Recent headlines haven’t exactly been kind to the crypto sector. Collapsed stablecoins TerraUSD and Luna turned out to be stable in name only. Bitcoin is down 37% for the year. Berkshire Hathaway’s Warren Buffett and Charlie Munger delighted in taking shots at cryptocurrency during the company’s latest AGM, saying it “doesn’t produce anything” and is “stupid and evil.”
So what is Andreessen Horowitz — the storied venture capital outfit with one the most successful records in tech investing — doing? Pushing its digital chips in. On Wednesday, a16z, the moniker by which the firm prefers to be known, announced it had raised $4.5 billion for a new crypto fund, the largest the sector has ever seen.
While their NFT apes (which the fund is heavily invested in) may be bored, a16z is fully alert and plugged in to the crypto space. It now has four crypto investment vehicles worth a combined $7.6 billion and is a backer of crypto leaders including Coinbase, OpenSea, NFT game developer Sky Mavis, and Bored Ape NFT creator Yuga Labs.
The new fund will invest in both crypto assets and the companies behind them. Investments could touch on games, social media, NFT communities, privacy firms, and more. But the volume of cash being thrown around harks back to concerns that the “web3” principles cryptocurrency represents are under threat:
- “Web3” was coined by Ethereum co-founder Gavin Wood, and holds that a decentralized version of the internet can empower users over Big Tech by employing technologies such as blockchain, a kind of public ledger powered by peer-to-peer computer networks rather than proprietary servers or algorithms.
- Critics, including Tesla CEO Elon Musk and Square CEO Jack Dorsey, have dismissed Web3 as little more than a buzzword. “You don’t own ‘web3’,” Dorsey tweeted in December, “The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label.”
One example is ApeCoin, a digital currency launched in March by Yuga, 14% of the tokens in which were allocated to launch partners like Andreessen Horowitz, giving them significant power over its trading value. Software engineer Stephen Diehl has said Web3 is “pushed by the world’s largest investors who have deep bags of tokens to dump.”
The Decentralized Grass: Earlier this month, $600 billion in market cap was wiped from the digital-assets space in a single week, yet Andreessen Horowitz still sees dollar signs lining the road ahead. “Bear markets are often when the best opportunities come about, when people are actually able to focus on building technology rather than getting distracted by short-term price activity,” Arianna Simpson, a general partner at Andreessen Horowitz, told CNBC. Maybe they could get a headstart on building that technology by minting an NFT collection of bears.