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Who is behind the biggest crypto funds?

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As of December 12, 2022, one of the main crypto firms in the US (FTX) went bankrupt as its founder and former CEO was accused of multiple fraud charges involving the company. 

It is considered one of the largest financial crimes in American history as the founder, Bankman-Fried, designed a fraudulent cryptocurrency scheme to take advantage of US and global investors and customers, making them lose billions of dollars. Consequently, in a matter of a few days, the company’s valuation dropped from $32 billion to bankruptcy.

This news has shaken the crypto market and, therefore, has led it to lose billions in value (it has dropped below $1 trillion). It has also become even more volatile. FTX’s collapse is expected to impact cryptocurrencies in the near future, however, VCs are still willing to keep investing in crypto and more crypto funds are being launched. But why is that?

Beginning of crypto

Crypto currencies existed long before the pandemic started. In fact, the concept was created in 1983, and it was in 1990 when the first cryptocurrency company was born (eCash). However, it wasn’t until 2009 when the term started to gain acknowledgement. When talking about crypto, probably the first cryptocurrency that comes to our mind is bitcoin, and although it is the oldest surviving one, it wasn’t the first one.

Evolution of crypto in a nutshell

The period of 2016-2018 is when crypto became a worldwide phenomenon. Focusing on bitcoin, its prices rose steadily year over year, going from $434 in January 2016, to $998 in January 2017. In July 2017, an upgrade was approved and bitcoin started trading at around $2,700. That December, a couple of months later, Bitcoin reached almost $20,000.

In that same period, Ethereum also became popular in the crypto world, and in a matter of three years it became the second most popular cryptocurrency. Nevertheless, after this glory period, crypto became more unstable and, together with the financial regulations and security concerns, bitcoin dropped down to around $3,700 by the end of 2018.

Since then, we have seen recovery periods and busts as well. Despite the falls of the market and the uncertainty periods, Venture Capital firms do not seem to be discouraged to invest in crypto, but just the opposite: more and more funds are being created to support these companies.

Why VCs keep investing in crypto

More than $25 billion were invested in blockchain companies in 2021, and then an additional investment totalling $16 billion was made in the first six months of 2022, according to data from CB Insights.

Venture Capital firms usually invest in disruptive projects and fields as they chase fantastic companies that may become unicorns. Nevertheless, all innovation and breakthrough technology come with some risks. In the case of cryptocurrency, however volatile and unstable the market is, it is part of blockchain, which is the technology that powers crypto and which remains robust. As blockchain is a big part of Web3 (which is considered as ‘the future of the internet’) VCs supporting Web3 bet on that technology and, therefore, are optimistic about crypto as it is currently the driving force behind blockchain. 

Well-known venture firms such as Coinbase Ventures, Sequoia Capital, and Tiger Global are among the many VCs committed to investing hundreds of millions of dollars in crypto start-ups.

Top 5 crypto funds

Nowadays, most of the funds that invest in crypto are located in the US. Some of them include VCs such as:

a16z

Founded in 2009 by Ben Horowitz and Marc Andreessen, Andreesen Horowitz (a16z) has become one of the main crypto venture capital investment companies that supports blockchain firms. Its portfolio includes Digital Ocean, Slack, Roblox, Phantom.

It is based in California (US) and has brought traditional venture capital investments to the crypto world. Their latest and only was announced on Jun 26, 2018 and raised a total of $300M.

Pantera Capital

Located in California, Pantera Capital invests in blockchain companies and defines itself as “the first U.S. institutional asset manager focused exclusively on blockchain technology”. Its portfolio includes Ox, Balancer, Brave, Cosmos.Pantera Capital has launched 8 funds, their latest being Pantera Select Fund. This fund was announced on Apr 6, 2022 and raised a total of $200M.

Draper Associates

Located in Silicon Valley (California), Draper Associates is a crypto investment fund that has been investing in disruptive and transformative technology for nearly 40 years. A huge part of its portfolio includes blockchain and crypto-based companies, such as Coinbase, Ethereum, Hashrabbit, or Ledger. The firm has raised a total of two funds worth $420M. Their latest fund was Draper Associates VI, launched on Nov 16, 2021 and which raised a total of $230M.

Coinbase Ventures

The popular firm Coinbase has created a new arm called Coinbase Ventures, whose focus is on early-stage companies that seek capital and resources to scale up. Its portfolio includes firms such as Compound, Etherscan, Keep and Coinstracker.

Their latest and only fund was announced on Apr 6, 2018 and raised a total of $15M.

Paradigm

Located in San Francisco, it was founded by Matt Huang of Sequoia Capital and Fred Ehrsam of Coinbase. Paradigm focuses on blockchain companies and thus it invests in blockchain companies, from early-seed stage to mature and growth businesses. Its portfolio includes BlockFi, Compound, Cosmos and Magic Eden.

Paradigm’s latest and only fund was launched on Nov 15, 2021 and raised a total of $2.5B.

Crypto funds in Europe

Europe is investing more and more in cryptocurrency. In 2021-2022 new crypto funds have been created in Europe, and some non-crypto venture capital firms are starting to invest in this sector.

Outlier Ventures

Ourlier Ventures is the UK leading accelerator firm focused on crypto. It invests in early-stage companies from blockchain infrastructure to the NFTs and the Metaverse.

BlueYard Capital

Located in Berlin, BlueYard Capital is a venture capital firm that has been investing in blockchain since 2016. The firm has launched three funds, their latest being BlueYard Capital Fund III, announced on June 12, 2022 and totalling $185M.

Fabric Ventures

Based in London, Fabric Ventures became the first fund with EIF-backing to pursue digital assets. In 2021 the firm launched a $130M fund for crypto startups.

Semantic Ventures

Based in London, Semantic Ventures is a venture capital firm focused on the data and digital economy.

Maven 11

Based in the Netherlands, Maven11 raised its second fund for crypto startups. The VC firm raised, on December 2, 2021, $120M to invest in infrastructure protocols, DeFi, and Web 3 applications.

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Meet the expert: TAMAS SZEKER

I am a passionate Innovation and Business Growth Partner, based in Barcelona, supporting clients to scale and succeed globally. My key domains include venture building,