VENTURE MEETS CRYPTO
Good morning, Term Sheet readers.
It seems like forever ago when I wrote about traditional venture capitalists and their role in the brave new world of cryptocurrency. It’s only been eight months, but a lot has changed.
As I noted then, despite talk of cryptocurrency projects being scams and/or pump and dump schemes, VCs were warming up to the idea because of profits and liquidity. That hypothesis is now becoming a reality.
Storied firm Andreessen Horowitz announced yesterday the formation of a new $300 million crypto fund. The investment fund, called “a16z crypto” will specialize in crypto assets and projects that build on blockchains, the distributed ledger technology that underpins virtual currencies like Bitcoin and Ethereum. It will be co-led by Andreessen partner Chris Dixon and new general partner Katie Haun, a former federal prosecutor best known for her work against corrupt agents tied to the Silk Road drug market.
Here’s where it gets interesting: The fund will invest in startups as well as the actual digital currencies and crypto-related projects known as initial coin offerings. The reason many VCs hadn’t participated in these ICOs before is partially because many of them lack a mandate from their limited partners to do so. Dixon noted that venture capital funds are legally limited to hold no more than 20% of their money in assets that are liquid securities, such as cryptocurrencies. “There are some regulatory constraints we were running into that limit how many times we could do different investments in our main fund,” Dixon told Fortune.
Three other things to keep in mind about the structure of this fund:
• It’s patient capital: The firm has been investing in crypto assets for more than five years. It says it hasn’t sold any of those investments and doesn’t plan to anytime soon. In other words, a16z will hold investments for longer than the normal venture cycle of 10 years.
• It’s an ‘all weather fund:’ The fund plans to invest consistently over time, regardless of market conditions. If there is another “crypto winter,” it will “keep investing aggressively.” Put simply, it’s making a long-term bet on the space, not on the day-to-day volatility of price fluctuations.
• It has flexibility regarding stage, asset type, and geography: a16z crypto will give itself the freedom to invest at all stages — from seed/pre-launch projects all the way to the fully developed, later-stage networks. Why? Because without capital there’s no innovation and without innovation, there’s no market. Who cares who wins the race if you’ve bet on the entire ecosystem?
Like virtually every tech news outlet has reported, $300 million is a big number when compared to industry peers. But the more important thing to keep in mind is that this fund is big for the industry as a whole. Andreessen has become one of the largest and most active investors in cryptocurrency thanks to investments in online exchange Coinbase, hedge fund Polychain Capital, and blockchain-based social payment app Celo.
Funding for crypto-focused startups is exploding and the talent (both operators and investors) is flocking. The floodgates to greater inflows of institutional money are wide open.
THE LATEST FROM FORTUNE...
• Apple CEO Tim Cook On Data Privacy, Immigration, and Speaking Out (by Jonathan Vanian)
• How Should We Regulate Blockchain? It Depends on Which Country You Ask (by Zhuling Chen)
• After Months of Selling Off Many of Its Businesses, What’s Left of General Electric? (by Hallie Detrick)
• From Happiness to Existential Threats, an Evening With Steven Pinker (by John Patrick Pullen)
• PolicyBazaar, an India-based operator of a digital insurance business, raised more than $200 million in funding. SoftBank’s Vision Fund led the round, and was joined by investors including InfoEdge and Naukri.com.
• B-Stock Solutions, a Belmont-based online auction platform for returned, excess and other liquidation inventory, raised $65 million. Investors include Spectrum Equity.
• TourRadar, an Austria-based operator of an online marketplace to compare and book group travel, raised $50 million in Series C funding. TCV led the round, and was joined by investors including Cherry Ventures, Endeit Capital, Hoxton Ventures, and Speedinvest.
• Unison Home Ownership Investors, a provider of home ownership investments, raised $40 million in Series B funding. F-Prime Capital led the round, and was joined by investors including Citi Ventures and Royal Bank of Canada.
• BigID Inc, a New York City and Tel Aviv-based provider of enterprise data protection and privacy solutions, raised $30 million in Series B funding. Scale Venture Partners led the round, and was joined by investors including ClearSky Security, Comcast Ventures, BOLDstart Ventures, Information Venture Partners and the SAP.iO Fund.
• HONK Technologies, a San Francisco-based platform for connecting drivers, towing professionals and insurers, raised $18 million in funding. Altpoint Ventures led the round, and was joined by investors including Venture 51 and Structure Capital.
• Homee, a Tampa Fla.-based on-demand property maintenance app, raised $11 million in Series A funding. Investors include Home Depot, Activate Capital and Engage Ventures.
• Quantum Xchange, a Bethesda, Md.-based provider of fiber-optic network and data protection services, raised $10 million in Series A funding. New Technology Ventures led the funding.
• Catalog, a San Francisco-based developer of a method to encode data in DNA, raised $9 million in funding. New Enterprise Associates led the round, and was joined by investors including OS Fund, Day One Ventures, messaging app Line, Data Collective, Green Bay Ventures, AME Cloud Ventures, and Industry Ventures.
• Winnie, a San Francisco-based developer of an app that offers parents with information needed to travel, explore, or run errands with kids, raised $4 million in seed funding. Reach Capital led the round, and was joined by investors including Rethink Impact, Homebrew, Ludlow Ventures, Afore Capital, and BBG Ventures.
• Triptease, a U.K.-based travel SaaS startup which helps hotels to get more direct bookings and bring hospitality online, raised $4 million in funding. Investors include BGF and Notion Capital.
• Atomic Reach, a Canada-based artificial intelligence-based content optimization platform, raised $3.4 million in funding. Investors include Fidelity Investments Canada ULC.
HEALTH AND LIFE SCIENCES DEALS
• Akero Therapeutics Inc, a Cambridge, Mass.-based biotechnology company focused on treating non-alcoholic steatohepatitis and other serious metabolic diseases, raised $65 million in Series A funding. Investors include Apple Tree Partners, Atlas Venture, venBio Partners and Versant Ventures.
• NodThera, a U.K.-based developer of next generation NLRP3 inflammasome inhibitors for the treatment of diseases driven by chronic inflammation, raised $40 million in Series A funding. Sofinnova Partners and 5AM Ventures led the round, and was joined by investors including Epidarex Capital and F-Prime Capital Partners.
PRIVATE EQUITY DEALS
• Netgain Technology LLC, which is backed by Bluff Point Associates, acquired iManaged Solutions LLC, a Huntington Beach, Calif.-based provider of cloud services to optometry practices. Financial terms weren’t disclosed.
• Harbor Beach Capital made funding of an undisclosed amount in AVFX, a Boston-based provider of event technology services.
• United Claim Solutions, a portfolio company of Great Point Partners, acquired Zebu Compliance Solutions, a Portsmouth, Ohio-based provider of payment integrity and ongoing credentialing solutions to payors, clearinghouses and provider organizations. Financial terms weren’t disclosed.
• Centauri Health Solutions Inc, which is backed by Silversmith Capital Partners, acquired NHI Billing Services, a Phoenix, Ariz.-based provider of Medicaid-related specialized billing services to hospitals and health systems. Financial terms weren’t disclosed.
• Selecta, the vending machine operator, is preparing for an IPO on the Swiss Bourse, Reuters reports citing sources. KKR backs the firm. Read more.
• China Renaissance Group, an investment bank led by one of the country’s most famed rainmakers, filed for an IPO in Hong Kong. The firm aims to raise as much as $800 million in a Hong Kong IPO, people with direct knowledge of the matter told Reuters. Read more.
• Kramer Laboratories Inc, which is backed by Avista Capital Partners and Dana Holdings, acquired Nizoral, a Fort Washington, Penn.-based anti-dandruff shampoo brand. The seller was Janssen Pharmaceutica NV. Financial terms weren’t disclosed.
• Arlington Capital Partners sold Zemax Software Holdings LLC, a Kirkland, Wash.-based provider of optical and illumination design software, to EQT. Financial terms weren’t disclosed.
FIRMS + FUNDS
• RRE Ventures, a New York City-based venture capital firm, raised $265 million for its latest fund.
• Dementia Discovery Fund, a venture capital fund, raised $350 million for a new fund.
• Highland Capital Partners, a Cambridge, Mass.-based private equity and venture capital firm, raised $170.7 million for its 10th venture capital fund. The fund’s target was $300 million.
• Stacia Schlosser Ryan will join Perella Weinberg Partners as a partner.