- Crypto prices are falling, but VCs are still looking for investment opportunities in digital assets.
- Companies like Coinbase and FTX have been actively building venture capital teams.
- Hear from 6 executives who work for top crypto companies about what they look for in an investment.
Crypto prices are far from immune to the lingering macro risks hanging over growth stocks. The tech-focused Nasdaq Composite Index is down around 25% this year, while the price of bitcoin is down more than a third.
But venture capitalists still have money to spend. And one of the biggest areas of growth when it comes to raising capital for crypto startups has been within crypto businesses themselves.
A record $25 billion in funding flowed to blockchain companies last year. In Q4 2021, nearly 25% of that came either directly from crypto-focused companies or from their venture capital arms, a share now on par with traditional venture capital firms, according to the CB report. Insights 2021 on the state of blockchain.
That’s a big jump from 2015, when less than 15% of blockchain funding came from corporate investment teams. And their share could grow as more digital asset firms formalize their investment efforts in dedicated venture capital teams like those taking shape at Coinbase, FTX, and Circle, among others.
Rather than investing solely to maximize returns, venture capitalists are typically tasked with investing in startups that can bring new technologies and ideas in-house and generate economic gains. But in the crypto world, the tendency for startups to invest in other startups is generally seen more as a bet on an “ecosystem” of fledgling fintechs, as Coinbase Ventures’ Shan Aggarwal told Insider.
These investments are made in the hope that a proverbial rising tide will lift the boats of the industry as a whole.
In late March, Insider spoke with 6 executives who control billions in venture capital for major crypto companies like Coinase and Binance. They explain what their teams are looking for when looking to deploy capital, from multi-blockchain networks to GameFi to NFTs, and the development of new bitcoin infrastructure tools.
Certainly, the recent frenetic pace of investment in startups has diminished. Venture capital funding for all startups slowed in the first quarter of this year, Crunchbase News reported in early April. Some investors, meanwhile, have signaled that the tumultuous outflows for private companies going public in 2021 will instead lead to a surge in M&A activity in the fintech sector.
Investors acknowledge that the industry could face tough times, but say they are playing the long game when managing their portfolio of crypto companies.
“You could say that right now there are enough users and investors in crypto for the floor to be an order of magnitude higher. But that could certainly change, and we could see ourselves in another multi-year bear market. It’s really hard to predict,” Amy Wu of FTX Ventures told Insider. “On the business side, we’re really trying to think about this space over a 10, 20 year horizon,” she added.
Meet six of the leaders who lead the venture capital investment teams of the biggest crypto startups.