Venture capital firms such as Silicon Valley’s Andreessen Horowitz have been on the lookout for opportunities to invest in hot blockchain startups. As hype surrounding cryptocurrency markets has increased, capital from investment firms has been pouring into the space. According to data from analytics firm CB Insights, blockchain startups raised over $4 billion in the second quarter of 2021. That represents more than a 50% increase from the same period last year.
The New Andreessen Fund
Andreessen is an venture capital firm. Not surprisingly, the firm announced that it is launching a $2.2 billion cryptocurrency-focused fund called Crypto Fund III. The VC firm stated in a blog post, “we believe that the next wave of computing innovation will be driven by crypto.”
The VC firm had last launched a crypto fund, called Crypto Fund II, in 2020. That fund had a total of $515 million in commitments. Its first crypto fund, Crypto Fund I, closed in 2018 with $300 million in commitments.
Crypto Industry Veteran Ariana Simpson in Charge
Andreessen Horowitz has tapped Ariana Simpson, a 30-year-old partner at the firm, to lead the new crypto fund. Ms. Simpson is a well-known name in the crypto industry, having launched her own venture capital firm to invest in blockchain at the age of 24. The existing crypto team at Andreessen Horowitz includes Katie Haun, a former federal prosecutor, and acclaimed venture capitalist Chris Dixon.
The price of bitcoin dropped from its nearly $60,000 high in April. Similarly, the price of ether, the world’s second most popular cryptocurrency, has dropped over 50% from its $4,000 record in May. Despite these price drops, Ms. Simpson is optimistic about the long-term trajectory of bitcoin and other cryptocurrencies. “You have to really separate the short-term prices from what is fundamentally being built—we just kind of ignore the headlines and just focus on the technologies. Bear markets are often where the real work happens,” she stated.
“The size of this fund speaks to the size of the opportunity before us: crypto is not only the future of finance but, as with the internet in the early days, is poised to transform all aspects of our lives,” Katie Haun stated.
Additional Andreessen Fund Members
Other members of the Andreessen Crypto Fund III team will include Anthony Albanese, who will be the Chief Operating Officer. Albanese formerly worked at the New York Stock Exchange. Another hire with exposure to government regulators is Tomicah Tillemann, who will be the Global Head of Policy. Tillemann previously worked as a senior adviser to President Joe Biden and chaired the Global Blockchain Business Council, a leading industry organization.
The firm’s crypto fund also has added a number of individuals with prior government experience to its list of advisors. Bill Hinman, a former director of the Securities and Exchange Commission’s Division of Corporation Finance, will serve in an advisory role. A couple other individuals with background navigating complex securities law and the changing regulatory landscape will also serve as advisors. This is likely a strategic move as the crypto industry increasingly becomes regulated.
Andreessen Horowitz started investing in the blockchain space in 2013, with an investment in Coinbase. The firm was also an early investor in the Facebook-backed digital currency project Libra, which is now known as diem. It currently has stakes in startups such as Axoni, Oasis Labs, Maker, and Talos.
The Firm Has NFT Investments, Too
Andreessen Horowitz also has stakes the fast-growing area of non-fungible tokens (NFTs). The NFT startups it has investments in include OpenSea and Dapper Labs. Another crypto-related category that the firm has focused on is decentralized finance, known as “defi.” Defi refers to traditional finance applications, such as banking and lending, being built on the blockchain.
A number of the crypto-related startups in Andreessen Horowitz’s current portfolio have taken off recently. Dapper Labs, the company behind CryptoKitties and the NBA Top Shot, hit a $7.5 billion valuation earlier this year. Dfinity, a blockchain infrastructure startup in the VC firm’s portfolio, was last valued at $9.5 billion.
Overall, Andreessen Horowitz has $18.8 billion under management. Founded in 2009 by Marc Andreessen and Ben Horowitz, the VC firm began with an initial capitalization of $300 million. With a number of early-stage investments in companies such as Facebook, Twitter, Airbnb, Foursquare, Stripe, and numerous others, the firm grew quickly. By 2011, Andreessen Horowitz had over $1.2 billion assets under management.
Funding for blockchain startups has been breaking records this past year. Chris Bendtsen, a senior analyst at CB Insights, notes that “at the current rate, blockchain funding will shatter the previous year-end record—more than tripling the total raised back in 2018.” Looking at funding for startups in the fintech industry shows an even rosier picture. In the second quarter of 2021, fintech companies raised a total of $30.8 billion. That number is nearly triple the amount of funding received by fintech companies in the second quarter of 2020.