Polychain Capital, one of the most prominent venture capital firms in the crypto space, has raised around $200 million in the “first close” of its fourth fund, according to a person familiar with the matter, while letting go three members of its research team amid new investing priorities. It still plans to raise around $400 million total for the fourth fund.
The raise is a bullish sign for the industry, suggesting ongoing interest in the sector despite a “Crypto Winter” that has seen venture funding evaporate for both startups and VC firms.
Polychain declined to comment for this article when reached by Fortune.
Founded in 2016 by Olaf Carlson-Wee, Coinbase’s first employee, Polychain Capital quickly became a leader in the crypto venture space. The firm has led investments in companies such as the decentralized exchange Uniswap and the African crypto exchange Yellow Card. Polychain was included in the inaugural FORTUNE CRYPTO 40 this year.
Polychain has raised three funds with a reported $2.6 billion in assets under management, according to data from Pitchbook, although the number is prone to fluctuation due to Polychain’s liquid token hedge fund. In 2019, the Wall Street Journal reported that its assets under management had dropped 40%, or nearly $400 million, amid a crypto market downturn, although it performed better than the aggregate value of cryptocurrencies, which dropped 70% during the same period.
After raising a third fund over 2022 and 2023, Polychain deployed most of the capital, according to the person familiar. In March 2023, The Block reported that Polychain was targeting $400 million for its fourth fund. The person told Fortune the target amount is “a little less” than $400 million.
The successful first close of $200 million means Polychain has signed agreements with investors, or limited partners, to begin deploying capital, although it will continue to raise from investors for its fourth fund.
The raise is a positive signal for crypto VCs. According to data from Pitchbook, global crypto VC firms have only raised $1.7 billion in the first half of 2023 across 12 funds. By contrast, they raised $22.5 billion across 91 funds throughout 2022. On Tuesday, Bloomberg reported that the crypto VC firm CoinFund had raised $158 million.
Polychain’s $400 million target still reflects a lower figure than some crypto firms raised in 2022, such as Haun Ventures, which raised $1.5 billion, the largest-ever debut by a solo female founding partner.
Staff turnover
The fresh funding came with a shakeup of Polychain’s small team of around 25, with around 15 focused on research. Three employees from the research team were let go while another staffer was added, according to the person familiar, as the firm prepares for its fourth fund. General partner Niraj Pant also left to start his own project as part of the turnover.
Polychain’s new fund will come with a different focus, as the firm seeks to navigate the bear market. The staff shakeup reflects shifting priorities, with the new researcher brought on for their background in data science. The person familiar said that Polychain will be looking in particular at Ethereum-based projects similar to its investments in Arbitrum and Scroll, both layer-2 networks on Ethereum, and EigenLayer, an Ethereum re-staking protocol.
