Venture capital has stepped up. What crypto funds are raising millions of dollars for
In July, two venture capital funds raised more than $350 million to invest in cryptocurrencies and blockchain startups
Two major venture capital funds raised more than $350 million to invest in crypto assets and blockchain startups
Investments in crypto startups have fallen for five consecutive quarters, but some venture capitalists are still making multi-million dollar bets on blockchain projects.
Fortune's source reported that Polychain Capital, one of the most prominent venture capital firms in the cryptocurrency space, has raised about $200 million in its fourth fund. According to the publication, the company plans to raise a total of about $400 million in its fourth fund.
This fundraising can be considered a positive signal for the industry. The event indicates continued investor interest, despite a period when the volume of funding has decreased for both startups and venture capital firms.
Founded in 2016 by Olaf Carlson-Wee - one of the original employees of the Coinbase exchange - Polychain Capital has quickly joined the list of leaders in the cryptocurrency venture capital market. The firm has invested in Coinbase, Uniswap, CoilnList, dYdX, Matrixport, Scroll, and dozens of others.
According to Pitchbook, Polychain has raised three funds with $2.6 billion in assets under management, though that amount is volatile due to the fact that some of Polychain's funds are held directly in a few liquid crypto stocks. Several services, such as CoinMarketCap or Messari, separately highlight Polychain's portfolio. According to them, the company invests in bitcoin (BTC), Ethereum (ETH), Polkadot (DOT), Avalanche (AVAX), Cosmos (ATOM), Filecoin (FIL), Maker (MKR), Tezos (XTZ), Compound (COMP) and other assets.
According to Fortune's interlocutor, Polychain has deployed most of the previously raised capital in 2022 and 2023 before starting to raise a fourth $400 million fund, reporters have now learned. As for the $200 million already raised, Polychain has signed new agreements with investors or partners to begin placing those funds. At the same time, the company will continue to attract new investors in order to raise the full amount.
The new funding was accompanied by a reorganization of Polychain's team of about 25 people, about 15 of whom are involved in market research. According to the publication's interlocutor, three employees from the research team were fired, while another with data science experience was hired. One of the general partners also left the company to start his own project.
According to Fortune's source, Polychain will primarily look at Ethereum-based "second layer" infrastructure solutions such as Arbitrum or Scroll for investment, as well as projects such as EigenLayer, a service for "restacking" Ethereum.
Even more investments
According to Pitchbook, global cryptocurrency VCs raised just $1.7 billion across 12 funds in the first half of 2023. By comparison, they raised $22.5 billion in 91 funds in 2022. On the same day that Polychain's new fundraising from Polychain was revealed, Bloomberg reported that another cryptocurrency venture capital firm, CoinFund, raised $158 million to support early-stage crypto startups.
According to the head of the company, Jake Bruchman, the company managed to raise more money for the new fund than originally planned. Investor interest in the fund was higher than expected.
The last year and a half in the crypto industry was spent in crisis, but during this time CoinFund managed to raise $550 million, Bruchman told journalists. The year 2022 was "extremely challenging," he said. Part of the problem was that big players in the market became interested in cryptocurrencies during their growth phase, but changed their minds about investing when they saw the sharp drop in prices.
The new CoinFund investment fund is also the fourth for the company. Under the previous funds, the company supported such startups as, for example, Dapper Labs (creators of the FLOW blockchain) or Blockdaemon, a blockchain infrastructure service. Funds from the new fund have already been partially invested in the startup Giza, which focuses on implementing artificial intelligence in smart contracts, and in Superstate, which plans to combine decentralized finance (DeFi) with mutual funds.
With the funds raised, CoinFund plans to invest in startups at the intersection of cryptocurrencies and artificial intelligence. Previously popular areas such as NFT are now not interesting to investors due to the market lull and capitalization drawdown of the largest projects
CoinFund will also continue to invest directly in cryptocurrencies and tokens, and the company has an advantage here. When it comes to crypto market regulation in the US, there is uncertainty over whether cryptocurrency tokens are considered securities, which was vividly demonstrated in a recent judge's ruling in the US Securities and Exchange Commission's (SEC) lawsuit against Ripple Labs. However, CoinFund is a registered investment adviser and can invest in securities, so even equating their portfolio crypto assets with securities shouldn't pose a problem.
According to Alex Felix, CoinFund's chief investment officer, about 90% of the company's transactions now involve buying cryptocurrencies and tokens directly. According to him, the company still believes that this industry can coexist with traditional finance in a regulated manner.
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