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May 3, 2020
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A Massive VC Just Raised $500M to Back Crypto: Here’s Why It’s Important

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Supply chains have ground to a halt and dozens of millions are unemployed but this hasn’t stopped crypto from getting a big fundamental boost: one of Silicon Valley’s most respected venture capital firms just raised half a billion dollars to invest in industry startups.

Related Reading: Crypto Tidbits: Bitcoin Hits $9ks, a16z Raises $500M Crypto Fund, Ethereum 2.0 Nears

Top Venture Capital Firm Raises $0.5B Crypto Fund

Announced by Katie Haun and Chris Dixon, Andreessen Horowitz (a16z) — a VC firm known for its investments in Twitter, Slack, Lime, Instagram, and many other big companies — just finished fundraising for “Crypto Fund II,” a new “$515 million fund that will be used to invest in networks and businesses.”

Haun and Dixon will be the partners leading this fund. According to them, they will be focusing on five main categories of investments in the cryptocurrency space:

  • Next Generation Payments
  • Modern Store of Value
  • Decentralized finance (DeFi)
  • New Ways for Creators to Monetize
  • Web 3.0

Vance Spencer, a co-founder of thesis-driven crypto fund Framework Ventures, said that this new $515 million fund could be very important to this industry moving forward.

“I see this as a recapitalization of the early-stage crypto scene both from a financial and legitimacy standpoint With crypto projects starting to show real traction, I am excited to see a later-stage funding ecosystem starting to take shape to support our industry,” Spencer said, summarizing the signifiance of this fund.

The raise comes as crypto funding has slowed down at a dramatic pace. Data shared by Rob “Crypto Bobby” Paone, founder of Proof of Talent, indicates that the number of crypto funding deals that took place in Q1 of 2020 was a mere 79 — far below the 220 in Q1 of 2019 or 230 in Q1 of 2018.

Ethereum Could Be the Biggest Beneficiary

Andrew Kang, a venture investor, explained that Ethereum could be one of the biggest beneficiaries of this new fund. The investor interpreted a16z’s assertion that it will be investing heavily in “next-generation payment” projects as a sign that they will be “investing in ETH, the stablecoin settlement layer.”

Considering a16z’s previous fund dealing with blockchain, Kang is likely correct in making this statement.

Although Crypto Fund I made investments into vanilla projects like Coinbase, Libra, Polychain Capital, and Dfinity, a big focus of that portfolio was clearly Ethereum, stablecoins, and decentralized finance.

The venture capital firm’s Ethereum wallet, for instance, holds $19 million worth of ERC tokens like MakerDAO’s MKR and Synthetix, while the fund made direct investments into Ethereum projects like Compound, dYdX, and TrustToken.

Should a16z’s Crypto Fund II follow a similar format, countless projects based on Ethereum and potentially Ether itself could benefit greatly once investments start rolling.

Related Reading: Elon Musk Casually Drops the Bitcoin Bomb On Twitter, Once More
Photo by Sharon McCutcheon on Unsplash

Article Categories:
Analysis · Andreessen Horowitz · Crypto · DeFi · Ethereum · Fundamental
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