Meet Modern Crypto Venture Capital
Crypto venture capital is a different game from traditional venture capital, which not all participating companies have yet fully appreciated.
Why is this important: The key is to match the asset class in which you invest.
Key attributes of modern VC crypto:
- Registered Investment Advisors: Venture capital funds are exempt from registering as investment advisers, but only 20% of their holdings can be “non-qualifying investments” like digital tokens. So it’s no surprise that an increasing number of companies are registering with the SEC. Compliance with custody and other requirements also makes sponsors feel more comfortable.
- Tokens + equity: While some crypto investments are best made at the enterprise level, the value of others lies in tokens (or eventual tokens). For example, around 75% of the current capital of Andreessen Horowitz’s crypto fund is invested in tokens, partner Katie Haun said at an event last week. Some companies even manage more hedge fund-type vehicles that trade in tokens, given the liquidity of many of these assets.
- Multi-step: Paradigm Capital, which just raised a $ 2.5 billion fund, describes itself as an early stage investor, but co-founder Matt Huang admits the company won’t always catch all the big investments in its early days. , so she has a habit of writing checks in all stages. For example, he participated in the $ 900 million July cycle of the FTX crypto exchange.
- Research: Hiring smart tech researchers is all the rage among crypto funds, in part to boost their credibility with entrepreneurs and keep them up to date with the latest trends and advancements. “[Our research team’s] the basic job is to be at the border, ”Huang told Axios.
- Services: Crypto startups have some of the same support needs as other tech companies (e.g. hiring, marketing, etc.), but they also have unique challenges. Navigating the hazy regulatory landscape and attracting quality contributors to their projects is part of it.
What they say : “In the normal world, there are existing software, vendors or suppliers. In crypto, a lot of these solutions don’t exist, ”says Huang, adding that her company (and her peers) need to create many tools that she uses to manage her own operations.
- “We see ourselves as a startup.
The bottom line: “You can’t just be a signal,” says Jake Brukhman, Founder and CEO of CoinFund. “I think they must be active participants [in the ecosystem]. ”