The State of Venture Capital and Crypto

Screenshot: “Silicon Valley” / HBO

Despite initial skepticism, many investment banks and financial institutions are already making strides with incorporating cryptocurrency and blockchain technology into their business models. On the private side, venture capital firms are also cautiously stepping into crypto and blockchain investments. In 2017 alone, global venture investments in blockchain-related companies nearly topped $1 billion. This year, almost halfway through 2018, total venture investments have already exceeded $1.3 billion. Let’s see what startups the biggest names have invested in so far.

Andreessen Horowitz and Union Square Ventures have invested in the cryptocurrency sector for a while. Their most high-profile investments include decentralized app startups like CryptoKitties and OpenBazaar, cryptos like Ripple (XRP), and fintech startups like Dfinity, Algorand, Chia, and Earn. Dfinity is a decentralized cloud computing project, Algorand is a blockchain payment and transaction platform, Chia is a green, energy-efficient blockchain project, and Earn is a microtask platform powered by crypto. Recently, Andreessen Horowitz announced plans to launch a dedicated crypto fund, a separately managed fund compliant with US financial regulations.

Sequoia Capital and Draper Associates have also invested in crypto projects. Sequoia made investments in Protocol Labs’ Filecoin and Orchid Labs, a company aiming to reduce digital surveillance and censorship. Last year Sequoia invested in two crypto hedge funds, MetaStable and Polychain Capital. Draper Associates, founded by notable crypto bull Tim Draper, recently invested in GUN, an open source decentralized database project, and signaled interest in a partnership with the government of Papua New Guinea to create a crypto paradise for blockchain tech.

LightSpeed Venture Partners has recently backed the enormous Telegram ICO and Basis, a stablecoin pegged to the US dollar. LightSpeed is also planning to launch a dedicated crypto investment fund. General Catalyst, an early investor in crypto unicorn Circle, recently invested in the seed round of Carbon, a stablecoin project based on algorithms.

In addition to traditional, more established venture capital firms, new crypto venture firms have cropped up in recent years. Some names include FBG Capital, Fenbushi Capital, HyperChain Capital, Blockchain Capital, InBlockChain, Kenetic Capital, HASHED, Bitmain, Pantera Capital, and Coinsilium Group. Known crypto giants like Coinbase and Ripple Labs have also launched investment funds. Since last year especially, these young firms have actively invested in exciting crypto and blockchain startups.

It is worth noting that venture capital firms have so far largely avoided ICOs and new cryptocurrencies. Instead, they prefer blockchain-related startups with clear utility, as well as crypto investment funds and stablecoin projects to replace the controversial Tether (USDT). It seems the regulatory environment is not yet ripe for venture capital to directly and broadly buy coins that retail investors hold and know. However, venture capital’s enthusiasm for blockchain tech and the crypto sector definitely exists, and perhaps in the future, they will explore more direct investment mechanisms.

More: ICOs delivered at least 3.5x more capital to blockchain startups than VC since 2017
Interesting: A Look Inside Hashed’s $250 Million Blockchain Investment Portfolio
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