a16z stands behind its words with a new .5 billion crypto fund
Be greedy when others are fearful, and fearful when others are greedy. Consensus is expensive. Clichés abound when it comes to making money, and many investing koans do the opposite of what the masses are doing at any given time.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange’s newsletter every Saturday.
The logic works to some extent in startup land. For example, the Web 2.0 chestnut with which large companies are founded in difficult times has been adapted by the web3 crew. When crypto prices rise, money piles up in the sector. When crypto prices crash, people in the web3 world like to call the regular and painful downturn “building periods.”
What’s more important than slogans? capital flows. And for all the common wisdom that investing when the markets crack and the public gets scared, we’re seeing overall venture capital growth slowing around the world, particularly in crypto.
Heading into today, it seemed likely that the declining pace of venture investing we’ve seen in recent months would continue while crypto would hibernate between price events. And then Andreessen Horowitz announced this morning that it has raised a $4.5 billion crypto-focused fund. As our own Lucas Matney put it, that’s a fund-sized “stunner”.
Placing capital where one’s own mouth dwells
A disadvantage of venture capital is that it is not always adventurous. For example, during the SaaS era of the past decade, venture investing has become increasingly measured and penetrated to some extent. Sure, some investors still put money into moonshots — literally sometimes — but it seemed like the easy, well-trodden path to software recurring revenue nirvana absorbed so much market acid that most VCs looked more like mini-crossover funds than venture outfits. .
In fact, we’re seeing even those bets decline as the stock market takes a beating and market sentiment about growth versus profitability swings from the former to the latter.
What a16z is doing looks like quadrupling the web3 market with its largest fund to date, just as its competitors are tightening their wallets. This is what it actually means to be greedy when others are afraid, and a16z knows it. From Matney’s look at the new fund:
Crypto Fund IV is still managed by longtime GP Chris Dixon, who has seemed to bolster his public personality in recent months, most notably on Twitter, where he breathlessly defends the web3 space against his opponents, occasionally getting into fights. featuring figures like Block’s Jack Dorsey and Aaron Levie from Box. Continued skepticism among numerous investors and entrepreneurs has grown louder in recent weeks following the particularly ugly collapse of the Terra ecosystem and its stablecoin UST, which seemingly imploded overnight, evaporating tens of billions in value as calls of federal lawmakers to follow suit were renewed legislation aimed at curbing the industry.
Asked if the market cooling will deter traditional companies from pursuing their crypto betting, Arianna Simpson of a16z told Marketingwithanoy that “it’s likely that other companies will pull out,” but that “the size of our new fund speaks to the level of excitement and faith we have in this category.”