Andreessen Horowitz Goes Crypto With New $ 2.2 Billion Fund

In 2013, the Venture capital firm Andreessen Horowitz led a fundraiser for a startup called Coinbase. Cryptocurrency had barely become mainstream, but Coinbase, just a year away from Y Combinator, has positioned itself as the financial exchange of the future. Andreessen Horowitz led the $ 25 million round of funding, the first of several investments that would make Coinbase the best-funded crypto company in the world.

Eight years later, the investment has paid off. In April, Coinbase became the first major crypto company to go public and did it with such enthusiasm that even crypto-skeptics paid attention. Coinbase closed its first day of trading at $ 328.28 per share, bringing its value to $ 85.8 billion, making it Andreessen Horowitz’s biggest exit to date. (Today it is trading at $ 226.01 per share.)

Now the company is betting that the growing interest in cryptocurrency can continue to make it very rich. Andreessen Horowitz today announced its third crypto-focused fund for the “next generation of visionary crypto founders.” The $ 2.2 billion Crypto Fund III will be one of the largest capital commitments in the crypto ecosystem in history and approximately four times the size of the company. second cryptocurrency fund one year ago. “We believe the next wave of IT innovation will be crypto-led,” several partners wrote in a blog post, which suggested potential innovations in governance, networks and the distribution of economic benefits.

Andreessen Horowitz’s new fund comes amid a crypto gold rush. So far this year, venture capitalists have invested $ 17 billion in crypto companies, according to Bloomberg. Union Square Ventures, another early investor in Coinbase, reserve 30 percent of its new $ 251 million fund for crypto firms. Even more traditional players, like PayPal and Visa, have started to infiltrate the crypto space by joining the new $ 300 million fund. Many of these investors are betting that other startups can replicate Coinbase’s massive success and the recent craze on things like non-fungible tokens will trigger a number of new crypto projects.

Yet the fate of these startups is largely tied to the prices of bitcoin and other traditional cryptocurrencies. And these prices can be volatile. The price of bitcoin has gone from a record high of $ 63,000 in April to around $ 33,000 this month. Recently, prices have hovered based on Elon Musk’s tweets and news about crypto mining.

Cryptocurrencies have been volatile since they existed, but that hasn’t stopped entrepreneurs from rushing when times are good. Chris Dixon, general partner at Andreessen Horowitz, called it the “crypto price-innovation cycle”: Prices skyrocket, a frenzy ensues, new startups are founded and VCs rush to fund them. Then the prices go down, attracting more attention from the media and some startups with it. But Dixon argues that this “chaotic” cycle has led to many innovations over the past decade. Andreessen Horowitz has funded some of these companies with his $ 515 million Crypto II fund, including Aleo, which is helping build decentralized applications, and Goldfinch, a platform that allows crypto borrowing without crypto collateral.

As cryptomania nears an all-time high, regulators are also starting to pay more attention to digital currencies: the Chinese government recently repressed on bitcoin miners and startups facilitating crypto transactions. In the United States, some regulators have also called for greater enforcement of crypto exchanges.

To that end, Andreessen Horowitz also introduced several new advisors to the crypto team, who are supposed to help “translate crypto to the general public” and possibly navigate future regulations in the crypto market. Tomicah Tillemann, the former chairman of the Global Blockchain Business Council and White House adviser, will join as global head of policy. Two other people with government experience – Bill Hinman, former director of the corporate finance division of the Securities and Exchange Commission, and Brent McIntosh, former undersecretary of the treasury for international affairs – will also join as advisers. Anthony Albanese, who left the New York Stock Exchange last year to join Andreessen Horowitz’s crypto team, will now serve as COO.

With his massive new fund, Andreessen Horowitz plans to do more than just meet the challenges ahead. He hopes to find the next Coinbase or something even bigger.

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