Coinbase Buys Crypto Trading Firm Tagomi To Boost Institutional Trading Business

Coinbase, the largest cryptocurrency company in the U.S., is acquiring the two-year-old, 20-person digital asset trading firm Tagomi for a price between $75 and $100 million, say multiple people familiar with the situation. 

New York-based Tagomi caters to deep-pocketed crypto traders who make transactions between $250,000 and $2 million. It doesn’t have its own exchange—it links to a dozen of the largest, including Coinbase and Binance U.S., aiming to route investors’ orders to the venues offering the best prices. Tagomi has attracted high-profile backers and clients, including Peter Thiel’s Founders Fund and crypto investment firms like Paradigm, Polychain, Pantera and Multicoin. It had raised $28 million in venture capital before the Coinbase deal was announced, and it was valued at $72 million when it last raised funding in early 2019.  

Coinbase is acquiring Tagomi for its technology and talent. Greg Tusar, who previously led electronic trading at Goldman Sachs
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, is Tagomi’s co-CEO alongside Jennifer Campbell, a former venture capitalist at Union Square Ventures who was named to Forbes’ 30 Under 30 list last year. Marc Bhargava, Tagomi’s third cofounder, did prior stints at McKinsey and Airbnb. As of October 2019, the startup was facilitating $17 million in crypto trades on average a week, with estimated monthly revenue of $75,000. The trio will help Coinbase accelerate Coinbase Prime, a trading platform for institutional investors announced in 2018, says a person familiar with the deal. 

Campbell declined to comment on any details of a potential “earn-out” contract, where entrepreneurs are typically guaranteed a large, additional payout if they meet certain goals and remain at the acquiring company for a specified number of years.

The two teams started discussing an acquisition in the summer of 2019, says Jennifer Campbell. Last fall, The Block reported that Coinbase was in talks to buy Tagomi, but that deal never materialized.

Campbell says Coinbase’s balance sheet, which includes $8 billion in bitcoin and other cryptocurrencies stored through its institutional custody business, will help Tagomi serve large customers. With that access to cheap funding, Tagomi can vastly expand its “prime brokerage” services, including letting customers borrow cash, borrow crypto assets and sell assets short (betting that they’ll go down in value). 

Coinbase’s balance sheet will also help Tagomi with a liquidity challenge, since trading platforms like Tagomi need to pre-fund trades, having cash in the right places at the right times. “When you want to buy $1 million of bitcoin, we need to have thought through where you’re likely to want to buy,” Tusar told Forbes last year. 

The Tagomi purchase follows other key acquisitions by Coinbase over the past two years. Last summer, it bought cryptocurrency custody company Xapo for $55 million. Two years ago it bought Earn.com, a company that lets people make money for giving advice, for a reported $100 million. The Earn.com deal hasn’t been a success—it was widely perceived as a strategic move to bring on Earn.com CEO Balaji Srinivasan as CTO and have him boost Coinbase’s institutional investor business, but he left the firm after just a year. Coinbase’s acquisition of Tagomi is another attempt to acquire outside talent and turbocharge its institutional business.