Andreessen Horowitz raises $4.5 billion crypto fund to take advantage of bargains in down market

Andreessen Horowitz plans to plow billions of dollars into crypto start-ups while digital asset markets are in a rut.

The Silicon Valley firm announced a new $4.5 billion fund for backing crypto and blockchain companies on Wednesday. It marks Andreessen’s fourth fund for the asset class and brings its total raised for crypto and blockchain investments to $7.6 billion. The firm plans to invest in both the cryptocurrencies behind projects and in company equity.

Andreessen’s first crypto-focused fund was launched four years ago, during a downturn now known as “crypto winter.”

“Bear markets are often when the best opportunities come about, when people are actually able to focus on building technology rather than getting distracted by short-term price activity,” Arianna Simpson, a general partner at Andreessen Horowitz told CNBC in a phone interview.

Cryptocurrencies have slid significantly from their all-time highs, with bitcoin down more than 50% since its November peak, and they remain tightly correlated to higher growth tech stocks, which have undergone a major slide this year. Earlier in May, the crash of stablecoin TerraUSD shook investor sentiment and caught the attention of regulators.

But Simpson said investors should not worry about the firm’s bets.

“The technical diligence and the other kinds of diligence that we do are a key part of of making sure that projects meet our bar,” she said. “While our pace of investment has been high, we continue to invest really in only the top echelon of founders.”

Simpson and partner Chris Dixon liken the long-term opportunity in crypto to the next major computing cycle, after PCs in the 1980s, the internet in the 1990s and mobile computing in the early 2000s.

Andreessen Horowitz is known for early bets on Instagram, Lyft, Pinterest and Slack, and made its first major crypto investment with Coinbase in 2013. The firm has since backed a variety of start-ups in the crypto and NFT space, including Alchemy, Avalanche, Dapper Labs, OpenSea, Solana and Yuga Labs. Earlier this week it invested in Flowcarbon, a carbon-credit trading platform on the blockchain also backed by controversial WeWork founder Adam Neumann.

While cryptocurrencies may be struggling to regain momentum, money flowing into private companies is at all-time highs. Blockchain start-ups brought in a record $25 billion in venture capital dollars last year, according to recent data from CB Insights. That figure is up eightfold from a year earlier.

The flood of investment into so-called “Web3” start-ups trying to build businesses on blockchain technology has inspired scorn from some tech luminaries. Two of the world’s best-known tech billionaires, Tesla CEO Elon Musk and Twitter co-founder Jack Dorsey, have been among those questioning “Web3.” Dorsey argues VCs and their limited partners are the ones who will ultimately end up owning Web3 and it “will never escape their incentives,” he tweeted, calling it a “centralized entity with a different label.”

“The people who are skeptical are not where we are, which is again in the fortunate position of being able to talk to these brilliant builders all day,” Simpson said. “The other thing I would add is that many of the skeptics are the titans of Web 2.0 — they have been very much in a position to profit from and benefit from the closed platforms.”