One of the most well-known venture capital firms out of Silicon Valley aims to raise between $800 million and $1 billion to back crypto startups, per the Financial Times. This will be Andreessen Horowitz’s third and biggest foray into the sector, following the $300 million and $515 million crypto funds it launched in June 2018 and April 2020, respectively.
Andreessen Horowitz, much like other funds, is ramping up crypto investments in a bid to ride the sector’s recent tailwind. The rapid rise in retail and institutional demand in recent months is driving crypto startups’ growth, with crypto exchange Coinbase earning more in revenues in Q1 than all of 2020 and BlockFi reaching $15 billion worth of assets held on its platform in March, up from $1 billion in the same month last year. Andreessen experienced impressive returns from its earlier investments in the crypto space and is undoubtedly looking to recreate this success: Its stake in Coinbase, in which it started to invest in 2012, was worth $11.2 billion when the exchange went public in April, more than half the amount of capital the VC raised from investors in its 12 years of operation. Other funds are also increasing their commitment to the space, with Pantera Capital seeking to raise another $600 million following its $175 million crypto fund in 2018, per the FT, and Multicoin Capital raising a second $100 million fund.
Insider Intelligence expects the VC bullishness to drive global blockchain funding to a new record in 2021, in part driven by investments in B2B crypto startups targeting financial institutions (FIs). Global blockchain funding dipped in 2020 to $2.8 billion, but the successive mega-rounds during Q1 among crypto startups have already brought funding volume up to $2.6 billion. The latest announcements by Andreessen and its peers will help further fuel crypto raises in the coming months to set a new funding record in 2021, beating the current record of $6.9 billion set in 2018. With more and more FIs testing new crypto products, business-to-business crypto startups that facilitate these projects will likely be especially attractive to VCs. For example, Fireblocks and Consensys recently raised funding to help FIs issue stablecoins or securities on the blockchain and develop blockchain-powered payments.