- By the end of 2021, nearly 25% of all funding to blockchain firms came directly from corporations or corporate venture arms.
- Within crypto, names like Coinbase and FTX have been some of the most active in building out venture teams.
- Meet the executives leading five of the most active venture arms at crypto startups.
The rise of digital assets isn’t just about the price of bitcoin.
The broader embrace of cryptocurrencies — from Wall Street to the US Treasury — has given birth to entirely new industries, from digital payments to decentralized finance. As a result, crypto and blockchain have become a new target for growth-hungry startup investors.
A record $25 billion in funding went to blockchain companies last year. In the fourth quarter of 2021, nearly 25% of that came either directly from crypto-focused corporations or their venture capital arms, a share now on par with traditional VC firms, according to CB Insights 2021 State of Blockchain report.
That’s a big jump from 2015, when fewer than 15% of blockchain funding originated from corporate investing teams. And their share could grow as more digital assets startups formalize their investing efforts into dedicated venture capital teams.
Rather than investing solely to maximize returns, corporate venture capital arms are generally tasked with investing in startups that can bring new technology and ideas in-house as well as deliver economic gains. But in the world of crypto, the trend of startups investing in other startups is typically viewed more as bets on an “ecosystem” of nascent fintechs, as Coinbase Ventures’ Shan Aggarwal told Insider.
These investments are made in the hopes that a proverbial rising tide will lift the boats of the industry as a whole.
That approach has seen companies like Coinbase place bets across a vast swathe of the crypto landscape. Since its launch in 2018, for example, Coinbase Ventures has participated in more than 200 deals, according to Pitchbook data, and more than 60 in 2021 alone.
To be sure, the recent frenetic pace of startup investing is unlikely to continue this year. Venture funding to all startups slowed in the first quarter of this year, Crunchbase News reported in early April. Some investors, meanwhile, have signaled that rocky exits for private companies going public in 2021 will lead instead to a ramping of M&A activity across the fintech sector.
Investors acknowledge that the industry could face tough times ahead, but say they are playing the long game when managing their portfolio of crypto companies.
“You could argue that right now, there’s enough of a base of users and investors in crypto that the floor is another order of magnitude higher. But that could definitely change, and we could see ourselves in another multi-year
bear market
. It’s really difficult to predict that,” FTX Ventures’ Amy Wu told Insider. “On the venture side, we are really trying to think about this space on a 10, 20-year time horizon,” she added.
Amid this backdrop, new crypto venture funds have joined the fray. This February, NFT marketplace OpenSea launched its own venture arm. In January, FTX launched its own $2 billion fund, led by Wu. And last November, stablecoin issuer Circle also launched its own dedicated investment team.
In their view, these funds are especially primed to understand the technology and depth of the crypto world.
“It takes a specialized financial shop to really understand the complexity, the depth, the pace of change in the industry and discern between the coins out there,” Alex Chizhik, Okcoin’s head of listings, told Insider.
Meet six of the executives leading the venture investing teams of crypto’s biggest startups.
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