Andreessen Horowitz raises $4.5 billion for a crypto fund in a bear market

Chris Dixon, general partner at Andreessen Horowitz, discusses cryptocurrency during the TechCrunch Disrupt Forum in San Francisco, October 2, 2019.

Kate Munch | Reuters

Andreessen Horowitz plans to pour billions of dollars into crypto startups while the digital asset markets are in trouble.

Silicon Valley on Wednesday announced a new $4.5 billion fund to support crypto and blockchain companies. It is Andreessen’s fourth fund of the asset class and makes a total of $7.6 billion in crypto and blockchain investment raised. The company plans to invest both in the cryptocurrency behind the projects and in the company’s equity.

Andreessen’s first crypto-focused fund launched four years ago, during a recession now known as “crypto winter.”

“It’s often bear markets when the best opportunities emerge, when people are actually able to focus on building technology rather than being distracted by short-term price activity,” Arianna Simpson, general partner at Andreessen Horowitz told CNBC in a phone interview.

Cryptocurrencies are significantly off their all-time highs, with bitcoin down more than 50% since its November peak, and still closely related to top-grossing tech stocks, which have seen a big drop this year. Earlier in May, the collapse of the TerraUSD coin rattled investor sentiment and caught the attention of regulators.

But Simpson said investors should not worry about the company’s bets.

“Technical due diligence and the other types of due diligence that we do are an essential part of making sure that projects meet our standards,” she said. “While our investment pace has been high, we continue to really invest only in the top level of the founders.”

Simpson and his partner Chris Dixon likened the long-term opportunity in cryptography to the next major computing cycle, after computers in the 1980s, the Internet in the 1990s, and mobile computing in the early 2000s.

Known for his early bets on Instagram, Lyft, Pinterest and Slack, Andreessen Horowitz made his first major crypto investment with Coinbase in 2013. Since then, the company has backed a variety of crypto and NFT startups, including Alchemy and Avalanche and Dapper Labs, OpenSea, Solana, and Yuga Labs. Earlier this week, it invested in Flowcarbon, a carbon credit trading platform on the blockchain also backed by controversial WeWork founder Adam Newman.

While cryptocurrencies may struggle to regain momentum, the flow of funds to private businesses is at an all-time high. Blockchain startups brought in a record $25 billion in venture capital last year, according to recent data from CB Insights. This number is eight times more than the previous year.

The influx of investment into so-called “Web3” startups trying to build businesses on blockchain technology has inspired scorn from some of the tech industry’s leading figures. Two of the world’s most famous tech billionaires, Tesla CEO Elon Musk and Twitter co-founder Jack Dorsey, were among those questioning “Web3”. Dorsey argues that venture investors and their limited partners are the ones who will end up owning Web3 and “never get away with their incentives,” he tweeted, calling it a “central entity with a different brand.”

“The skeptical people aren’t where we are, and he’s again in the fortunate position of being able to talk to these wonderful builders all day long,” Simpson said. “The other thing I would like to add is that many of the skeptics are the Web 2.0 giants – they have been in a position to take advantage of and benefit from closed platforms.”

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