Erik Weijers, 10 months ago

Andreesen Horowitz launches biggest crypto fund to date

A major venture capital fund, Andreesen Horowitz (a16z), has launched a crypto fund worth $4.5 billion. It shows that the bear market has not dampened enthusiasm for investing. 'A bear market is the best time to build'.

Through the new fund, a16z (the 16 in this so-called numeronym represents the number of letters between Andreesen's A and Horowitz's z) has invested 7.6 billion in web3. In 2021, a16z and other venture capital have invested over $30 billion in this new world. The fund of a16z will invest in startups related to DeFi, gaming, DAOs, NFTs and more.

“We think we are now entering the golden era of Web3,” general partner Chris Dixon said in a blog post announcing the new fund. “Programmable blockchains are sufficiently advanced, and a diverse range of apps have reached tens of millions of users. More importantly, a massive wave of world-class talent has entered Web3 over the last year.”

Questions about influence of venture capital

Investments like these pull crypto through a bear market. On the other hand, it raises questions: do we want an industry where venture capital is the main beneficiary? Last year, Jack Dorsey started a discussion on Twitter about whether it's such a good thing that big money owns Web3 projects. How decentralized can a project be that is created to pay back that one lender?

Chris Dixon of a16z disagrees. In order to reduce the power of the four or five companies that actually own the Internet today (Google, Facebook, etc), he says a new infrastructure needs to be built. “There’s about four or five companies that basically control the internet. I think we’re at risk of having the internet turn into the 1970s broadcast landscape [with networks] controlling everything.” To change this situation and build Web3, someone has to make that investment.

High net worth individuals

Dixon has a point: Web3 isn't going to build itself. And the U.S. Securities Act does not allow normal investors to invest in so-called "unregistered securities". And that's what a launch of a new coin is. So how is a startup supposed to get capital if an ICO is legally problematic? There are few alternatives but to tap venture capital. Because to invest as an individual, you have to be a "high net worth individual": which is to own more than 1 million dollars.

There are only about a dozen venture capital funds that understand enough about crypto to invest in it. So capital inflow is very centralized right now. Anyone who complains about the power of venture capital should call on U.S. lawmakers to lower the threshold to invest in new projects.

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