Venture capital firms are investing in the blockchain
July 11, 2018
Venture capital funds have been investing in blockchain for the better part of the past decade. But it’s only in the last two years that the industry has really begun to mature.
Over 120 venture capital (VC) firms have now made two or more investments in blockchain companies. With that in mind, we will look at the development of venture capital in the industry and some of the leading players.
Maturation of Venture Capital and Blockchain
Some VCs, like Node Capital, made their first investments in the industry in 2011. For the most part, however, things were quiet until 2013 when almost two dozen different venture capital funds invested in blockchain startups.
Some of the early funding rounds of blockchain companies, like investments in Ripple and Coinbase, have paid off handsomely. Still, venture investing really hit its stride in the last couple of years. So far in 2018, there have been more than 200 venture investments in blockchain and cryptocurrency companies. This is more than in all of 2011-2015 combined.
Investment has been Increasing Sharply
Not only has the number of venture deals been rising, but so has their size. Robinhood, a stock and cryptocurrency trading platform, raised $363 million in a single series D round in May of 2018. Compare that to the $50 million it raised in 2015. Likewise, in 2012 Ripple was among the first cryptocurrency companies to receive venture funding. Ripple raised a total of just $3.1 million in its first three funding rounds. That’s less than 1% of what Robinhood raised in a single round this year.
Though there are more than a hundred venture capital funds actively investing in the blockchain, there are several dozens that play an outsized role. The 50 top venture funds in the space invested nearly half a billion dollars in blockchain in 2017 and are on pace to more than double that amount in 2018.
Who are the Top Venture Capital Firms Investing in Blockchain?
There are essentially two key types of venture investors in blockchain and cryptocurrency companies:
Traditional Venture Capital Funds
The first type consists of traditional venture funds, many specializing in technology startups that have added a handful of blockchain companies to their portfolios. Some examples include multi-billion dollar venture funds like Sequoia Capital and Andreessen Horowitz.
Sequoia has largely invested indirectly via investments in cryptocurrency hedge funds like Polychain Capital and Metastable Capital.
Andreessen Horowitz made early investments in Ripple and Coinbase in 2013 and has continued to invest in more than a dozen other blockchain companies. In fact, they recently announced that rather than comingle blockchain companies with their existing funds, they would create a $300 million crypto-focused fund.
But for most of these funds, blockchain investments remain a relatively small component of their investment funds.
Crypto-Focused Venture Funds
The other key type of venture funds is those dedicated exclusively to cryptocurrency and blockchain investments. Though the majority of venture funds on Crypto Fund Research’s list of the top 50 blockchain venture funds are of the traditional variety discussed above, the top three are all dedicated funds. These include Digital Currency Group, Pantera Capital, and Blockchain Capital.