By David G. Barry
Institutional investors will be keeping a close watch on Andreessen Horowitz’s new crypto fund.
At $4.5 billion, the fund is the largest dedicated to the sector – a sector that many pension funds and endowments are eyeing cautiously. But the fund is arriving as crypto appears to have lost some of its 2021 luster. Ethereum and Bitcoin have seen their prices drop by some 50% over the past six months, while Coinbase’s shares have declined by 80% in that same period and the TerraUSD stablecoin has essentially collapsed.
Chris Dixon, the general partner at the venture firm who leads the fund, said in a blog post that it is the ideal time to invest, believing that we are “now entering the golden era of Web3” – a term also used to describe crypto. This period, he wrote, is akin to what mobile computing experienced in 2009 to 2011 when such companies as Uber, Venmo, Snap and Instagram were started.
The fund is being split between two “sleeves:” $1.5 billion for seed-stage opportunities and $3 billion for venture investments. The firm - known as a16z - now has raised $7.6 billion in crypto/Web3 funds.
Dixon said the reason for his optimism about the coming years is that “programmable blockchains are sufficiently advanced, and a diverse range of apps have reached tens of millions of users.” More importantly, he adds, is that a “massive wave of world-class talent” has entered Web3 over the last year.
“They are brilliant and passionate and want to build a better internet,” he wrote. And it is the reason that a16z “decided to go big,” Dixon said.
The fund, he said, will focus on such areas as Web3 games, DeFi, decentralized social media, self-sovereign identity, Layer 1 and Layer 2 infrastructure, bridges, DAOs and governance, NFT communities, privacy, creator monetization, regenerative finance, new applications of ZK proofs, and decentralized content and story creation.
Andreessen Horowitz, for instance, recently backed Flowcarbon, whose founders include WeWork founders Adam and Rebekah Neumann. The company is building an on-chain carbon credit tokenization platform that allows all market participants equal access. It enables anyone to use the platform and tokenize their certified off-chain carbon credits.
The size of the fund speaks to how quickly the crypto area has grown as Andreessen Horowitz’s first crypto fund closed in 2019 at $350 million. Even its prior fund, a $2.2 billion vehicle closed last year, is just half the size of the new fund. Notably, Katie Haun, a member of its team when it raised that 2021 fund, has since left, formed her own firm and raised a $1.5 billion crypto-focused fund.
Prior to Andreessen Horowitz closing the new fund, the largest crypto fund had been the $2.5 billion fund raised by Paradigm.