High above Market Street, Fred and Brian stared at the sun breaking through fog-dappled San Francisco Bay. Coinbase didn’t have anything resembling a real boardroom on Bluxome Street, so they had borrowed space at LendingClub, whose posh corporate headquarters would be the backdrop for a make-or-break meeting.
It was April of 2013—less than a year after Brian’s Y Combinator stint and just five months since they’d turned Coinbase on—and the startup needed more money. Brian and Fred had put all the pieces in place to persuade venture capitalists to open their cash spigots and crown Coinbase with a Series A round—a multimillion-dollar investment that would let the company ramp up operations and signal to Silicon Valley that rich, influential people believed in Brian’s vision. Then Fred saw it. His stomach sank as he watched the team from Union Square Ventures file in, without Fred Wilson.
“We are so fucked,” he said to Brian.
Fred Wilson is the mercurial cofounder of Union Square Ventures, one of a handful of New York City–based VC firms that rivals the prestige of the august Silicon Valley outfits. He is scheming, cold-blooded, and brilliant. As a board member at Twitter, Wilson had presided as a cruel puppet master—summarily purging not just one, but two CEOs. His relationship with the press is famously fractious. Upon learning a reporter was contacting his associates after he had refused to cooperate for a magazine profile, Wilson had warned the journalist that he “might want to think about making friends instead of pissing people off.”
Wilson is ruthless, yes, but he’s also been a mentor to a generation of startup founders. And unlike other venture capitalists, he was an early bitcoin believer. Satoshi Nakamoto’s creation, he thought, could change the world—if only someone could act as a cheerleader who was neither a zealot like Roger Ver nor a criminal like those Katie Haun had heard about from her FBI colleagues. In Brian and Fred, he saw a public face for the technology: two buttoned-up young men with entrepreneurial spirits.
Unfortunately, on this particular May morning, Wilson was home sick in New York City. This left Brian and Fred to make their pitch to the other partners at Union Square Ventures, none of whom shared Wilson’s enthusiasm.
“We are so fucked,” Fred said again.
The words echoed in Brian’s head as he played it forward: What would happen if Union Square Ventures failed to pony up? Like other graduates of the Y Combinator program, he had scraped together a series of $50,000 investments to fund Coinbase’s seed round—the little pot of money a new company needs to try to get off the ground. Those investors included the cofounder of Reddit, Alexis Ohanian, whose future wife—tennis star Serena Williams—would, years later, also invest in Coinbase. Brian had also persuaded the entrepreneur Barry Silbert to chip in. Silbert, who had become a stockbroker at the age of seventeen, had been buying masses of bitcoin since 2012, and when his wife insisted he diversify his wealth, he began investing in cryptocurrency companies too.
Upon approaching Coinbase, however, Silbert was taken aback when Brian told him he could buy in but only in the form of an uncapped convertible note. Such an arrangement would give Silbert the right to receive shares in Coinbase’s Series A round, but with a big drawback: “uncapped” meant there was no limit to how much Barry’s investment could be diluted by competing investors. Typically, only the hottest of hot startups have the clout to demand an uncapped note, and Silbert, who had invested in dozens of companies, had never agreed to such terms.
“If you believe Coinbase has the best shot to be the number-one wallet, the valuation is almost irrelevant. Look at PayPal. The investors are rich, and the investors in number-two got nothing,” Brian wrote to Silbert. It was a cocky email, but it also amused and impressed Silbert, persuading him to take a flyer on Coinbase. He decided to invest $100,000—in bitcoin.
These early investments from Ohanian, Silbert, and others got Coinbase up and running, but that’s it. If the company wanted to scale—Silicon Valley–speak for growing into a colossus—Brian and Fred needed venture capital firms to rain down millions of dollars. And making it rain cash required Coinbase to show it was moving “up and to the right.” For venture capitalists, the phrase is a near-holy invocation. Up and to the right. It means a startup is adding both users and revenue month after month, making a beautiful diagonal line on their PowerPoint slides.
Since late 2012, Coinbase had been up and to the right. On three occasions, Brian and Fred had taken their beautiful line to Paul Graham, the cofounder of Y Combinator and their rabbi of fundraising. The first two times, Graham had told Fred, “You are not ready, my son.” On the third occasion, he stared at Coinbase’s performance—still growing up and to the right—and gave his blessing for a Series A funding round, introducing Brian and Fred to his well-heeled network of money men.
But despite Graham’s endorsement and Coinbase’s growth numbers, the venture capital world—normally so risk-loving—was still skittish. Most VCs didn’t understand bitcoin, and many of those who did saw something that would invariably be snuffed out by law enforcement. The biggest exception was Fred Wilson, who persuaded the other partners at Union Square Ventures to take a trip to San Francisco for a serious look at Coinbase’s potential. If all went well, the firm would lay down $5 million.
Now, on this fateful May morning, Wilson had called in sick. Brian and Fred would instead have to make their case to Wilson’s skeptical compatriots, including Brad Burnham, the cofounder of Union Square Ventures and an open skeptic of bitcoin. “So fucked,” thought Brian, again.
Only half-fucked, it turns out. Brian and Fred’s presentation, their clean-cut appearance, and Coinbase’s up-and-to-the-right trajectory persuaded the Wilson-less Union Square Ventures team to buy in—at $2.5 million. They’d have to find the other $2.5 somewhere else.
For that, a white knight appeared in the form of Micky Malka, who ran the VC firm Ribbit Capital, and for whom bitcoin was deeply personal. Malka, a tall man with protruding ears and close-cropped hair, speaks with a heavy Latin accent of his native Venezuela, where he had seen firsthand how a venal, inept government could debase a money supply. Like so many bitcoin believers, Malka saw digital currency as a torch for economic freedom that autocrats like Hugo Chavez, Venezuela’s ruinous leader, could not snuff out. “He could see the global money angle and for him, unlike other investors at the time, bitcoin was not heretical,” says Fred.
For Malka, a bet on Coinbase was a bet on bitcoin, and he could not say no. Coinbase had its full Series A.
As lawyers put the final touches on the deal, Fred recalled how a friend at Goldman Sachs had made him a promise. One of the bank’s few senior directors who shared Fred’s frustration with Goldman’s dithering digital ways, the friend told him he would cut a $25,000 check to invest in anything he pursued. Fred called and asked if he still meant it. He did. And so, as Goldman Sachs sat on the sidelines while bitcoin blossomed, at least one of its executives made out like a bandit as his $25,000 early stake morphed into Coinbase stock worth millions years later.
Not everyone thought so highly of Coinbase’s Series A round. Sam Biddle of Valleywag, a now defunct muckraking site, greeted the funding news with a sneering headline: “VC Dumps $5 million in real dollars into bitcoin hysteria.” He also pooh-poohed bitcoin itself, grousing, “We’re all talking about it because an obscure, obfuscating group of libertarian nerds are gaga for the digital currency.”
The Wall Street Journal, the country’s business newspaper of record, took a more upbeat tone. In a long article, the paper noted the $5 million investment as a landmark moment for cryptocurrency and quoted an effusive Fred Wilson, who praised Coinbase as the “JP Morgan of bitcoin.” Brian and Fred high-fived and went back to work.
• • •
The Bluxome Street place Brian had rented across from The Creamery was actually a two-floor, one-bedroom apartment, but after the Series A round, it started to resemble an office—and also a cult of bitcoin. Fred had taped up an iconic “Dream” poster of the rapper Biggie Smalls, but changed the “d” to a “b” so it read “Bream,” short for “Bitcoin Rules Everything Around Me.” And occupying pride of place sat a wood-and-glass cube containing a bright blue betta fish named Satoshi.
The apartment-turned-office was filling up with people too. After Olaf came Craig Hammell, a talented engineer who had helped build the dating site OK Cupid—perhaps a fitting career choice for someone so painfully shy with women that he didn’t have a girlfriend until his senior year of college. Brian and Fred had met Craig on a trip to New York and, discovering he was a bitcoin believer, invited him to San Francisco for a work trial. Upon arriving, Craig moved into “Hacker House,” a place that billed itself as a home for the city’s tech elite, but for Craig was more of a hustle than a hot spot.
“I realized it was a way to rip off people by getting them to pay $1,500 a month to live with nine other guys in a crummy apartment,” Craig recalls. Soon after, the building’s owner discovered what was going on and evicted everyone, including Craig. So he grabbed his sleeping bag and moved into Bluxome Street for the next few months, coding late into the night and rising early to shower and code some more. For someone who, in Olaf’s words, “is an insane workhorse who just loved to ship coin,” a round-the-clock bitcoin gig suited Craig just fine. Like Olaf, he took his salary in bitcoin, and also like Olaf, he had been an early client of the company—Coinbase customer number 80.
Years later, Olaf—now fabulously wealthy—would distill his Coinbase experience into a nugget of advice for startups: Hire your customers. In Olaf’s view, Coinbase flourished even as dozens of other bitcoin startups flamed out because it hired people who believed in the company and loved bitcoin. It’s good advice, and not just for crypto companies. Phil Knight, the legendary founder of Nike, laid the foundation of his shoe empire with a small team of devout sneakerheads.
Unfortunately for Brian, not all of his customers wanted to work at Coinbase. One who said “no thanks” was Julian Langschaedel, a superb coder who lived in Germany. For months, Brian had paid him to help adapt Satoshi’s original bitcoin code—which was designed for individuals to run on home laptops—into something sturdy enough to serve Coinbase’s commercial purposes. Fred and Brian persuaded Julian to come to San Francisco for a work trial. These work trials were part of Coinbase culture and amounted to a several-days test to see if a prospective employee would fit in. Julian fit in just fine but, for his part, he had two objections. The first was that Americans worked too much. He preferred a work culture that left more time for sipping beer. Julian’s other objection was the beer itself—more specifically, that Americans did not know how to make it right. He flew back to Germany.
Coinbase had better luck with Charlie Lee. A stout, soft-spoken man who wears his jet-black hair in a sharp part, Lee had used his “20% time” at Google—a renowned perk that let employees spend a fifth of their work hours on personal projects—to create Litecoin, an early alternative to bitcoin. Charlie’s entire life had been shaped by his extraordinary proficiency at math. This included his first day of elementary school in Ivory Coast, where a teacher discerned that first-grade mathematics was too easy for Charlie and promoted him to the second grade. The second-grade teacher, however, drew the same conclusion and, the following day, Charlie walked into the math class of the third grade.
“I’m Asian, so I was already one of the smaller kids, but walking into that third-grade class, I was smaller than ever,” he recalls.
As he grew older, Charlie’s talent served him well, helping him build computers with his brother Bobby before he was a teenager, and later as an engineer at Google, where he worked on building YouTube and the operating system for Google’s web browser, Chrome. Charlie applied his math skills to engineering but also to economics, which led him to become a gold bug—a quirky class of investors that regards the yellow metal as better value than stocks or bonds. He was a gold bug until 2011, when he discovered bitcoin.
“It really made sense to me. I read the code part and realized it would be big. I decided to go all in during 2013. It was a better version of gold,” he said. Charlie meant it, barely blinking when the value of his first bitcoin investments dropped from $30 to $2 in 2011—one of many spectacular crashes that would help define the currency in its early years. By 2013, he not had only put all his own money into bitcoin but urged his family to do the same. His brother didn’t need much persuasion—Bobby Lee was by now becoming fabulously wealthy by founding China’s first bitcoin exchange.
Getting ordinary people to buy bitcoin, however, was a tall order. Charlie shared Brian’s view that the rigmarole of wallets and private keys was too daunting for non-technical people, and that it couldn’t go mainstream without a service like Coinbase. He became Coinbase’s third hire.
The small team—Brian, Fred, Olaf, Craig, and Charlie—quickly developed an esprit de corps, hitting a local rock-climbing gym and unwinding over Call of Duty and other video games—matches that pitted Fred, the national gaming champion, against two or even three of the others. But mostly the Coinbase crew worked like maniacs. They treated the task of building the startup with the urgency of a military operation, coding the website from morning until 10 or 11 at night, then pausing to sketch grand schemes on whiteboards, then returning to their laptops to code some more. High on startup endorphins, the early Coinbase team followed Fred’s lead. Fiercely competitive, the former lacrosse and basketball star took to bellowing about “running through brick walls” until the phrase became a company mantra that can be found on Coinbase’s website to this day.
One such brick wall came in the form of Apple. A teenage bitcoin enthusiast had built an app for Coinbase as a quick way for customers to buy and sell bitcoin on iPhones. Unfortunately, Apple didn’t allow cryptocurrency trading and would bar any apps that offered it from its App Store. Brian, though, came up with a plan to run right through this wall: Coinbase would use a technology called geo-fencing to disable the app’s trading feature, but only for the town of Cupertino, California—the site of Apple’s headquarters and where its engineers vetted new apps. As far as those engineers could tell, Coinbase’s app complied with policy, and so it was allowed to remain in the App Store. Meanwhile, Coinbase customers in the rest of the country began slinging bitcoin on their iPhones.
It was a neat trick and a textbook example of how to run through a brick wall. Unfortunately for the Coinbase crew, other walls were too strong to bust. Two obstacles in particular loomed that could not only halt Coinbase’s progress but kill it outright. The first was a serious hacking attack of the sort that had already wiped out numerous other crypto startups. The second was the US government. Coinbase came perilously close to being crushed by both.
• • •
The hacking attack came in mid-2013 when the Coinbase team had paused to eat dinner. An odd email alert notified Fred about a withdrawal from Coinbase’s hot wallet—the place where the company stored millions of bitcoin to handle day-to-day transactions. It had to be a mistake, he thought. Coinbase guarded the keys to the hot wallet in the way a bank protects its vault and Coke protects its secret formula. No intruder could come anywhere near it. Then came the notification of a second withdrawal.
“Shit. Better check this out,” Fred told Charlie, who had his laptop at hand during dinner.
Charlie logged in to the Coinbase control screen, and what he saw made his heart sink. Someone else had logged in and was siphoning out the company’s bitcoin. Worse, the intruder was growing bolder—and greedier. The initial theft had been for only a few bitcoin, but now the hacker was plundering Coinbase wallet in earnest. After the third illicit withdrawal, Charlie frantically changed the password to access the wallet and shut off access to everyone else, but not before the mysterious robber had helped himself to a hoard of bitcoin. The Coinbase crew glumly finished dinner, their startup $250,000 poorer than when the meal began.
The team quickly figured out what had happened. The thieves, it turned out, had hacked one of Coinbase’s IT contractors to obtain the password—an all-too-common trick in the cybersecurity world, where hackers treat external vendors as the soft white underbelly into a company’s network. Brian ordered a security overhaul, requiring any firm that worked with Coinbase to use a Chromebook laptop provided by the company. He also took stock of what had happened.
The robbery delivered a financial hit, of course. But it also posed an existential threat to Coinbase’s reputation if anyone found out. In those go-go early days of bitcoin, when hacks and scams were everywhere, Brian had branded Coinbase as a safe and secure alternative—a place where customers could park their funds with the same confidence as at a big bank. A media headline blaring that Coinbase could not protect its own assets would be devastating. Banks that lose your money don’t stay banks for long. Fortunately, no one spilled the news about the hack, leaving Brian and the others to return to doing what they did best: work their asses off.
Still, the robbery left uncomfortable questions hanging over the team. The hacker had gotten into Coinbase’s hot wallet, which was connected to the internet, but the company had millions more in bitcoin stashed in “cold storage”—how crypto people refer to bitcoin stored on physical devices like USB keys or even scraps of paper. These techniques meant the all-important private key for a given bitcoin wallet was stored off the internet so hackers couldn’t steal it. The obvious appeal of cold storage meant there was a growing market for stashing private keys offline. One company, Xapo, even offered a service that stored customers’ private keys in a vault under a mountain in the Swiss Alps.
Coinbase’s own cold storage system was hardly that dramatic. In the early days, for instance, a chunk of customer bitcoin resided on a USB drive in Brian’s pocket. This produced some uncomfortable moments, most notably when Brian arrived at US Customs after a trip overseas. In response to a standard question from a customs agent about whether he was entering the US with more than $10,000 in cash or cash equiv-alents, Brian decided to say no. Better not to tell the agent about the USB stick on his key ring holding millions of dollars in bitcoin.
As Coinbase grew, it quickly added other layers to its cold storage, including a multicity system where private keys were broken into different segments and scattered across the country. Similar to the Horcrux puzzle in the Harry Potter series, the system relied on different people finding and reassembling the different pieces in order to re-create a private key that held a store of bitcoin. It was a clever way to guard Coinbase’s reserve supplies, but in the wake of the hack of the company’s hot wallet, Brian and the others felt less confident. In response, the company hired Andreas Antonopoulos, a well-respected bitcoin scholar, to carry out an audit of its cold storage supplies. Using a series of random samples, Antonopoulos tested whether the private keys scattered across the country actually unlocked the supply of bitcoin they were supposed to hold. Brian breathed a lot easier when Antonopoulos’s audit came out clean.
Hackers conducting out-and-out robberies were, however, just one of the species of criminals who confronted Coinbase. Far more common were the fraudsters who used trickery rather than hacking to steal bitcoin. In a common scam, these crooks purchased stolen bank account credentials from sketchy sites on the internet and then signed up as Coinbase customers. They then purchased bitcoin using funds from the ill-gotten bank accounts in the hopes of whisking the bitcoin to another wallet before the bank or Coinbase had figured out what occurred. For Coinbase, such scams were a double disaster—not only did the company lose bitcoin, but the bank would restore the victimized customer’s loss by clawing back the funds Coinbase had received.
A variation of this scam involved crooks who bought bitcoin despite not having funds in their bank account to pay Coinbase. At the outset, Coinbase made customers wait three days before delivering the bitcoin a customer had purchased—the amount of time it took to confirm, under the banking system, whether the customer indeed had the requisite funds. Brian, however, believed Coinbase had an opportunity to turbocharge its business by offering customers same-day service, delivering bitcoin within an hour. Despite entreaties by Craig and Olaf, who warned the plan would be a scammers’ bonanza, Brian pushed forward. Big mistake. It took less than a day to realize the same-day service was a fiasco as fully 10 percent of the company’s transactions came back as fraudulent, costing Coinbase both cash and bitcoin. The team wryly referred to the problem as “friendly fraud.”
The team also had to grapple with the uncomfortable fact that some of their customers treated the company as their personal money-laundering agent for a host of crimes. These included ransomware operators who would lock up the computers of companies, cities, and schools and only unlock them once the victims had paid a ransom in bitcoin. Once crooks had collected their ransoms, a site like Coinbase offered an excellent place to turn those bitcoin into US dollars.
Coinbase was hardly the first company to be an unwitting agent to money laundering. Extortionists and drug dealers have long used money-transfer services like Western Union and even Apple gift cards as a way to move their ill-gotten loot. But unlike Western Union and Apple, Coinbase did not enjoy decades of goodwill. Worse, it dealt in bitcoin, already a red flag. If criminals ran rampant on Coinbase, a host of powerful agencies would waste no time shutting it down.
Olaf, already swamped with thousands of customer support tickets, did his best to squelch the crooks who crawled like cockroaches from one Coinbase account to another. If he saw activity that looked like money laundering, he would cut off the offending customer and file a document called a “Suspicious Activity Report” with the US Treasury, a process he later described as “covering your ass.”
The process worked for a while, keeping Coinbase in the good graces of law enforcement, if only barely. For his part, Fred Wilson had seen enough. The company’s mercurial patron warned Brian and Fred that running through brick walls was well and good, but not when it came to federal regulators like the US Secret Service and the Financial Crimes Enforcement Network. Coinbase needed adult supervision in the form of a compliance officer, whether the founders wanted one or not.
And so Martine Niejadlik joined Coinbase in the fall of 2013 as hire number four. A tell-it-to-you-straight New Yorker with a bushel of frizzy hair, Martine was a veteran of an earlier generation of financial startups, including PayPal, and she had helped develop the famous credit metric known as the FICO score. Along with her real-world experience, she also stirred the first strain of diversity into Coinbase’s bro-centric culture: she was the first woman, the first parent, and the first forty-something. Fred Wilson had personally persuaded her to join, emphasizing how the bitcoin startup was on the path to rocket-ship growth, and it needed Martine to keep it steady.
• • •
Adam White had not been on a rocket ship before, but he had been on plenty of fighter jets. The onetime US Air Force commander had carried out dozens of F-16 missions over Iraq and Afghanistan, and despite his mild-mannered demeanor, he brought an insatiable intensity to any task. After an initial rejection letter from Harvard Business School, he slashed his sleeping schedule to four hours a night while in the Air Force in order to prepare seventy-two versions of a second application.
That did the trick. He got into Harvard but, as an early bitcoin believer, he discovered to his dismay that no one leading the prestigious B-school had any time for cryptocurrency. “It was supposed to be the West Point of capitalism, so I found it strange that the idea of a private system of money didn’t go over well. I tried to write about bitcoin for one of my economics papers, and my professor told me not to,” he recalls.
Upon graduation, Adam followed the predictable path of other business school graduates, doing a stint at Bain & Company, and then as a product manager at a video game company. But his bitcoin fever kept burning.
When he turned up at Coinbase, Fred and Brian—true to form—put him through his paces with an elaborate logic riddle. This one involved people stranded on an island who could leave only if they could guess their own eye color based on a clue from a green-eyed guru. Adam, realizing the problem turned on deductive reasoning, solved it, leading the Coinbase founders to invite him for a work trial—paid entirely in bitcoin—that required him to sign up local merchants to accept bitcoin payments. It was a tall order, given the digital currency’s shaky status in the real world, but Adam was undaunted. With Fred Ehrsam’s exhortations about “running through brick walls” ringing in his ears, he sent three hundred cold-pitch emails, tracking the response rate with a spreadsheet. It worked. At the end of his work trial, Adam had persuaded an airline, a frozen yogurt shop, and a social media site to plug their payment systems into Coinbase and accept bitcoin payments.
“You’re hired,” Fred told him, and turned him loose to sign up more merchants. Adam thrived in the role, signing up ten $1 billion businesses for bitcoin within a year and relishing the workaholic culture. “Coinbase was very hierarchical, like the military,” he recalled. “I idolized Fred as a leader. He was the blend of an elite software developer and a Goldman Sachs trader.”
Adam’s arrival in October of 2013 coincided with a surge of new customers for Coinbase as the company’s month-over-month figures kept on their magical trajectory up and to the right. Meanwhile, news of bitcoin was spreading far beyond the tech-y corridors of San Francisco as the mainstream press began to write serious stories about Satoshi’s creation. Much of this had to do with the price of bitcoin, which crossed above $100 in the summer of 2013 and kept on climbing. But it also had to do with novelties like bitcoin ATM machines popping up in coffee shops and a growing horde of art and merchandise that signified to everyone a new tribe was in town.
The bitcoin buzz in the air also electrified the Coinbase crew’s apartment-turned-office on Bluxome Street as a steady stream of bitcoin pilgrims dropped by. These included people who would go on to become some of the most famous figures in the crypto clique. The venture capitalist Marc Andreessen came by, and so did Tyler and Cameron Winklevoss, the Harvard rowers who took a large legal settlement from Mark Zuckerberg over the founding of Facebook and plowed it into a bitcoin fortune. A visionary and crypto zealot named Balaji Srinivasan turned up. Craig and others thought he looked like a cross between a drug dealer and a street person with his torn Nikes and stained sweatpants, but they became transfixed. Balaji may have looked like a hobo but he sounded like an Ivy League professor, delivering an impromptu lecture on the work of political economist Albert Hirschman. A scrawny teenager named Vitalik Buterin, who would soon invent the most important cryptocurrency after bitcoin, also spent days puttering around the Coinbase office.
Not all visitors to Bluxome Street were so welcome. On several occasions, irate Coinbase customers appeared at the door, demanding explanations for whatever glitch had befallen their account. Olaf or Craig would do their best to assure the customer their bitcoin were safe and nudge them back outside onto the street. On another occasion, a stalker appeared at the door, a young man who explained he had been watching that “very good-looking guy”—Fred—and had obtained the Coinbase address from a burrito delivery person. Would they like to hire him? He, too, was coaxed back outside.
In late 2013, Coinbase also hired its first lawyer, Juan Suarez. A boyish-looking twenty-five-year-old with deep-set eyes and a mop of dark hair, Suarez had clerked for future Supreme Court Justice Neil Gorsuch and was following the cookie-cutter career path lawyers call Big Law. Bored out of his mind by long days reviewing subprime mortgage documents, Suarez spent his nights lurking on Reddit forums and reading about bitcoin. When he saw that Coinbase was hiring, he recognized his deliverance. “I was writing this multidistrict litigation bullshit over Countrywide mortgages, so I thought ‘screw it.’ I put together this half-assed slide deck on how I could help Coinbase. Martine told me she had received many more-qualified applications but liked my deck,” he recalls.
Together, Martine and Juan began to impose some order on Coinbase’s cavalier approach to legal and financial filings. They also commenced a series of diplomatic visits to the Secret Service, the FBI, Homeland Security, and other powerful agencies, explaining the potential of bitcoin and assuring them Coinbase wasn’t a money-laundering front. Encountering unexpected allies like the prosecutor Katie Haun, their message started to resonate, and Coinbase began to acquire a faint halo of respectability.
Presiding over all of this like a pair of drill instructors stood Brian and Fred. Hunkered in a command center on the upper floor of the Bluxome apartment, the pair radiated workaholic energy. If Fred’s mantra was “running through brick walls,” Brian’s was “headphones on.” The Coinbase crew would see Brian’s bald head encased in giant cans, a signal to stay away. “Brian had this ‘don’t fucking bother me’ vibe when the headphones were on. Don’t even walk past him when he’s in the zone,” Juan recalls.
Coinbase’s cold and non-fuzzy culture would later lead Bloomberg Businessweek to describe Brian and Fred as “Vulcan Swiss bankers . . . do not try to make them laugh.” Meanwhile, the company’s already arduous hiring culture—with its sink-or-swim work trials and Google-style interview riddles—became more intense still with a practice called “doing the thumbs.” This entailed everyone who had interviewed a prospective hire meeting in a room and at once engaging in a Gladiator-style display of up-or-down. A single thumbs-down typically doomed a candidate.
For Juan, the Coinbase culture could be extreme, but it didn’t faze him. “I thought it was fun. If you want to talk about a ‘cold and Dickensian’ culture, try working in a big law firm,” he says.
Nonetheless, Fred and Brian’s imperious approach to managing began to leave other Coinbase employees edgy and exhausted. Fred’s relentless exhortation to run through brick walls, at first inspiring, became intimidating, and the startup risked collapsing under its own intensity.
Then, in December of 2013, came Nathalie McGrath, a soulful young woman with kind blue eyes and a tumble of brown hair. Nathalie had cut her professional teeth running operations and manning the front desk for the MBA program at Stanford University—a place populated with the same hard-charging, bro-ish strivers she found on Bluxome Street. At her Coinbase interview, Brian and Fred promptly served up a crushing logic problem that involved a cruel Pharaoh forcing his subjects to choose from a jar of black or white marbles. The wrong choice meant death. When Nathalie asked them why the Pharaoh was doing this in the first place—a question outside the scope of the problem—an impatient Brian replied that “the slaves are rebelling and we need to set an example.”
“Well, I would push the marbles aside and make the slaves more productive,” Nathalie replied. Fred declared this to be bullshit. But Brian liked the answer and decided such unconventional thinking should be rewarded. Soon after Nathalie was hired. She and Juan Suarez came as hires number six and seven.
Coinbase had everything a startup needed—money and mentors and hard-driving coders—except for one thing. The company, like so many in the Valley, lacked emotional intelligence. With Nathalie’s arrival as chief of staff, that began to change.
Tasked with organizing Coinbase’s first retreat, Nathalie deftly deflected Brian and Fred’s idea that they do a “hunt and gather” outing that would require every employee to kill their own food. Instead, Nathalie arranged a trip to Napa Valley and several days of team games sandwiched between bouts of boozing and hot tubs.
The outing worked. Nathalie’s subtle ministrations smoothed over the gruffest parts of the company, and the Coinbase crew began to click like never before. Even the two Vulcan bankers expanded their emotional depth—albeit often with each other. Years later, Fred would recall how he and Brian took their bromance to a new level during a trip to Oahu, where together they went over a set of thirty-six questions presented in a New York Times article as a way to accelerate intimacy.
Meanwhile, the startup’s monthly numbers, ever up and to the right, began to resemble another sacred Silicon Valley invocation—the hockey stick. The phrase “hockey stick growth” implies a sudden lurch upward, and this is what Coinbase had toward the end of 2013, as the company rapidly approached a customer count of one million wallets. Fueling it all was a staggering jump in the price of bitcoin, which burst past $200 in October, then $500 in November, and over $1,000 in December. The first truly big bitcoin boom was in full swing. And Coinbase, which had sweated to raise a $5 million Series A at the start of the year, now had the top venture capitalists of Silicon Valley lining up to throw money at them. So they took it. Days before 2013 came to an end, just over a year since opening for business, Coinbase closed a $25 million Series B round, by far the biggest-ever investment in crypto. It was time to celebrate.
• • •
“Bang!” “Bang!” The bullets tore through targets at a shooting range in South San Francisco. Brian and the rest of the Coinbase crew yelped with delight when their shots hit the mark, and with an exhilaration of being at the top of the cryptocurrency world. Martine, the compliance officer, stood firing guns alongside her Coinbase colleagues. There on the shooting platform, she listened to the bark of the pistol reports when suddenly, she felt a searing spot on her cheek. A hot shell casing had whizzed out of a gun and singed her. Was this a sign?