A recent article by the tech publication Recode shared that the venerable Andreessen Horowitz venture capital franchise has begun to raise money for a “crypto fund”. This fund will direct fundraising to companies looking to experiment with cryptocurrency and related blockchain advances. Traditionally, entrepreneurs have had to raise money from individual angel investors and large venture capital firms, both of which historically have pushed for heavy control over the operation of startups. The pioneering advances of cryptocurrency and “initial coin offerings” have enabled entrepreneurs to crowdsource funding with limited restrictions on founder control. The decision by Andreessen Horowitz to create this new crypto fund perhaps is the inception of a new era that weaves together traditional control-focused VC firms with new fundraising mechanisms such as initial coin offerings. This fusion will be interesting to watch for entrepreneurs looking for creative financing structures.
Interesting article, Kate. I found another article from a few months ago that mentions some of the VC firms that are investing in cryptocurrencies. However, using cryptocurrencies to make investments is a fascinating premise. If anyone is going to pioneer this space, then it should be firms like Andreessen Horowitz and other VC firms. Below the the article I mentioned:
https://medium.com/bleecoin/top-cryptocurrency-venture-capital-firms-3da1720202ad
This is super interesting. I don’t know if you’ve heard of Safe Notes – those are fairly new too. Y Combinator was the first to introduce them, basically it’s a contract that allows you a certain amount of money on the promise that if your business succeeds, you will owe that much in shares. It’s a fairly friendly way to get investments, but it’s better for VCs that simply giving money away, and it might be better in some cases buying equity right away in a company that might not succeed. I wonder if investing with crypto will be subject to a lot of market fluctuations and cause difficulty when converting shares.
Great article Katherine! There is definitely a growing fascination with cryptocurrency and blockchain. I attended a conference over the summer where financial regulators discussed the concerns they have with these new forms of funds especially initial coin offerings. Regulators often warn of the potential unlawfulness of online platforms to trade digital assets because many assume it falls under the definition of a “security” and thus under the regulation of the SEC. I would be interested to see the impact on the benefits of these new forms of funding if they were regulated as a security. SEC regulation would likely make it much less attractive as a form of funding due to the increased financial and compliance costs. However, I do see cryptocurrency and blockchain as the future and regulators will need to find a way to balance its benefits with investor protection.