I have previously mapped the crypto landscape in my article about the crypto VC landscape, and written about where I think crypto VC will go next. I wanted to pick up where I left off with regards to my thesis for the space there, and continue mapping the VC landscape, with a bit more nuance than previously expressed. In fact, while I divided funds across clear lines, the truth is a bit blurrier, and less obvious paradigms are emerging that require careful observation and interactions with both the funds in question and the founders who actually work with them to understand who and what is propagating true value creation on the investment side and allowing it to flow down the to the founders themselves.
I had written before that I think that there are three silos of funds: Brand Funds, Specific Value Add Funds, and All-Purpose Service/Value Add Funds (usually begun and continued on as Incubators and Accelerators), and that the type of funds that would come to dominate were the funds that could become “full stack VCs”, i.e. service their investments on all sides and in all stages of their businesses. This is not necessarily false, but the structure of these kinds of full stack service funds is important to note and is going to be the topic of this article.
We discussed funds that were brands unto themselves for being vintage (or “first” rather), and then funds that developed marquee brands for being smarter (Gumi Cryptos is a great example). Since these funds tend to be brands unto themselves, they attract deal flow without having to be reciprocal in sharing it.
Then there were value add funds that focused on one specific way to bring value to their companies, and others that were full stack. It seems like for every three specific value add funds and for every all-purpose value add, there is (at least) one decentralized alternative. If LedgerPrime, Coral Capital, Alameda, GSR, Jump, Efficient Frontier, Spartan, Wintermute, Blocktower, and CMS were all the best market makers to partner with out there, then DxDAO, which specializes in bringing liquidity to its partner projects, is an interesting decentralized alternative, as does Neptune DAO. (On that note, decentralized finance is a silo that has popped up, but most of the funds that are the biggest value adds there tend to be market making firms.)
There is a new female focused fund that is coming onto the scene; perhaps it will mirror its decentralized predecessor, Komerebi DAO.
For every NFT fund that has popped up, there is a DAO that has specialized in buying them as well. Now that there are centralized funds focusing on NFTs (SFermion, as mentioned previously, but more recently Red Pill Ventures (NFT collector Mike Dudas’ new fund) and Kevin Rose’s new fund, it feels remiss to not mention the decentralized funds (read: DAOs) that have been collectively investing into NFTs all along - and may even serve as a better option for investment purposes. NoiseDAO specializes in buying sound and music NFTs, Flamingo DAO focuses on collecting metaverse-themed art, and PleasrDAO doesn’t necessarily seem to have one central focus, instead acquiring an unreleased Wu Tang Clan album and the original DOGE NFT meme. On the collector side, The One DAO wants to buy the largest house in the world and the ConstitutionDAO attempted to buy a copy of the U.S. Constitution. Even Links DAO is attempting to buy a golf course for its members.
I had mentioned metaverse funds as being a specific silo, or focus, of certain funds, including Galaxy Interactive, Gemini’s metaverse fund, Metaversal, Republic Realm (which has rebranded to Everyrealm), and Haun Ventures. I meant to add Animoca Brands, which wants to be the Berkshire Hathaway of the metaverse, and has a super aggressive investment arm at all stages of the business. But what I didn’t mention were the countless decentralized counterparties to these: NeonDAO invests into metaverse companies, Corby Pryor’s new metaverse investment DAO does the same, PangeaDAO - a first-of-its-kind a metaverse land cooperative, is acquiring land in the metaverse for its members to make sure that real estate there is democratized (not unlike AxieLands NFT and Landworks). There are other metaverse funds for in-game assets as well. (You could even argue that buying into gaming guilds, which are buying game assets, is another form of subscribing to a fund that focuses on those types of NFTs).
I had mentioned several funds as a focus of geography, but only included East Asian as the focus (mostly Chinese/Hong Kong-based: Folius Ventures, Sky9 Capital, OP Crypto, GBIC, Hashkey, C Squared, SkyVision Capital, Spartan Group). In fact, there are several funds that focus on a variety of locations around the world. Hashed and A21 Crypto are Korean-based but globally focused. Ledgerprime had first focused on Southeast Asia as part of their mandate. As for India, they remain relatively underrepresented: the only two that I know of are Woodstock Fund and LightShift Capital. I don’t currently know of any funds focused on Latin America or the Middle East.
As for which funds are truly global, with outposts in various countries and the foresight to do geographical arbitrage not unlike Yuri Milner’s DST Global is Whitestar Capital, with nearly ten global offices and over 30 employees.
There are even law firms that are opening up their investment arms to invest into these kinds of startups, not unlike law firms currently do with traditional venture, to offer their legal advice as value add services. Horizon Law, Marin Capital are examples. Sino Global is said to be focused on regulatory / legal arbitrage.
I had mentioned funds that were focused on specific ecosystems as value add funds as well.
DOT has Hypersphere and Parity, Cosmos has Tendermint (rebranded as Ignite), Terra has its Terra Ecosystem Fund. Avalanche has several ecosystem funds. Algorand’s Borderless Capital (and Valhalla Capital), Zilliqa’s Zilliqa Capital. Solana’s Solar Ecosystem Fund, Solana Foundation, Evernew Capital. Near has Metaweb VC.
Grants programs as well: Polygon, Flare Network, Uniswap, and now OpenSea as well as Gitcoin, etc. Uniswap actually just launched their own venture fund, led by my genius former Columbia classmate Teo Leobowitz, and the founder of Uniswap, Hayden Adams.
Exchanges that have their own investment arms or adjacent funds - I had mentioned Coinbase Ventures previously, and Huobi Ventures, but we should add Kraken Ventures here for good measure - now have ByBit DAO to contend with, the DAO spun out of ByBit exchange, which dwarfs them in terms of usable capital: 2.1 billion USD. Other venture DAOs include: the Lao and MetaCartel.
Community is another silo that I did not mention last time. Koji Capital focuses on cultivating community for its projects, as does Framework VC, whose thesis is almost exclusively decentralized finance focused. Israeli Blockchain Association, which also invests, is a great community creator. 0xVentures DAO, which I had framed as a full stack DAO in my previous article, also does tons of community building on behalf of the founders as well.
Marketing, which is tacitly different from community building, is a value add that especially younger teams need (and appreciate). For example, vaunted investor Shima Capital is extremely well known for their ability to do business development on behalf of their portfolio companies and the ability to market their investments on Twitter, and through various events that the team there always populated. Yida Gao, the firm’s founder, even teaches a class at MIT where he had everyone from Vitalik Buterin and Alex Mashinsky as guest lecturers. I spoke to one of their portfolio companies who had said that after investing, Yida had made 3 business development intros for him the first 30 days after investing. As I mentioned before, IDEO Co-Lab specializes in helping founders design their products and marketing materials as well as Twitter presences.
I had highlighted Electric Capital’s research as being truly value additive such that people saw it as one of their main competitive components. It’s worth noting that Global Coin Research, a decentralized do-it-all venture hub, also publishes its own vaunted research that everyone relies on.
LP bases are even sometimes value add, or the person who owns/started the family office the particular investments come from. Eric Schmidt’s Steel Perlot is starting to make investments in the space and is said to be starting their own incubator. Some investors are celebrities in their own right, or married to ones: Alexis Ohanian’s latest fund is said to be focused on crypto/blockchain. And Larry Ellison’s fund, Quiet, has already made several strategics in the crypto space. Sabrina Han’s new fund is said to have celebrity LPs that would love personal exposure to the teams themselves (if Moonpay’s latest celebrity fundraising round is any signal, it seems like more and more celebrities want access to crypto deals and are willing to invest either individually or by way of funds).
Sometimes the LPs or the GPs of the fund are also bought into OTHER crypto funds, which they see as a way to gain deal flow. L1 Digital is an LP in dozens of funds (as they double as a multi-manager platform) and finds it easy to gain first look at everything because of this.
Funds that run validators as their main value add are also popping up, either as ancillary to the staking businesses that they work with (Figment has a VC), or independently: P2P and Everstake.
Other large crypto companies have VCs as well. Terrawulf, the large mining firm, has a VC, and HUT8 does VC as well, both focus on strategic infrastructure investments but also all purpose early and late.
I mentioned the last category of fund last time, All-Purpose Value Add Funds, but didn’t truly separate them by decentralized/centralized. Many of these kinds of funds were started as incubators or accelerators, or still function this way as an extension of being value additive along the way. Consensys’ Ethereal Ventures, Thesis, Delphi Digital, and Advanced Blockchain AG. Longhash VC, and Alphabit are Asian accelerators.
The fascinating trend of incubators and accelerators is that many of them are becoming more and more decentralized. I had mentioned Yunt Capital, 0xVentures DAO, and New Order DAO as examples of decentralized organizations that were able to do full service value add stuff. But I didn’t mention Defi Alliance DAO, or Global Coin Research. There are now several incubators and accelerators that are decentralized, too: Kernel0x, Seedclub, and more.
In fact, because it’s harder and harder to prove value add at certain funds, virtually every fund or family office I know is launching one: Spartan Group, Nima Capital, just to name a few.
If everyone is starting to incubate, and if incubation is moving more and more towards a decentralized future, what will become of funds?
We honed in on Joyce’s GCR in our last article because we truly believe in the law of numbers.