How CoinGecko went from CoinMarketCap challenger to DeFi investor

CoinMarketCap rival CoinGecko began its life as a crypto data aggregator in 2014. This year, it became something else as well: an early-stage investor in several decentralized finance (DeFi) projects.

In fact, the firm is set to launch a dedicated venture arm soon, co-founders Bobby Ong and TM Lee told The Block in an interview this week.

"We are in the final process of launching CoinGecko Ventures," said Ong. "We are just finalizing some paperwork and bank accounts, and it should be done in a month."

The Malaysia-based firm is already an investor in seven DeFi projects: Zapper, Serum, Frontier, ParaSwap, Dune Analytics, APY.Finance and DODO. CoinGecko has also invested in two more projects that have not yet launched publicly, and is "actively considering a few more investments," according to Ong.

'We knew at some point DeFi was going to be big'

DeFi has been on CoinGecko's radar since last year, according to Ong. "We followed developments of projects like MakerDAO and Synthetix and thought the space was interesting." 

Still, the DeFi-focused strategy it has adopted "was not exactly deliberate," said Lee. "We have some key members in our team who are into DeFi and told us to integrate DEXes [decentralized exchanges] and track data in the space. That's what we did and just keep doing it."

In March, CoinGecko published a book called How to DeFi. That's when the firm became more focused on DeFi, said Ong. Then in April, May and June the prices of all DeFi tokens went "crazy" and "outperformed the market." A rush to launch DeFi projects followed.

"We knew that at some point DeFi was going to be big ... but it happened this year," said Lee, adding that he didn't expect DEXs to get so popular so soon. Now, "everyone wants to learn how to trade on exchanges like Uniswap" because they give access to all tokens easily without know-your-customer or KYC processes, he said.

Since it was already paying close attention, CoinGecko found itself in a good position to take advantage of the excitement. "We were the first data aggregator that figured out how to track data from Uniswap, Balancer, Curve, Compound, and so on and also track tokens that got listed on these platforms," said Ong.

Its rapid response helped CoinGecko achieve  one of its best years in terms of traffic, said Ong.  According to SimilarWeb, CoinGecko's total traffic now represents 55% of rival CoinMarketCap's total — up from 25% in April.

Ong and Lee acknowledged that besides the DeFi mania, Binance's acquisition of CoinMarketCap in April has been a "major catalyst" for CoinGecko's growth.

Venturing into VC

Once the mania was in full force, "a lot of people in the industry took notice of our very active involvement in the DeFi space," said Ong. "We started looking into early-stage DeFi projects to get involved either as an advisor or an investor."

Most of the investments that CoinGecko has made so far are through requests from founders and referrals. The first thing they look for in a project before investing is its team. "Projects or products can change from time to time, depending on the market. But if the team is nimble, they can adjust accordingly," said Lee.

Ong agreed. He said for early-stage projects, it is tough to tell which ideas will catch on. But if a project's team has a strong understanding of the crypto or DeFi space, they would know "how to adapt and pivot accordingly as the industry shifts or changes its direction," he said. "A team that does not really understand the space well is generally a recipe for disaster."

The other important factor is the project's idea, said Ong. If the ideas are strong, and if they fit into CoinGecko's vision of how the crypto or DeFi space will progress, the firm invests.

The potential of decentralized services is "almost endless," said Lee. Although the current valuations of some DeFi tokens are "crazy," and the space is "overheating," there will be "something good that will come out of this," said Lee.

Lee added that since CoinGecko is new in the investing game, it is writing "small checks." But as the venture arm is formalized and scales, the firm may invest larger amounts, he said.

Data platform still the priority

Even though CoinGecko has moved into investing, CoinGecko's main focus continues to be the data platform, said Lee. "That's where we're spending most of our time." 

CoinGecko's primary source of revenue is advertising, but it is looking to expand its earning streams. Ong and Lee said CoinGecko plans to write more books, and that it is considering launching a subscription-based data product for institutional clients.

CoinGecko will also continue adding new features to its platform — depending on how the market moves and what users want. "It is just really iterating the product as the market changes and goes over time," said Lee. "I would say that's the plan in the short term, and offering more defined DeFi metrics, or whatever metrics that people are interested in looking at."

So what do Lee and Ong think will be the next big thing in the crypto space? Non-fungible tokens, or NFTs.

Says Ong: "I don't think it's a prime time for NFTs yet. I'm not so sure when it is, but eventually, at some point. I don't think it's this near. Probably it's a long-term bet." Of course, that's also what he and Lee thought about DeFi.