Andreessen Horowitz Goes Ham on Crypto with a New $2.2B Fund

In 2013, the enterprise capital agency Andreessen Horowitz led a funding spherical for a startup referred to as Coinbase. Cryptocurrency had hardly gone mainstream, however Coinbase, simply a 12 months out of Y Combinator, positioned itself because the monetary alternate of the longer term. Andreessen Horowitz led the $25 million spherical, the primary of a number of investments that will make Coinbase the best-funded crypto firm on this planet.

Eight years later, the funding has paid off. In April, Coinbase turned the primary main crypto firm to go public and did so with such élan that even crypto skeptics paid consideration. Coinbase closed its first day of buying and selling at $328.28 a share, placing its worth at $85.8 billion—making it Andreessen Horowitz’s greatest exit but. (Today it trades at $226.01 per share.)

Now the agency is betting that rising curiosity in cryptocurrency can proceed to make it very wealthy. Andreessen Horowitz introduced at this time its third crypto-focused fund for the “subsequent era of visionary crypto founders.” The $2.2 billion Crypto Fund III can be among the many largest capital commitments to the crypto ecosystem in historical past, and about 4 occasions the dimensions of the agency’s second cryptocurrency fund a 12 months in the past. “We imagine that the subsequent wave of computing innovation can be pushed by crypto,” a number of companions wrote in a blog post, which instructed potential improvements in governance, networks, and the distribution of financial advantages.

Andreessen Horowitz’s new fund comes amid a crypto gold rush. So far this 12 months, enterprise capitalists have invested $17 billion in crypto corporations, in line with Bloomberg. Union Square Ventures, one other early investor in Coinbase, will reserve 30 percent of its new $251 million fund for crypto corporations. Even extra conventional gamers, like PayPal and Visa, have began to creep into the crypto area by becoming a member of Blockchain Capital’s new $300 million fund. Many of those traders are betting that different startups can replicate Coinbase’s huge success and that the current mania over issues like nonfungible tokens will spark a variety of new crypto initiatives.

Still, the destiny of those startups is basically tied to the costs of bitcoin and different mainstream cryptocurrencies. And these costs will be risky. The value of bitcoin dropped from a document excessive of $63,000 in April to about $33,000 this month. Recently, costs have seesawed based mostly on Elon Musk’s tweets and information about crypto mining.

Cryptocurrencies have been risky for so long as they’ve existed, however that hasn’t stopped entrepreneurs from swooping in when occasions are good. Chris Dixon, a normal associate at Andreessen Horowitz, has referred to as this the “crypto price-innovation cycle”: Prices spike, a frenzy follows, new startups get based, and VCs rush to fund them. Then costs decline, bringing extra media consideration and a few startups down with it. But Dixon argues that this “chaotic” cycle has led to many inventions during the last decade. Andreessen Horowitz funded a few of these corporations with its $515 million Crypto II fund, together with Aleo, which helps construct decentralized functions, and Goldfinch, a platform that allows crypto borrowing with out crypto collateral.

While cryptomania is close to an all-time excessive, regulators are additionally beginning to pay extra consideration to digital currencies: The Chinese authorities just lately cracked down on bitcoin miners and startups facilitating crypto transactions. In the United States, some regulators have additionally referred to as for higher enforcement on crypto exchanges.

To that finish, Andreessen Horowitz additionally launched a number of new advisers to the crypto staff, who are supposed to assist “translate crypto to the mainstream” and maybe navigate future regulation over the crypto market. Tomicah Tillemann, the previous chair of the Global Blockchain Business Council and an adviser to the White House, will be part of as world head of coverage. Two others with authorities expertise—Bill Hinman, the previous director of the Securities and Exchange Commission’s Division of Corporation Finance, and Brent McIntosh, former undersecretary of the Treasury for International Affairs—may also be part of as advisers. Anthony Albanese, who left the New York Stock Exchange final 12 months to take a position on Andreessen Horowitz’s crypto staff, will now function chief working officer.

With its huge new fund, Andreessen Horowitz plans to do extra than simply meet these challenges forward. It’s hoping to seek out the subsequent Coinbase—or one thing even greater.


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