Despite Bitcoin being down 50% from its November peak, money for blockchain startups continues to set record highs (now at $25 billion).
This past Wednesday Andreesen Horowitz (A16z) announced its latest funding towards blockchain startups that doubles the amount it funded just under a year ago. The monster deal of $4.5 billion may come as a surprise considering the volatile year that the crypto market has endured. The sudden collapse of the stablecoin TerraUSD earlier in May left fear in the minds of investors and reason in the voice of regulators to question whether crypto VC funding needs to be slowed down.
Or not. The biggest player in the crypto market has made the message clear: it’s not shying away from the high-roller table; if anything, it’s ready to raise the stakes. With the departure of Katie Huan, one of A16z’s former crypto-leads, volatility has been no stranger to the firm based in Silicon Valley. The firm is no stranger to placing early bets either, known for its investments in Lyft, Pinterest, and Slack before making its first crypto investment with Coinbase (2013).
As one of the earliest and most aggressive movers of crypto, this is the fourth fund A16z has made in this asset class that bolsters its total investment for crypto and blockchain to $7.6 billion – the biggest one yet.
First Web3 Investment for A16z
And now it’s placing its chips on Web3 which promises a new era of the internet that uses crypto’s underlying blockchain technology to change how information is shared, stored, and owned. Advocates of Web3 believe it has the potential to create new economies, products, and services available online.
Critics of VC involvement in Web3 argue that the new web will not be decentralized but instead just centralized under the umbrella of blockchain VCs and their partners. Remaking the web is no simple feat, and every year or two it seems that an imminent crash of digital assets begs the question of whether or not crypto has a real future alongside tech companies.
A16z Not Concerned With Bear Market
For A16z, the bear market presents a golden opportunity to cash in. As a partner of the firm Arianna Simpson told CNBC via phone, “Bear markets are often when the best opportunities come about when people are actually able to focus on building technology rather than getting distracted by short-term price activity.”
To critics, Simpson asserts the following: “The people who are skeptical are not where we are, which is again in the fortunate position of being able to talk to these brilliant builders all day. The other thing I would add is that many of the skeptics are the titans of Web 2.0–they have been very much in a position to profit from and benefit from the closed platforms.”
Simpson also assured that the funding only intends to support the best of the best, with a third of the funding going to seed deals exclusively. The real question is whether or not the move was to upstage competing crypto-native firms such as paradigm and Electric Capital whose massive funds were knocking on the door of A16z’s reign as the VC crypto titan. After all, it was A16z who stated in a crytpo report that in the world of crypto, the prices are the biggest indicator of performance: “Prices are a hook. The numbers drive interest, which drives ideas and activity, which in turn drives innovation.”
Prices are down, no doubt. But history has shown that A16z’s recent deal is nothing outside the ordinary. It will serve you well to remember that A16z’s first crypto-focused launch came during a bear market period famously (or infamously) known as the “crypto winter.”
For now, the VC crypto king has reclaimed its throne at the table and only time will tell how this funding plays out in the industry and the future of technology.
