A16z: Why did we launch a $4.5 billion Web3 fund in a bear market

22-05-26 13:00

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A16z: Why we launched a $4.5 billion Web3 Fund in a Bear Market

Lucas Matney, Techcrunch

Moni, Odaily

In the past few weeks, the cryptocurrency market has experienced tremendous turbulence, such as the UST/LUNA crash and DeFi Eg. The outlook is bleak. These seem to make it hard to see the prospects of this new industry. However, for the future of Web3 venture capitalists, they did not stop.

Andreessen Horowitz (A16Z) announced on May 25 that it has raised $4.5 billion for its fourth Crypto Fund, "Crypto Fund IV." It plans to allocate $1.5bn for seed investment in Web3 and $3bn for more traditional venture capital. The fund is the largest individual crypto fund ever raised in venture capital, bringing the total amount of crypto funds under management by A16Z to more than $7.6 billion.

So why did A16Z form a Web3 investment behemoth during a bear market? There may be two main reasons for this

First, A16Z market position is challenged

About a year ago, A16Z announced the launch of Crypto Fund III, which was worth about $2.2 billion at the time. In terms of size, the new fund is twice the size of the previous crypto fund, reflecting the growing interest of the A16Z Limited partners in increasing their exposure to crypto startups.

In fact, the crypto market has changed dramatically over the past year, and A16Z has faced many unexpected challenges. Especially in recent months, Paradigm & NBSP; And Electric Capital, which raised a lot of money to challenge the A16Z's market dominance.

Not only that, but the A16Z has had to endure staff turnover. In January, A16Z partner Katie Haun announced her exit and brought along a group of colleagues to form Haun Ventures, which raised $1.5 billion, $500 million for early-stage investments (investing directly in equity and tokens) and $1 billion for "accelerator" funds.

The $4.5 billion Crypto Fund IV will be led by A16Z General partner Chris Dixon. A few months ago, Chris Dixon was on social media with Twitter. Founder & have spent Jack Dorsey and others took Web3 to the mat and defended the Web3 industry from its critics, resulting in a huge public profile boost.

Chris Dixon is a big fan of Web3. He has stated that ownership and control are decentralized in Web3, and users and builders can get away with owning. NFT And FT to "own" Internet services. NFT gives users property rights, that is, the ability to "own" part of the Internet. Web 3 offers a new approach that combines the strengths of previous eras, and this is the early stage of the movement and a good time to get involved.

Second, to help crypto enterprises in the bear market to get enough capital to deal with the storm

In recent weeks, Terra & NBSP; Ecosystems and their stabilizers & NBSP; The UST collapse has had a huge impact on the crypto market as a whole, and many investors and entrepreneurs have become more skeptical of the nascent industry. With UST having lost tens of billions of dollars in market value almost overnight, there have been calls for federal lawmakers to expedite legislation to control the crypto industry.

On the other hand, the global cryptocurrency market cap has dropped from a high of nearly $3 trillion to $1.3 trillion, and many are wondering about A16Z launching a huge Web3 fund during this market downturn, when a cooling market would normally scare off traditional companies from continuing to bet on cryptocurrencies. However, Arianna Simpson, a partner at A16Z Crypto, explains:

"Other investment firms may well pull out, but we won't. The size of a16Z's new $4.5bn fund shows that we are excited about the industry and believe there are good things ahead."

Indeed, since global stock markets have also taken a beating recently (Robinhood & NBSP; And & have spent Coinbase Both are down more than 75% from their debuts), and many crypto investors are not so optimistic about the industry's prospects. Observers predict that an era of global financial turmoil is coming, with problems not only in the crypto industry but also in other financial sectors.

What is "interesting" is that a16Z launched its last blockchain fund at a time when the crypto market was also on the verge of collapse, but when A16Z entered the market, it recovered quickly and even pushed bitcoin and Ethereum prices to record highs. Frankly, in a down market, many new entrepreneurs feel uncertain about their future and worry about not having enough capital to spend during the "crypto winter." In this regard, A16Z has an obvious advantage because the "established venture" has a lot of capital to help its portfolio continue to scale.

As Arianna Simpson puts it:

"We cannot predict the future of the crypto market, but A16Z will work closely with our portfolio companies to ensure they have enough capital to weather the storm during bear markets."