By Hannah Miller
Global venture capital investments in crypto startups has fallen for five consecutive quarters data show, but some venture capitalists are still betting millions on blockchain. VC firm CoinFund has raised $158 million to back early-stage crypto startups, the firm plans to announce Tuesday.
The new fund is larger than the one CoinFund initially set out to raise, said Chief Executive Officer Jake Brukhman. The New York-based firm had initially aimed for $125 million, but received more interest than expected, he said.
The last year and a half in the crypto industry has been marked by calamity: The demise of the TerraUSD stablecoin, the collapse of hedge fund Three Arrows Capital, the implosion of digital asset exchange FTX, the bankruptcy of lender BlockFi Inc., and the fallout from rising interest rates. Over that time period, CoinFund has managed to raise $550 million, Brukhman said.
He said that 2022 was “an exceptionally difficult year.” Part of the problem is that major mainstream players had been interested in crypto on its way up, but backed off when prices went down, Brukhman said.
CoinFund’s latest investment vehicle is its fourth seed fund. With its earlier funds, the firm backed startups like Dapper Labs, the creator of the NBA Top Shot nonfungible token collection, and Blockdaemon, a blockchain infrastructure provider. The new investment vehicle has already invested in Giza, a startup aiming to introduce artificial intelligence to smart contracts; and Superstate Inc., which plans to combine decentralized finance with mutual funds.
With the new cash infusion, CoinFund will focus in part on startups at the intersection of crypto and AI. “Some of the more consumer stuff is a little bit in a lull, like if you look at the NFT space,” Brukhman said, referencing the once-hot corner of the crypto market that has seen sales volume plummet.
CoinFund will also continue to make token investments. Regulatory uncertainty has swirled around whether crypto tokens are considered securities — a federal judge recently ruled in a lawsuit against Ripple Labs by the US Securities and Exchange Commission that the company’s XRP token was a security when sold to institutional investors. CoinFund is a registered investment advisor and can do security investments.
About 90% of the firm’s deal-making involves tokens, said CoinFund Chief Investment Officer Alex Felix. Felix said that the firm still believes that the industry can converge with traditional finance in a regulated way.
“We are not trying to build a parallel universe,” he said.