Coinbase acquires crypto investment platform Echo for $375M

Coinbase Global Inc. has acquired Echo, the operator of a platform that enables users to invest in crypto startups by buying their tokens.

The deal values Echo at about $375 million. Coinbase plans to finance the acquisition with a combination of cash and stock. The transaction, which was announced this morning, marks the company’s eighth acquisition since the start of the year. 

Nasdaq-listed Coinbase operates a popular crypto exchange of the same name. Over the past few years, the company has expanded into numerous other parts of the crypto sector to sustain its revenue growth. The company’s frequent acquisitions support that growth strategy by extending its product portfolio into new market segments.

Alongside its exchange, Coinbase offers a crypto operating account for businesses. The service enables companies to pay suppliers in crypto and sync transaction data to their third-party accounting software. For financial institutions, Coinbase provides application programming interfaces that make it possible to carry out high-volume trades through its exchange.

Echo’s platform enables investors to buy crypto startups’ newly issued tokens through private sales. Additionally, it offers a tool called Sonar that allows members of the public to participate in token sales. The company says it has processed over $200 million in funding across more than 30 transactions since launch.

Coinbase positions Echo’s technology as a simpler alternative to traditional fundraising methods. “Founders often struggle to raise capital and individual investors don’t have the opportunity to invest in private token sales,” Coinbase executives Shan Aggarwal and Aklil Ibssa wrote in a blog post today. “Echo solves this by allowing projects to raise directly from their community, either through a private sale or by self-hosting a public token sale using Sonar.”

Echo will complement the technology that Coinbase gained through the acquisition of another startup, LiquiFi, in July. After raising funding through an Echo-hosted token sale, startups can use LiquiFi’s software to manage their cap tables. Those are documents that track how many tokens are held by each investor. LiquiFi also eases related tasks such as issuing digital assets to employees and managing vesting schedules. 

The Echo acquisition is one of the largest ever made by Coinbase. The company’s biggest buyout was its purchase of Deribit for $2.9 billion earlier this year. Deribit operates an exchange for trading in crypto options, contracts that give investors the option to buy digital assets at a predetermined future date for a predetermined price. The company processed more than $1 trillion worth of transactions last year.

Coinbase plans to expand its product portfolio further in the near future. Earlier this year, it revealed that it intends to turn its platform into an “exchange for everything.” The plan is to let users trade in tokenized versions of stocks, prediction markets and a variety of other assets.

The company will also extend Echo’s feature set as part of the engineering push. “While we’ll start with crypto token sales via Sonar, we plan to expand support to tokenized securities and real-world assets over time, leveraging Echo’s infrastructure,” Aggarwal and Ibssa wrote.

Photo: Nasdaq