Venture capital heavyweight Andreessen Horowitz (a16z) has launched a $2.2 billion crypto fund, doubling down on blockchain startups amid a surge in venture capital in artificial intelligence.
The new vehicle, called “Crypto Fund 5,” will invest in crypto entrepreneurs at all stages, with capital deployed over a decade, according to a company spokesperson. The company said it is targeting founders building practical applications in crypto infrastructure, especially in areas such as payments, financial services and decentralized systems.
The firm’s partners see the current crypto market as an opportunity to invest in founders who build projects that are “durable” and long-lasting even when the hype cycle dies down.
“We are now in one of those calmer moments. And the signal that is coming is one of the most encouraging that there has been in years,” according to a blog by the company’s partners, published on Tuesday.
“The founders we’re backing with this $2.2 billion fund are working on the part of the cycle that gets the least attention and produces the most lasting value: turning new infrastructure into products that people use every day,” according to the blog.
What is the fund investing in?
The fund will focus on sectors where these capabilities are translated into tangible and durable products.
One of the areas where a16z is seeing that pattern is stablecoins. The digital dollar market, which recently reached $320 billion in market capitalization, has seen its adoption continue to grow during crises, with users relying on it for cross-border payments, savings, and everyday transactions. This is particularly true compared to legacy systems, which are “slow, expensive and unreliable,” a16z said.
Other areas seeing “significant growth” include perpetual futures, blockchain-based lending, prediction markets, and tokenized assets.
The new fund launches at a time when venture capital firms are recalibrating their strategies amid a boom in AI funding. Recent industry trends show that mainstream investors are shifting capital into AI startups, forcing cryptocurrency-focused funds to improve their positioning.
And this is where a16z sees the use of cryptocurrencies’ role as a financial and coordination layer for artificial intelligence systems as more important than ever.
“Software is becoming more complex and harder to trust. Artificial intelligence systems are powerful and largely opaque. The infrastructure on which the Internet runs is more consolidated than ever. In that environment, the properties that cryptographic networks were designed to protect become more valuable, not less,” the blog says.
While the new fund is almost half the size of its fourth fund, which raised $4.5 billion in 2023, it is still larger than the $1 billion recently raised by Huan Ventures (founded by a former a16z partner) and the $650 million raised by another prominent crypto venture capital firm, Dragonfly Capital.
These recent increases are likely signs that, while sentiment is not as high as in the 2021 bull market, there is a gap between the hype and underlying activity.
“We believe that while sentiment may be low, the fundamentals of the crypto industry are at an all-time high,” according to the spokesperson.
