It’s selling time for stablecoin companies

Founder sources I’ve spoken to seem to agree: There’s never been a better time to be selling a stablecoin startup.

I learned this the hard way last week. After noticing the relative dearth of recent crypto acquisitions, I was planning a bratty column titled: “Is the crypto M&A season in the room with us right now?” 

Then Fortune blew up my spot when it broke the news that Coinbase and Mastercard are offering between $1.5-2.5 billion to acquire stablecoin infrastructure firm BVNK. Coinbase appears to currently have the inside track to win the bidding war, Fortune reported.

Stripe paid $1.1 billion for stablecoin infrastructure shop Bridge last year, and BVNK could get double that amount. BVNK reportedly had $40 million in annualized revenue at the end of last year.

The revenue multiples that stablecoin startups can ask for in the current market environment are “pretty damn high,” said one stablecoin founder, who declined to be named. The founder added that despite the relatively low number of closed acquisition deals in recent months, the sharks are circling behind the scenes.

“If you can name a company in the space or tangential to the space, they are shopping around,” the founder said.

Stablecoin startups can fast track large financial or payments’ firms pathway to market in a post CLARITY Act world. This is partly because stablecoin tech may be cumbersome to build in-house and partly because stablecoin firms may have earned the requisite licenses to do business in the US. 

“M&A will be a key for institutions to play catch up games,” Jiazi Guo, founder and CEO of crypto tax firm ETZ Soft, said.

Some of these startups — the BVNKs and Bridges of the world — may have great pieces in place but lack the scale to absorb all the demand for stablecoins. The apparently high revenue multiples being demanded by stablecoin startups in the current environment could be justified by the projected revenue these firms could produce in the context of a larger company with more compliance infrastructure and distribution, said a second founder in the stablecoin space.

In conversations on crypto’s M&A outlook, I heard names like Visa, Mastercard, and Square come up as potential buyers. 

Within crypto, things can get murkier. Paying with stock helps billion-dollar-plus acquisitions actually happen, and while private crypto projects can offer tokens, those may be seen as risky assets to accept from a seller’s point of view. 

Actors like Coinbase, Circle, Tether, and some layer-1s could be outliers here, either because they have gone public or have a large amount of free cash flow. 

There has been a decent amount of acquisition activity within crypto in recent months, with firms like MoonPay making multiple smaller acquisitions. These deals may be more likely to be paid in cash, such as Solana staking firm Sanctum’s recent acquisition of IronForge.

The complicating factor in some crypto-native acquisition deals can be tokens, which present thorny questions as to the rights of token holders. Tokens can also make it less logical for companies to merge, said one of the founders, who recounted an acquisition deal with a down-on-its-luck DeFi venue falling through due to complications surrounding the project’s token.

The messy takeover attempt Wormhole made for cross-chain protocol Stargate Finance illustrated how projects with token holder bases don’t always make for the easiest acquisition targets.

Still, my sources seem to think crypto M&A is yet to peak for this market cycle. Perhaps a BVNK bidding war will be the activation energy that gets M&A season kicked off in earnest.

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