*, US$ |
1,085,488,973 |
1,248,312,319 |
1,435,559,166 |
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Transaction Fee (%) |
1.0% |
1.0% |
1.0% |
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Total Revenue |
10,854,890 |
12,483,123 |
14,355,592 |
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*Growth assumed under moderate scenario |
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As per the news for funding in Coinbase, the valuation of Coinbase ranged between US$140 million – US$1 billion. Based on weighted average (by applying 70% weight to the lower figure in the range), the above valuation is derived at US$398 million. Applying the multiples at which Bitpay and Circle are estimated to have been funded recently (using average revenue multiple of Bitpay and Circle), the valuation based on 2015 and 2016 revenues is as shown below: Table 4- Relative valuation |
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Particulars |
2015F |
2016F |
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Revenue ($) |
12,483,123 |
14,355,592 |
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Multiple Comparable- Bitpay and Circle |
16.0x |
13.5x |
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Valuation (US$mn) |
200.31 |
194.23 |
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Of course, we feel that these rapidly growing payment processor companies, although now profitable and expanding their reach like weeds, are barely touching the tip of what the Bitcoin industry will look like just two years into the future.
Wall street, pay attention!!!
See also:
- Payment Processors, Patents and a Dollop of Healthy Paranoia
- Margin Compression Is Coming in the Payment Processing Space As $100 Million Pours Into Startups
- Bitcoin Myth Busting 101
