Times may be tough on Wall Street at the moment, but it seems enthusiasm for cryptocurrencies and blockchain technology among investors remains undimmed.
Andreessen Horowitz announced today that it has managed to raise $515 million in order to launch its second crypto fund—substantially more than the $450 million it was reportedly aiming for back in mid-April.
The venture capital firm, also known as a16z, says the new fund will invest in crypto networks and blockchain businesses—and it has outlined several areas that it is excited to explore in future.
Transforming payments
Chris Dixon and Katie Haun, general partners at Andreessen Horowitz, have penned a prospectus of what they hope to achieve through the imaginatively named “Crypto Fund II.” They point to how investments in internet technologies have led to the rise of products and services that billions of people now rely on every day, including eCommerce and messaging. Others, such as video conferencing, have come into their own as the world adjusts to life in lockdown.
The pair argued that the payments system currently relied on by the global economy is archaic and in need of dire improvement. Whereas Bitcoin got the ball rolling, Dixon and Haun say specially created blockchains are going one step further by addressing currency volatility issues and settlement transaction times.
“Transferring actual value quickly and cheaply without a third party, in much the same way we currently transfer data like emails or photos, will soon be technologically possible at scale,” they wrote.
Andreessen Horowitz appears to be envisaging a world where actual value can be sent in seconds without the need for an intermediary—a stark contrast to “digital IOUs” provided by PayPal and Venmo, companies that charge substantial fees. “Payment blockchains require no bank account, thereby opening up financial services to the two billion-plus unbanked worldwide,” they added.
In parts, their post smacks of blue-sky thinking—suggesting that the billions of people who use banks and credit cards have no idea of the possibilities ahead. Dixon and Haun clearly want to prioritize removing friction in the market—doing away with unnecessary fees, call centers and “generally antiquated processes” that tend to slow things down.
Their belief in the potential of the startups that’ll form part of their crypto fund appears to be unflinching. “Payment blockchains could end up doing to banks what email did to the post office and what VoIP services did to long-distance carriers,” they wrote.
Upending business models
The a16z blog post also lists decentralized finance as a promising but young industry that it would be interested in foraying into, but perhaps the most interesting part of the blog post discusses how cryptocurrency and blockchain startups could unlock new ways for creators to monetize their content.
Dixon and Haun wrote: “We think the next wave of internet business models will come from crypto. Rather than engaging audiences through centralized gatekeepers that charge high rents and create self-serving rules, creators can use token models that bypass gatekeepers and give their fans a direct stake in their success.”
Watch out YouTube.
They noted how blockchain could completely transform the multibillion-dollar gaming market, where players often find it difficult to sell in-game assets often accrued through a lot of expense and effort. Crypto startups are already making it possible for digital goods to be traded on secondary markets and moved between titles. “In the near future, we expect crypto monetization models to be applied to other creative activities—including writing, music, podcasting, programming, design, and more,” they wrote.
A new internet
Last but not least, a16z believe blockchains could transform the mantra of internet-based companies entirely—marking a pivot from “don’t be evil” to “can’t be evil.”
Dixon and Haun said tension often arises between the likes of Facebook, Uber and the users they serve as corporate interests “often diverge from the interests of those who depend on the network.”
Although they noted that early steps are being taken to build Web 3.0, they said the current offerings “only scratch the surface of the yet-to-be-imagined applications that entrepreneurs will dream up.” They draw parallels all the way back to 2007, when few realized how applications on cellphones “would change so many aspects of the ways in which we move, consume, travel, communicate, and even date.”
A big war chest
Andreessen Horowitz isn’t just talking the talk when it comes to crypto and blockchain, it’s putting its money where its mouth is. The $515 million war chest it has now established is substantially bigger than the $350 million crypto-focused fund it established in 2018.
The company already has a number of successful investments under its belt, having been an early backer of Coinbase and a vocal supporter of stablecoins.
This second Andreessen Horowitz crypto fund could work wonders for a16z’s standing and footprint in the crypto sector. Chris Dixon was No. 36 in the Modern Consensus list of the 100 most influential people in crypto for 2020, while Katie Haun came in at No. 70. As they now embark on managing a second fund, Andreessen Horowitz could be on its way to becoming a bigger fish in an ever-expanding pond.
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