Why BitGo Went Public | Mike Belshe

What I expect is going to happen over the next couple years, the digital asset industry just on the current crypto components is going to massively grow.

The reason it's going to massively grow is because we basically tripled our TAM last year as a result of the regulatory changes. And each time we get another piece of goodness in it like Clarity Act, if that comes through, I think it's going to double our TAM again in terms of companies are willing and able to participate and they're going to be looking for infrastructure to use for themselves and they're going to find BitGo.

Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed.

All right, everyone. Very special episode coming up. We've got longtime friend of myself and also of Blockworks and also new founder I would say of CEO of a publicly traded company. So Mr. Mike Belshe of BitGo. Mike, welcome.

Jason, great to see you again. How we doing?

I can't complain. I think it's been a pretty good week. So you know we we open a new chapter here at BitGo. Now we are a public company. Excited to share a little bit about what is the method and the madness behind why we would do that.

It's been a great week. So many people did a great job. The bankers lead you through a process got a lot of faults to it but they also got us like a really kind of stable launch. I know some people be looking at the price of the stock every day and it's a longterm thing. It always has been. I'm excited to be where we're at.

Amazing. Walk me through. I was watching the video of you ringing the bell, and I'm sorry I couldn't make it. Stock opens at 18. Like, what, you know, you're ringing the bell, you're high-fiving everyone. What what's going through your head at that moment?

You know, I've been getting this question for the last week and a half. Like, how are you feeling? How you feeling? And you go through this road show. So, the road show, just so you know, before an IPO, there's basically a 10-day process that every company, it doesn't matter whether you're crypto or tech or something else.

And you you go and you do your final chats with various investors and hopefully bring them into the book and then they submit allocations which go to your bankers. Your bankers add that all up and then finally it culminates with the ring the bell.

People are congratulating me kind of all through this. Every investor you meet says congratulations. And look, it is true like the IPO process is the Super Bowl of business, right? It's where you finally take your your hard-earned sweat and tears and labor and turn it into something that's strong enough desired enough that you can take it to a massive capital market and hopefully hit in a appealing way.

So that's true. It didn't hit me through the whole process, but maybe around the time you're ringing the bell or maybe just a little bit earlier we had a kind of a I did a talk kind of down in the grand hall at New York Stock Exchange and it makes me tighten up a little bit actually to so many investors employees the past employees people like you the community that help us get to where we're at and I hope that we've played a role that's meaningful and influential we're strong advocates of digital assets we're strong advocates of self-custody we're strong advocates of like changing the way the systems work for the better.

And it's been a lot of people that helped along the way. So, incredible gratitude. Humility. It's not it's not about me. It's about all those people that win. And super happy to see they're having success.

You know, whatever it is you do in your life, if you're watching this thing, right? Like you spend maybe a third of your day sleeping, maybe a little less. You spend a third of your day working, maybe a little more. And then the rest of the time you get to yourself. But you spend a lot of time in that labor.

I hope everybody finds something they love. I hope they find something that's meaningful. And I hope that along the way you see, you know, just some amount of pinnacle and award and ceremony that actually does show that the stuff you're doing matters. And it's made a difference on the market and clients and so that's what we had to say. And it's it's an exciting time.

Is there anyone who bet on you either really early or at a really tough time in Bitcoin like when you were ringing the bell or you're walking up to NY like you're you're thinking about them?

There's too many to count. So for background if you guys don't know me I'm from Silicon Valley. I've been doing technology you know small companies for 30 years. I've always been more of a systems I started a systems programmer at Hulip Packard, went over to Netscape early on. That got me the taste of small companies. And what I really enjoyed was you can make such a bigger difference in smaller companies. So much less is written. It's really about like what each individual brings to the table and and the aggregate makes up.

So, I did startups, you know, for most of my career through through that. And then, happy to have you take this one. Look, my earliest investor, I'm so happy like they have been so patient. This guy Matten, he we were the last investment in his fund, you know, and this is all the way back 2011 and you know, we're the only investment left. And he finally gets a really strong payout. Whereas there's still a lockup and all that kind of stuff. So it's not and by the way, it's not like dump it or anything like that. So, he deserves tons of credit. He's been on the board with me forever.

I remember a couple of late nights sharing, you know, the better part of a bottle of tequila, you know, commiserating some some some things that haven't always worked out exactly the best. But, you know, you keep building, you keep up the the perseverance. It really is I I do think being being smart and having grit, those are the two things that it takes. You're either in the game or you're not in the game. And if you're not in the game, you will not win. So, you have to stay in the game. And we did that and I'm really appreciative that these people have stuck with us so long.

Another one, Antonio Gracias came in our series B bet big on us as we made the shift from a technology company to a financial services company which we did all the way back 2017 I think that was and you know again super good investors that that helped all the way from the beginning.

And then one guy that doesn't get enough credit, Bill Lee, co-founder of the company with him. You know, he's actually, listen, I hate talking about this, but so we have this patent on Multis, by the way. By the way, we don't we don't use it as an aggressive patent. We give it away. Don't sue us. And like, we don't use it. Have fun. But Bill's on the co-author of that patent. Definitely a big part of the inspiration from the beginning. Definitely was a huge he's just a a fantastic magnet for bringing smart minds together. Not necessarily in BitGo he brought in. So we've been on a different path. He he never wanted to be operational at BitGo but he helped off the ground. And so we've we've kind of come back together and in the last last few months it's been been really nice.

Nice. That's special. I'd love to hear more about the IPO process like why like I have a bunch of questions. Maybe starting with just why do it right because there's this big you spent you know 20 30 years in Silicon Valley the trend in Silicon Valley right now and people people oftentimes in Silicon Valley just follow the herd is not to go public you stay private later and later and later and we see this with companies like Stripe obviously you know SpaceX other other folks yeah why are you going public?

Look, it's a great point. Like from a just funds perspective, we don't really need to. You know, private equity markets tend to value companies higher. You raise tons of money. You can certainly raise this amount of money. This wasn't about a fund raise, right? We actually are profitable. We don't need the money at all.

One thing I I hope people know like BitGo. How much have you guys raised? A total of about 200 million prior to this. So, we we raised, I guess, a little over $200 million yesterday. That's, you know, half of what we've ever raised in our lifetime, and we we didn't technically need it. We do have good things to put it together. We can talk about put it to use. We can talk about it later.

No, the reason for us to be public where we sit is about bringing everybody in the industry in into the ecosystem. It's always been that way. In the early days was our technology. Later, it became some of our regulatory components. Later, it becomes our services. On top of that, this is how we've grown. The next set of clients that we actively want to bring in is Wall Street.

It is the traditional firms. These are companies that have longevity of between 25 and 100 years plus. They tend to work with publicly listed companies. They are often public themselves, which means all of their board of directors has a fiduciary duty to their shareholders. And how do you get into the crypto space? How do you partner with technology companies or regulated firms, financial services companies that are private? It's really hard.

So this is just our next evolution of being transparent. You can read everything about the company. It's good, it's bad, it's ugly. It's in that S1. You can read it all. I don't know. 300 pages of magn magnificent, fascinating reads. But it's all there and this gives a lot of comfort traditional firms and we think it's just next step. So, we have to do that.

Tell me about the process of going public. I let's say you were talking to a founder who's maybe I don't know they're they're six months out from the IPO. What did you learn through through the process and even like you know your timeline? I remember you guys I think filed in September and then this only got now it's you know January. So what like tell me about the whole process including like how was it work working with the bankers? Did they price it correctly? What's the good and the bad of the banker? I'd love to hear like the behind the scenes.

Sure. Well, I'll go I'll go back in time in a second, but yeah, originally we thought we were going to get out onto the markets in October. Remember Yeah. The US government decided to take a little vacation. The whole thing down. Oh, you didn't pause it because of the I thought you paused it because of like liquidation the whole, you know, October 10th and liquidations and the market was spooked. No, remember that the SEC shut down on October one. I honestly thought we were going to hit the road show on October 6th. And you know so we just hit the timing of of that and what would they shut down for a little over a month then it comes back on. You got like this little window right before Thanksgiving. Then you got a little window right after Thanksgiving. All right. December is a terrible time. And so so here we are. Still not necessarily like the optimal time.

The you know Goldman Sachs I mean top tier brand led us through the underwriting one of the folks there I mean he said pretty early on he says the number one thing you want in an IPO is a bull market that's the number one indication of how well you're going to do it's like okay so the stocks you remember went in a bull market and the ones that you don't remember didn't I guess so all right I I don't really think that way we're here for the long term we're about building business one last thing be you know going public. There's a whole bunch of reasons why you may or may not want to do it. Usually, it's access to capital markets. In our case, we're in this rare situation where we actually think we get more business by being a public company than it's going to cost to be a public company. And the costs are astounding.

Just a couple of things you may not expect. You know, the insurance that the company's required to hold, the prices just go through the roof, right? So we spent a bunch of unsure, millions of insurance that we didn't have to spend before. It's the same company it was yesterday. It's just we live in a latigious world. So get ready.

You know, audits, of course, we've been doing audits like forever. I mean, we're regulated firm, regulated firm here in the US or regulated abroad. Sometimes I joke with with Ed, our chief financial officer, you must really like audits because you do a lot. I don't know how many does. Well, 20 or 30 audits a year. It might even be a little higher than I mean a lot and that's just the financial audit by the way. There's other sock control audits and other things that you do also for glory and fund. So there's a lot of cost in being a public company.

Of course we've got investor relations a new sector of the company that we have to have where got a bunch of people they call in they're like how do I deal with my stock this way? You got to communicate with them. I mean there's a lot lot of work. So I don't know how much it costs exactly. I would probably if you wanted to be really cheap on it, I think you may be able to do it for 3 to 5 million a year. But I think more practically it's probably more like 15 to 20 million a year for a company like BitGo, but in our case is different.

Let's see. So, the process for us started actually January of last year, 2025. And it started with a decision of like, hey, maybe we really ought to do this. And we did have a new administration in. We knew that other companies were going to start going. Remember also the public process had been closed for crypto for a solid four years. In 2021, we had Circle, Bullish, E Toro, Galaxy. I feel like I'm leaving somebody off. Okay. Well, Coinbase was public in 2020.

Oh, you're saying 2021? Yes. Yes. Yes. They all filed and then didn't They all filed in 2021. They all got stalled out for a full four years. All four of those companies are public companies as of 2025. So, look, sometimes you look at the business, you look at where you're trying to get to, you look at the window, and you say, you know what, we better get into this window. So, we started the process. We did interviews with, I don't know, probably eight different bankers. They all come in with their pitch. They come with a nice deck. Super nice big, you know, I guess it's 18 by 10. They're always the same. I don't know why they all the same size. The big beautiful table and then the Yeah. And and they they they've got their picture and and and they're similar.

And what are we looking for? Look, I mean, at the time, you know, you're you're relatively novice on this. So you're trying to look for differentiation to some degree. It's like who do you like best? To some degree is brand. So, of course, we talked with Goldman Sachs, we talked with JP Morgan, we talked with City Bank. We talked to a long list of others. Each one gives you a different valuation, different kind of view of the company, but they haven't really done much depth yet because they're they're kind of just taking it from what information and they're probably just trying to give you as high of a valuation as possible in those pitches to convince you to work with them. I I would guess I wouldn't say it's quite that, you know, negative. But of course they're incentivized to try to garner your favor and if they say they're going to get better, like whatever the prices are in those decks, I mean, I think really for the founders or, you know, leaders that are deciding this process, it's probably more about who you work best with and, you know, what brands you're looking to affiliate with more than anything else.

You know, we had an investment from Goldman Sachs that dates back to 2018. So, I had a lean for Goldman Sachs kind of from the beginning. I I I value the fact that they bet on us relatively early. And you know, I kind of wanted to go that way from the beginning. Then you learn about this syndicate and you have to build like you you got your main underwriters. They're called the the the active book runners and or the leads. Sometimes they're called the lead left is the guy that's on the front cover on the left side. He's the most important. And the lead right and you have a whole bunch of others. If you look at our S1, you'll see see all those those parties. the other book runners and the passive book runners and they call them co-managers. They're doing less work. They're helping keep an eye on the market. They are trying to get the word out to to the um to their clients, but there's a lot of overlap for these Wall Street investment banks. So, you also look for some that are different.

I would call out Caner Fitzgerald for our industry. In my opinion kind of head and shoulders more educated about digital assets than others. You also look a little bit for like international so if you're looking for European coverage if there's one regret I think I would have looked a little bit more for European not because I feel like we is overs subscribed so like that's another we'll get to that part of the process later but it would just be good to cover cover investors as you're getting into it. you don't know what it's going to be on the over subscription. So, you want to make sure you have a good coverage.

All right. Then you start the process and basically you start working on what's going to be your S1 what's going to be your your deck that you take through the test the waters process, which is kind of a beta version of your road show. And that takes several months and you you know, of course, you got to have your finances all lined up. You got to get your auditors kind of brought along. You got to keep these current as you go. So, our initial confidential S1 filing, so when you file, you usually file initially in confidential mode. I think ultimately those become public. And we did that, I think it was September. And then you go a couple rounds with the SEC and when you feel like the comments are getting pretty light, you flip it public. You have to flip it public, I think, for like two weeks before you actually do the road show. So, you end up with some limits there.

Anyway, the the the investment bankers, they work super hard. They're really good at like the DEX. They help with all that material. Of course, the S1 statement. Got a CEO letter that goes into into the front of that perspectus. A number of other decisions that have to be made and cleaned up around the cap table, investors, and how it's all going to work. Most of that's fairly mechanical and wrote, and I think the bankers do a great job of of leading you through most of that. Of course, you got to get your attorneys in as well. So we have our council we used Fenwick which I think did an outstanding job. They also were the council for for Coinbase. We interviewed a bunch of you know really strong counsel. We had a lot of good options. Of course the the other side the your broker the sellers broker Goldman. They also hire attorneys. They they use a company called a firm called Crevath. Also a great firm. So there's a lot of people involved. All these calls. You got your I'm looking at a lot of bills right there. I'm like Yeah. Yeah. Well, you know, right. We So, we pay our lawyers. Yeah. We pay our bankers who then pay their lawyers. Yeah. Yeah.

How do you how did you think about I'm sure there's Sorry to cut you off. I'm sure there's more to the story, but one one thing I'm curious about is how did you think about how to give allocations? And one thing I noticed when Bullish went public was Tom gave a lot of allocation to retail through Robin Hood. So I'm curious how that process actually works and how you thought about that.

Well, let's let's not skip ahead. So before you get allocations, you get these. So first you do these test the water processes in late summer fall probably met with a hundred different companies. You're doing pitch pitch pitch pitch pitch like you're doing 50 pitches a week. The first one I think 30 pitches a week. The second one it's interesting. You get very good at doing the pitch. You also forget what you said in this meeting versus the meeting an hour ago. And so you either omit or say the same thing twice. You gota that's why you got to use like granola or some uh call recording software, you know. And uh, this is mostly, you know, myself and and CFO Ed Regginelli did this. He he turned out to be a great partner kind of here. It was mostly it's probably 90% my talking and then then 10% his. Some investors are more engaged and ask great questions. Others a little bit less.

Now for crypto, this is an interesting part. Like who are these bankers bringing to the table as investors? They are connected to the largest funds, the largest pools of capital in the world. So you know you're talking to the Black Rockcks, the Fidelities, the T-roll prices, American Centuries, like these big guys that participate in these IPOs. And all of these guys have had a a deficit of crypto knowledge for the last four years. At the time we were going we were talking to these investors you know after they'd seen circle I think they were excited about can we find another circle Gemini sorry bullish and figure had done reasonably well and then Gemini had not done as well and so they were a little bit fearful of Gemini. Anyway, they wanted to see, okay, what's coming next in the crypto crypto sector? Because they don't know that much about crypto, they're asking some pretty basic questions. These are kind of generalist investors. They invest sometimes in AI and sometimes they invest in, you know, soda distribution companies. They invest in everything, right? So their level of depth on on on crypto is largely shaped by what they read in the news. saw different types of questions. We had we got the question, what is a private key? How does it work? What's it look like? You know, types of things. Which is, you know, perfectly fine. I don't mean to criticize them. Like, of course, everybody goes through this learning curve and if it's not your domain, I I totally get it. But that was part of the process.

All right. Eventually, you know, you do the final stages, you do the filings with the the SEC, you get the the SEC green light to go, and then you get to the to the road show. And the road show is similar to the test the water processes. But this time is the the final call. And at this point, a lot of these investors you've already met with, so they already know you. And now the conversation much more interesting because they're looking at your final set of data that came out in your updated ES1, whatever that might be. And in our case, remember the first filing we had had our Q2 numbers in it. And then because we went through Q3, we thought we going to have to file then or we thought we were going to go in October. That had our Q3 numbers in it. And then this one we're doing it just after January. So we haven't finished our 2025 you need full audit. So instead they do this thing called a flash. And so if you look in our S1 you'll see kind of an abbrevable forecast of where the numbers are. And because of where we're at in the whole process, I can't talk to you really about the numbers. But of course everybody everybody reads those.

By the way some other interesting things that we saw which are sort of unique to our industry things that surprised me. I mean, if you look at our revenue, you'll see combinations of net revenue and gross revenue. And it's a really weird thing to mix together. What I learned as part of the process here is that actually GAP and even, you know, I thought this would be all just wrote stuff that they've got figured out for like I mean there's a zillion companies that do trading and do the types of activities that we do just in different industries. like why is it hard to do the audit and accounting of these things? It turns out, you know, actually GAP doesn't really cover it. So, you end up with a just a terrible thing which is gross revenue on trading. It's not meaning. So, I don't really think it's the right way to to account for what we do, but for whatever reason, that's the way it works. And so we had initially filed in our confidential S1, you know, to do a net revenue accounting. And towards the point where we were going to file that, I I started to get some real, you know, kind of yellow flags from the the auditors. They're like, hey, you know, it's not a gap metric. And I was like, is this a is this a problem? I mean, this is how we think about the business. Like anyway, turns out, yeah, the SEC does ask, well, what is this? What is this? Look, I think the SEC was pretty open to it, but it was taking time. We were having to go all these iterations.

Oh, wait. Just to make sure I understand that. So, you because you guys had the if I remember the numbers correctly, it was like 3.1 billion of gross, but then you passed through some amount of that and that turns into the net. It was like 130 million of net. I assumed you wanted to show the 3.1 billion of gross because that's the big number. But it sounds like actually the auditors or the SEC requested that you show that number.

I am not going to talk about the actual numbers because I I can't. But yes, in terms of what you just said, we would have done completely a net revenue type of accounting, but that doesn't that's not the way GAP works. So you have to get a special exception from the SEC to do that. I think the SEC was kind of open to it, but we don't want to we're not trying to plot new ground here. I I would have thought this would have been figured out like I don't know decades ago like why why why is this even an issue but somehow it is now when you get into the technical accounting for how it works whether are you principal are you agency is it a stable coin is it an asset is it a dollar is it not a dollar there's a lot of little details that are defined in strange ways but on the game side I think this all gets sorted out in a couple of years and the accountants will have a better answer that will work better for crypto and then they'll fault. But yeah, that's right. The the gross revenue shows up for us not because that was the way we wanted to account for it, but because that's the way the current system works. So, yeah, that was that was interesting.

All right, so that was a bit of a learning. Okay. Finally, you do your your road show and then it's a 10-day process and during that process, the folks that you meet with submit allocation requests. And you know, basically this comes from what they call longies and hedge funds. And that's an oversimplification of the types of investors that are out there. But of course the bankers have a good familiarity with who these different parties are and how they tend to take positions in any given company etc. And when they submit these allocation requests okay so first off at the beginning of your road road show you set a price so I was in our S1 that was $15 to 17. And that means that that's where you're indicating a visual and of course everything's a negotiation is always negotiation. you see lots of folks that raise those ranges. You know, we ultimately issued the stock at 18, which is outside of that range. So there's a number of things go into this, but all right, everybody's now negotiating. And now, by the way, you're you're in the final stretches. And you've got your banking team, that is your sellers broker. And then of course they're also trying to bring in these other guys. So, there's this natural like they're trying to get the best price, but they represent kind of both both sides a little bit.

Anyway, the process is they they request some amount. Usually, they just put in a market order, which means they're okay with your range. Sometimes they'll put in a limit. They'll say like, I only want to take it if it's, you know, the midpoint of that or the top end of that. And of course, they know that you're your desire is to take it higher. And so anyway, these these things come in and then then that's your your gross demand. And what I find mind-boggling about this is that you basically generate this list of what's gross demand, which is way oversubscribed, and you're setting yourself up for you're going to disappoint 19 out of 20 investors because they're not going to get what they requested. But then because this process has been going on so long, they all know the game and so they will put in some of them, not all of them, will put in bogus amounts hoping to get more. Oh, and then, you know, you stories about like, well, you can't fill too much of this guy's order because then he'll think you were you didn't have enough to fill it from anybody else because everybody's so used to not getting the amount that they want. So now you end up with this weird complete gut instinct thing about you how much really is there. And so then you focus on the the the top guys, the ones you start to narrow it down. You're like, "Okay, great. Here's the good investors, the high quality guys that we know what their patterns are." And then you start to focus on them and price tolerance. And basically the various bankers will reach out to them and try to get an understanding of how are they looking at the company, how do they think it's going to trade etc. And you get sometimes conversations about discount upon discount. You're like okay well we think it's going to trade here and we're going to try to discount it to there and then like we want to give it's it's ripe for improvement in terms of price discovery. It's also there's an interesting game between do you want to price it? you you don't want to actually price it to perfection because the best thing for an IPO is the stock pops, right? But that then means you're leaving money on the table for the company. So if you remember when you know Circle IPOed, stock pops, everyone said the bankers screwed them over. But did they because the stock was rip? So it's a funny game. There's a professor I think his name is Jay Ritter if I got that right. He's out in Florida. he's been analyzing and looking at IPOs for I don't know 20 or 30 years now. He's got all the data and and kind of how they do and tries to tries to read through this. I mean it's very clear that you know there's a reason why the investment banking division is usually the most lucrative division of any of these large banks. They do take a big chunk and then of course the folks that are buying it are their clients as well. So there would be more activity that way. Everybody knows this. And it's just just kind of the way it is in terms of the POP like from a issuers's perspective from my perspective. I I want all BitGo investors to make money. I mean, of course, they're investing and putting confidence in us and you want them to get a good return. So, it's not about at least for us, it was never about, you know, just getting the best price. You can add a dollar to it. You know, it doesn't really make a big difference. On the other hand having investors with a good experience and and whatnot very important to us. So we were not optimized around price per se.

Yeah you asked some other question. What what else is the thing you asked?

The only other question I was curious about and then I really want to get into the business and the business model and product lines and stuff like that. But the only other question I had is how do you think about it used to just be you give the allocation to institutions? Yeah. Black Rockck and Tro and Fidelity. Now there's two other people you could allocate to. One is retail. So you can give Robin Hood allocations and things like that is the way I understand. I don't fully get it. And the other is now kind of like the onchain world. Like I saw Ono had the abil you had the ability to buy Bitcoin the day that you guys IPOed which was pretty crazy through I think on. So how did you think about these two new buckets of of capital?

Well let's see on the invest institutional side you can really break that down is the long only and the hedge funds so prior to having direct access to retail computers IPO really dependent on those hedge funds right like you need to give somebody some stock so that you can start trading if you gave it to a bunch of guys are just all longies and they're really going to hold it for four years then you show up to the market and nobody trades. So the way they solved this problem was with allocations of hedge funds and different hedge funds of course have different strategies. Some are partly hold some are taking uh you know just immediate like what they can get. It's going to be all all over the map. These days you do have another option which is retail. So we allocate a full 25% over to retail. During this process of the road show, you know, the retail aggregators which includes SoFi, Robin Hood, Fidelity, Mumu, Click Markets, Weeble, I feel like I'm leaving somebody off. These guys go to their retail clients and they they offer shares. Well, the retail clients actually pony up the money right away. Like if