Andreessen Horowitz plans $1bn cryptocurrency VC fund

Andreessen Horowitz, one of Silicon Valley’s highest profile venture capital firms, is looking to raise a fund of as much as $1bn to invest in cryptocurrencies and crypto start-ups, after the success of its investment in Coinbase.

The new fund, Andreessen’s third that is focused on cryptocurrency investments, is aiming to raise between $800m and $1bn from investors, according to four people with knowledge of the process.

That would make it one of the largest pools of capital dedicated to crypto and potentially twice the size of its predecessor. The firm declined to comment.

Andreessen’s fundraising push comes as other cryptocurrency investors are raising large war chests, spurred on by a surging market in bitcoin, ethereum and other digital assets.

Cryptocurrency venture capitalists have begun to realise gains from Coinbase, the digital currency exchange which went public earlier this month and is currently valued at almost $60bn, and from direct investments in virtual currencies that have surged in value over the last 12 months.

Those returns have encouraged institutional investors such as endowments and foundations to renew their bets on the emerging technologies, in spite of the uncertain regulatory environment for large swaths of the market.

Pantera Capital, one of the earliest cryptocurrency investment firms, is aiming to raise $600m for a new blockchain fund that will combine investments in private companies and tradable tokens, it has said. Pantera’s latest venture fund raised $175m in 2018 and was worth 3.8 times that amount as of January, according to its website.

Last month, investors including Sequoia Capital China committed $225m to the second cryptocurrency fund raised by Dragonfly Capital, more than doubling the sum Dragonfly raised for its debut version in 2018.

Andreessen’s fundraising haul would rival the pool of capital raised by Paradigm, a cryptocurrency investment firm started by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang in 2018. 

Paradigm has raised a total of $1bn from investors including the endowments of Harvard and Yale universities, according to Pitchbook data. The firm invests from an open-ended fund structure that does not require it to return capital by a fixed date.

Coinbase’s direct listing on the Nasdaq exchange this month produced a windfall for early investors and employees, who have looked to reinvest their gains in new ventures. The company’s market value reached $75.9bn in early trading, though it has drifted about 20 per cent lower as private shareholders offload their stakes.

Founded in 2009 by Marc Andreessen and Ben Horowitz, Silicon Valley-based Andreessen Horowitz was an early investor in cryptocurrency groups including Coinbase and Ripple through its traditional funds.

Andreessen’s stake in Coinbase has been one of its largest successes, and was worth $11.2bn at the price of Coinbase’s first trades. The firm has sold close to $120m in shares since Coinbase went public, according to regulatory filings.

After raising its first fund dedicated to cryptocurrencies in 2018, Andreessen became a major investor in so-called decentralised finance projects and was one of the founding members of the Facebook-backed Libra project, now known as Diem.

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Andreessen converted to a registered investment adviser in 2019, a regulatory distinction that gave it more flexibility to invest in cryptocurrencies and other assets that venture funds are usually restricted from holding in large quantities. The firm managed $35.8bn in regulatory assets at the end of last year, a filing showed.

At the top end of its fundraising range, Andreessen’s third cryptocurrency fund would be nearly double the size of its last vehicle, which raised $515m one year ago.