“Let’s settle this!” an announcer rumbles over loudspeakers.
The “this” in question is one of the more important business disputes of the moment: Are alternative currencies like Bitcoin the future of financial services or a 21st-century Ponzi scheme? To get resolution, a Mexican data center company called KIO Networks is hosting a debate in a smoke-filled arena in the graffiti-coated Hipódromo Condesa neighborhood of Mexico City. The atmosphere screams lucha libre, the stylized form of Mexican wrestling that features acrobatic moves and dramatic masks.
On this late-September evening, the main event features two intellectual heavyweights from the United States, both highly credentialed, neither wearing disguises. In one corner is Paul Krugman, the New York Times columnist and Nobel laureate in economics. In the other is Kathryn Haun, an accomplished federal prosecutor recently turned venture capitalist.
Krugman’s position is predictable. He sees the rise of cryptocurrency networks—decentralized digital services that run on computerized money like Bitcoin—as an unnecessary throwback to a distant era, when precious metals made up the money supply. “I don’t believe we’re at the dawn of a new age,” he says. He delivers a smackdown on an investment craze that the likes of Jamie Dimon and Warren Buffett have repeatedly pooh-poohed: “I think 15 years from now, it will look a lot like Pets.com.”
Haun sees things differently. To her, virtual currencies and the technologies that underpin them are society’s saviors: a last great hope at reclaiming power gobbled up by greedy banks and Internet monopolists. “Facebook, Amazon, Netflix, Google, they control all the rules,” she says. “They have all the users. They have all the power.” The new technology, Haun argues, allows eager, entrepreneurial developers to compete. She throws her weight behind the democratizing dream of the new technology’s acolytes.
Cryptocurrency is “in the dial-up days,” says Haun, “and the critics are confusing the current state of innovation with the end state of innovation.”
Haun largely wins over the crowd, a collection of the megalopolis’s tech elite. And they like her visuals too. At the outset of her talk, five giant screens project the mug shots of corrupt U.S. law-enforcement officials she convicted in her previous career. But the audience isn’t enamored of Haun merely because she once was the sheriff in the Wild West of “crypto.” She excites them because now she’s joined their side. As one of the newest partners of the estimable Silicon Valley venture capital firm Andreessen Horowitz, Haun’s job is to find the next big thing in cryptocurrencies—and to help their founders succeed while staying on the right side of the law.
Haun is making her career shift at a precarious time. Cryptocurrency markets have been in free fall all year. A global speculative mania for virtual coins that sent valuations above $800 billion in January has dwindled to $200 billion. Bitcoin has lost two-thirds of its value, and Ethereum, the second-biggest cryptocurrency, is down 90%.
Haun and her new partners are undaunted. Investment crazes often spawn bubbles. But what’s left after they pop, if the true believers are right, are new industries. Firm cofounder Marc Andreessen, after all, parlayed his work developing the first commercial browser into Netscape, the flawed startup that helped beget the World Wide Web—and many billions of dollars in investment returns for the Internet industry. Haun also is unfazed by her lack of professional investing experience. “For entrepreneurs to want to work with you, they need to think you have some strategic vision, some hustle, and an ability to get the job done,” she says. These are the same skills, she posits, that a prosecutor needs to persuade FBI agents and others to work with them.
Bridging worlds, then, is one of Haun’s chief attributes. “She has this rare blend of having been in government and having a business-centric mind,” says David Marcus, a senior Facebook executive who sat on a corporate board with Haun. Adds Anthony Kennedy, the newly retired associate justice of the U.S. Supreme Court, for whom Haun clerked: “I’m quite reassured that someone with her talents and background would go into this new area.” Her involvement “is a tremendously important link between the law and the cyber age. And she recognizes that.”
Trendsetter Meets Prosecutor
Ben Horowitz is in repose on a sofa in his office, in Menlo Park, Calif., underneath a framed black-and-white poster featuring the rapper Nas. A mannequin donning an Oakland Raiders jersey stands guard in front of Horowitz’s desk. The nontraditional trappings match his firm’s maverick reputation. Founded only nine years ago, Andreessen Horowitz has quickly joined the top ranks of Silicon Valley’s venture firms with winning bets on the likes of Skype, Lyft, GitHub, and many others.
The firm sees itself as a trendsetter. With more than $7 billion under management, it was one of the first to invest aggressively in crypto technologies. This summer, just as cryptocurrency values were plummeting, the firm unveiled a separate $300 million fund focused on the new field. Horowitz confidently compares the moment to an earlier era of tech investing. After the dotcom bubble burst, he says, many people assumed investing in the Internet was moronic. “That was actually the dumbest takeaway because they missed the Internet. I think crypto is going to be the same.”
The firm has already put money behind a number of cryptocurrency-related bets. These include Coinbase, an exchange for digital assets, reportedly valued at $8 billion; Ripple, creator of XRP, the world’s third most valuable cryptocurrency; and Polychain Capital, a hedge fund whose value has swung wildly in tandem with the prices of cryptocurrencies. Andreessen Horowitz has even funded Dapper Labs, creator of CryptoKitties, a game that encourages collectors to trade representations of cats on the Ethereum blockchain. (Really.)
The concepts of digital coins and blockchains are so new that no one can point to a long track record of investing in them. That makes it easier to hire someone like Haun. “I didn’t have much experience as an investor either,” says Horowitz, who was an early executive at Netscape and cofounded a software company called Opsware with Marc Andreessen. “Most of our people weren’t super experienced investors when they got here.”
Still, Haun, who is 43, breaks Andreessen’s mold in multiple respects. She is the company’s first female general partner, the top of the heap at a VC firm. She’s never been a company founder, a prerequisite for many Andreessen Horowitz partners. And she spent the bulk of her career in the public sector, far from private enterprise. What she brings instead, argues Chris Dixon, who leads the new fund with Haun, is regulatory know-how and the ability to get entrepreneurs and others excited about the new field. “A lot of the work to be done here is to go out and evangelize and explain the benefits and bring more talent into the community,” he says. “Katie has the ability to articulate the importance of the space and to do it in front of a broad audience.”
The daughter of an oil executive, Haun spent her childhood moving around the world, with stops in Texas, Colorado, Egypt, Greece, and France. She chose law school, at Stanford University, in part out of the belief that corporate law would afford her a career with global reach. “She was one of the most hectically scheduled and constantly engaged law students you could find,” remembers Derek Schaffer, a Stanford classmate who is now a corporate litigator in Washington, D.C. He recalls Haun reading cases on a treadmill she installed in her dorm.
Haun kept the wheels turning after school. She accepted an offer from the white-shoe firm Cravath, Swaine & Moore and prepared to move to New York. Then she changed her mind. She accepted a prestigious circuit-court clerkship, which led to the ultimate gig for young lawyers: a Supreme Court posting, with Kennedy. In 2006, Haun joined the U.S. Attorney’s office in the Eastern District of Virginia, a jurisdiction known as the “rocket docket” for its fast pace and proximity to the seat of federal power. There she worked on cases related to national security and terrorism, and she took advantage of electronic evidence yielded by then-new technologies such as geo-location data triangulated from cell towers.
Haun’s work with crypto “is a tremendously important link between the law and the cyber age and she recognizes that.”
Supreme Court Justice Anthony Kennedy (ret.)
Three years later, Haun returned to California, where she brought suits against prison and motorcycle gangs, murderers, drug cartels, carjackers, and embezzlers. She even prosecuted Wells Fargo before it was cool, in a case involving the big bank’s allegedly tapping into the accounts of deceased customers. (A Wall Street regulatory group ended up fining Wells Fargo $2 million for the infractions.)
In 2012, Haun heard about Bitcoin for the first time when one of her bosses asked her to prosecute it—whatever it was. The currency was virtually unknown at the time, but Haun soon understood its underbelly. In the early days, crooks, pornographers, and other unsavory types adopted the cryptocurrency as a preferred means of transferring money.
The next year Haun created the first federal “digital currency task force,” a collaboration among the Justice Department, the IRS, the Treasury’s Financial Crimes Enforcement Network, and other agencies. The team investigated a fatal hack of Mt. Gox, then the world’s biggest Bitcoin exchange. It went on to lead a takedown of BTC-e, a crypto exchange the feds charged with money laundering. (Multiple countries continued to argue over the alleged proprietor’s extradition.)
The prosecutions made Haun a known quantity in Silicon Valley, where investors were trying to figure out if the field would be as ripe for legitimate startups as it was for criminals. “She showed an incredible entrepreneurial flair,” says Josh Stein, CEO of Harbor, an Andreessen Horowitz–backed crypto startup that aims to “tokenize” traditional securities. “She turned that first case into a string of cases, into a specialty, into a public persona, into producing public policy for the good of society.”
Some well-known prosecutors become politicians; Haun is following another path. Her prominence in tech circles made her a commercial prospect among startups. In 2015, while still in government, Haun presented her work on the task force at an exclusive retreat for Bitcoin investors at the home of Dan Morehead, an early cryptocurrency hedge fund manager. Some attendees were wary. Zooko Wilcox, a self-described libertarian “cypherpunk” and CEO of a company developing a Bitcoin competitor called Zcash, says he was “terrified” of her.
The fear wore off as it became clear that Haun and her audiences spoke the same language—and that Haun had crucial insight that might help companies like theirs navigate the regulatory maze. She became a fixture on the crypto speaking circuit. She spoke at a blockchain summit on Richard Branson’s private Necker Island. She gave a 2016 TEDx talk. In September she mingled at an elite Aspen retreat at the invitation of former Google CEO Eric Schmidt. Her message in each instance: why the technology behind the companies she’d been prosecuting holds so much promise.
In September 2015, Haun made her first small investment in a startup called Chain, a financial software company whose founders she’d met flying home from a Bitcoin conference. She cleared this stake with the Justice Department’s ethics office, she says. (She chose not to invest in cryptocurrencies at the time, although she could have, for fear that it might raise questions down the road.) Her professional network grew, and job opportunities began coming her way, she says, including executive roles at tech companies.The lure of the Valley hooked her. She describes her courtship with the private sector as an “epiphany,” much like the one she had when she decided to pursue criminals. “I just felt like I had already done what I wanted to do with law,” she says.
Haun resigned from the Justice Department in 2017 and immediately joined the board of Coinbase. (See “Coinbase Wants to Be Too Big to Fail.”) There she met Chris Dixon, who had been leading Andreessen Horowitz’s investments in cryptocurrencies and related startups. Dixon was looking for a partner to make similar bets. He admired Haun’s legal acumen. Plus, her experience as a trial lawyer, her speaking engagements, and her side-gig as an educator—she has taught cryptocurrency courses at Stanford’s law and business schools—had prepared her well as a spokesperson for this nascent industry that many people dismissed as either a scam or a joke.
It was a time of exciting career options for Haun. In February 2018, she joined the board of HackerOne, a San Francisco-based cybersecurity firm. Selection committees approached her about becoming U.S. Attorney for California’s Northern District, or a federal judge on the Ninth Circuit’s Court of Appeals. Despite their prestige, these openings paled in comparison with going to work for Andreessen Horowitz. When Dixon offered her a job earlier this year, Haun accepted.
Sand Hill Road
On an early September Monday in California, Haun looks extra cheerful. Her turquoise eyes gleam. She has reason to be excited. A venture capitalist for such a short period of time that her office at Andreessen Horowitz isn’t yet ready for her to move in, her first investment as an amateur “angel” investor has already borne fruit. Chain, the company she backed in 2015, has just been sold. Haun has quadrupled her modest stake, though she won’t put a number to her bounty.
The victory gives her confidence, which she’ll need to pick winners among the hordes of startups asking Andreessen Horowitz for money. She says she hears on average 10 pitches per week. The volume of meeting requests was so high this summer that Haun moved forward her planned starting date from September to June.
Andreessen Horowitz has registered its cryptocurrency-related fund with the Securities and Exchange Commission in a manner more common among hedge funds, an unusual choice for a venture capital firm. Typically, venture firms hold illiquid positions in companies until there’s an “exit”—meaning a sale or an initial public offering.
Hedge funds, on the other hand, trade in and out of positions depending on factors that can change by the minute. Haun says her investments will be long-term-oriented, and she cites the typical five-to-10-year life span of a venture fund as a rule of thumb. In other words, even if the Andreessen Horowitz “crypto” fund buys volatile cryptocurrencies and other digital assets, it intends to hold on to them for the long haul.
Haun and Dixon plan to divide responsibilities according to category, with Haun specializing in consumer-facing applications and Dixon on more technical offerings, like tools for developers. “One of my weaknesses is humans, and one of my strengths is machines,” Dixon self-assesses.
One area of particular interest to Haun is cross-border payments. “I see some of the power this technology can have for some places outside the U.S.,” she says, mentioning her upbringing in places like Egypt and Greece, whose populaces suffer financial hardships Silicon Valley can scarcely imagine. “Financial freedom, financial inclusion, foreign exchange, international remittances—that’s something people in this country sometimes forget.”
Haun points to Celo, an Andreessen Horowitz portfolio company that’s building a blockchain for payments, for example. The startup aims to optimize its tech for inexpensive Android phones, a popular means of connecting to the Internet in developing countries.
Remittances also figure prominently in Haun’s recent rhetorical battle with Krugman in Mexico City. In the annual $600 billion market for international remittances, the U.S.-Mexico corridor is the most active, amounting to $24 billion a year, she says. Despite all the advancements in technology, transferring money along this path remains slow and inefficient. “I predict that within the next 10 years, the idea of sending an international payment will seem like going to Western Union to send a telegram rather than an email from your phone.”
Haun’s vision of the future is informed by the past. “People who were buying some of the early cars were asked, ‘Why do you need the car? The horse and buggy work just fine.’ ” The same was true of the early Internet. Imagine, she says, if in 1994, “I would have told you, ‘Hey, fast-forward, you’re going to have a small device in your pocket. You’ll be able to download a two-hour movie, watch it on demand, shop for groceries,’ ” and so on. “You would have told me I was crazy and rightfully so.”
Cryptocurrency is no different, Haun tells the Hipódromo Condesa crowd. To gripe about the sluggishness, cost, and immaturity of cryptocurrency networks, she concludes, is to miss the point: “We’re in the dial-up days, and the critics out there confuse the current state of innovation with the end state of innovation.”
Ben Horowitz is so convinced of the revolutionary potential of cryptocurrency that he thinks “it’s possible that most of what we do ends up being crypto. Then we’ll probably have to reconsider how we’re organized.” First, though, his new partner will have to wrestle a few successful investments to the ground.
A version of this article appears in the Oct. 1, 2018 issue of Fortune with the headline “Jumping The Fence.”