Since the start of the year, several leading blockchain startups have made major acquisitions to boost their positions in the market.
Coinbase takes the lead
In March, Coinbase announced that it had hired former LinkedIn M&A head, Emilie Choi, to run the company’s merger and acquisitions activities. Choi says joined the company because she believes that “Coinbase [...] is in a position to do a lot of M&A.”
Choi also added that Coinbase would primarily focus on “acqhires”, which means the company wants to purchase startups in order to acquire the people who run them. As Coinbase has reportedly suffered from a talent vacuum, it looks as though the quickest way to fill key positions is with newly acquired industry professionals that come with the companies it buys.
An example of a recent Coinbase “acqhire” is the purchase of Earn.com for over $100 million, which came with former Earn.com CEO Balaji Srinivasan’s integration into Coinbase’s team as the company’s new chief technology officer.
Furthermore, in May, Coinbase announced the acquisition of the decentralized Ethereum exchange platform Paradex, which will allow the company—that so far has only supported four digital assets—to also cater to users who want to invest in a wider range ERC20 tokens, which have been made popular by the recent boom in initial coin offerings (ICOs).
Speaking to CNBC Fast Money, Asiff Hirji, president and COO at Coinbase, said: "This will significantly enhance the proposition for our customers in terms of what they want to trade and how they want to trade it."
Tron buys BitTorrent
In June, the relatively new blockchain startup Tron, lead by former Ripple employee Justin Sun, acquired the decentralized data sharing platform BitTorrent for around $126 million in cash. San Francisco-based BitTorrent runs the world’s largest decentralized peer-to-peer file sharing application with over 170 million users and protocols that move as much as 40 percent of all internet traffic on a daily basis, according to the company.
The acquisition of BitTorrent is part of Tron’s “All-In Decentralization” strategy and makes Tron the "largest decentralized Internet ecosystem in the world,” according to Sun.
The first step to monetizing the acquisition seems to be to provide financial incentives for BitTorrent seeders by allocating them TRX tokens when they provide digital content for other members of the peer-to-peer network.
“By integrating the TRON network into BitTorrent, we aim to improve on the currently existing altruism. At this point, there are no incentives for peers who have completed downloading to continue to seed. We intend to extend rewards to peers who seed torrents, infusing more resources into the torrent ecosystem,” Sun said.
Analysts say such a move would likely achieve two key objectives for Sun — helping to grow the Tron user base, and massively boosting adoption of the TRX token.
Binance Acquires Trust Wallet
In July, leading crypto asset exchange Binance completed its first acquisitions with the purchase of mobile Ethereum tokens wallet provider Trust Wallet.
“The Trust Wallet team shares the same values as us and the products are very complementary. For users who like to withdraw funds into a wallet now we have a product, they can use,” Binance CEO Changpeng “CZ” Zhao told TechCrunch. “We plan to keep the app as independent as possible. There will be more features going into it but not so much from a Binance demand perspective. We are like the addition of a godfather for the baby… there’ll be some cooperation,” he added.
Interestingly, Trust Wallet had planned an ICO to fund the further development of its app. However, it decided to cancel its token sale in June and return all funds to its investors to focus on product development as opposed to adapting its business model to meet the requirements of an ICO-funded startup.
Trust Wallet’s founder, Viktor Radchenko, now wants to grow his developer team and work on adding further cryptographic assets to its privacy-focused wallet while Binance intends for Trust Wallet to become one of the company’s default wallets for its upcoming decentralized exchange, which is in active development.
Given that Binance made around half a billion dollars in its first year of operation, it would not be a surprise to see Binance engage in further acquisitions to expand its growing empire.
Brave New Coin buys Cryptocurrency Newsfeed
Closer to home, BNC acquired the cryptocurrency news service Cryptocurrency Newsfeed (CCNF) in June. “Given that CCNF’s singular focus is on delivering timely, accurate news for cryptocurrency market participants, there was clear synergy between the two companies in terms of delivering enterprise-grade product offerings for investors,” says BNC founder Fran Strajnar.
The move will see CCNF’s up-to-minute cryptocurrency news and sentiment analysis integrated into an expansion of the BNC news platform, while CCNF will continue to maintain its brand, website and product development road map.
More M&A to come?
The recent surge in M&A activity would suggest that the blockchain industry will see more acquisitions by leading blockchain companies with deep pockets. Well-funded startups - whether through venture capital or ICOs - are in an excellent position to buy up smaller competitors to increase their market share and to make strategic acquisitions to expand their business.
The result of increasing M&A activity could be a degree of industry consolidation. Large exchanges, for example, are in an excellent position to acquire smaller international exchanges to expand into new markets while strategic acquisitions will enable blockchain startups to venture into new business areas as Tron’s acquisitions of BitTorrent demonstrates.
Increasing M&A activity will allow further legitimize the cryptocurrency industry and could result in highly profitable exits for early-stage VC investors — who will likely re-invest their funds into new blockchain ventures.