We took a closer look at these top VCs' blockchain investments, which range from private enterprise blockchains to cryptocurrency hedge funds.
This year’s blockchain craze has pushed a huge amount of new money into cryptocurrencies, private blockchain projects, and companies holding initial coin offerings (ICOs). As of now, the total market capitalization of cryptocurrencies stands at more than $340B — a huge leap from where it started the year at $18B.
Two of the top early-stage tech VCs, Andreessen Horowitz and Union Square Ventures, have placed bets on blockchain technology since 2013. Below, we show how their approaches to the sector have evolved, from traditional equity investments to investments into ICOs and cryptocurrency hedge funds.
USV initially focused on bitcoin, making its first bet in early 2013 on popular cryptocurrency exchange Coinbase.
Since then, USV has expanded its strategy to bet on more novel blockchain use cases: OpenBazaar is a blockchain-based, decentralized e-commerce platform, while Filecoin is a tokenized file storage protocol. Filecoin raised upwards of $200M in its ICO held earlier this year.
Notably, Earn was founded by Balaji Srinivasan, a former general partner at Andreessen Horowitz, and has pivoted from bitcoin mining to building a social network where users can earn money by replying to e-mails. Andreessen Horowitz has participated in two rounds to Earn totaling $116M.
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Andreessen and USV have participated together in 9 deals since 2013. More than a few of these portfolio companies have made headlines, with Coinbase joining the unicorn club in August at a valuation of nearly $1.6B and Spotify acquiring MediaChain in April. Notably, while USV led Coinbase’s $5M Series A, Andreessen led its $25M Series B.
Recently, Andreessen and USV have both made investments into tokenized protocols. These include Basecoin, which is developing a “stablecoin,” and Orchid, which is building a new decentralized internet “free from surveillance and censorship.”
The meteoric rise of ICOs has pushed VCs to reconsider their traditional financing mechanism and business model. As Fred Wilson (a prominent partner at USV) recently wrote on his blog: “With a new model, tokens, in its infancy, it begs the question of how it will impact our approach.”
Indeed, a number of USV’s portfolio companies have held or are holding ICOs, including social media platforms YouNow and Kik. Furthermore — and perhaps as a hedge — both Andreessen and USV have invested in cryptocurrency hedge funds as equity investors (Polychain Capital) and deployed capital as limited partners (MetaStable), giving them broader exposure to token markets.