Silicon Valley powerhouse Andreessen Horowitz (a16z) has some huge, and larger, information right this moment. First, it closed a devoted crypto fund late final week from a subset of its restricted companions, who’ve supplied the agency with $300 million in capital commitments. The fund had turn into the worst-kept secret within the enterprise trade, largely as a result of so many different enterprise corporations try to determine their very own associated methods and have been watching carefully a16z’s sluggish however rising variety of investments in crypto-related startups over the previous 5 years.
9-year-old Andreessen Horowitz has additionally, in the end, introduced aboard its first feminine normal accomplice: Katie Haun, whose star has quietly been rising within the Bay Space over for the previous couple of years. Haun — who’s main Andreessen’s crypto fund with normal accomplice and famend crypto fanatic Chris Dixon — is sort of a giant deal, so it’s no shock that a16z nabbed her.
Amongst her different many accomplishments, Haun spent greater than a decade as a federal prosecutor with the U.S. Division of Justice, the place she targeted on fraud, cybercrime, and company compliance no-no’s alongside the SEC, FBI, and Treasury. In response to Haun’s bio, she was additionally the DOJ’s first-ever coordinator for digital property, and he or she led investigations into the Mt. Gox hack and the duty pressure that investigated and finally took down the web drug market Silk Street. Haun can also be a lecturer at Stanford Enterprise College and he or she’s a director on the board of the digital change Coinbase, which was backed early on by a16z and is the place Haun obtained to know Dixon, who can also be on the board. (Each are retaining their seats.)
We talked with Dixon earlier right this moment to study extra concerning the fund, together with how he and Haun are fascinated about “exits” within the cryptocurrency world when there haven’t been an entire bunch. Our dialog has been edited calmly for size.
TC: You’ve raised $300 million from a number of the similar traders who fund Andreessen Horowitz’s flagship funds. Will this fund in any approach affect the subsequent flagship fund? Does the agency intend to spend extra time on crypto and fewer on different, extra conventional investments?
CD: No, we’re nonetheless full-speed forward on all conventional areas. The fund is a approach for us to double down on crypto and never in any approach scale back our dedication to enterprise, shopper, or bio investing.
TC: Can this new fund put money into different traders’ crypto funds, as Union Sq. Ventures has been actively doing?
CD: It might, however we don’t plan to. We invested in Polychain and some others about one-and-a-half years in the past after we had been determining our new crypto technique. Now, with the total fund and investing in each early-stage and later-stage in crypto tasks, the mandate is to be investing instantly, although [we] by no means say by no means to something.
TC: What number of crypto investments has the agency made over time, and can any of them be tucked into this new fund?
CD: We’ve made about 20 crypto investments during the last 5 years. [Bitcoin competitor] Ripple was my first funding in January 2013 and Coinbase later in 2013, then we did 21.co, which grew to become Earn [and sold earlier this year to Coinbase]. We did a couple of others — OpenBazaar and Mediachain — then the house obtained much more attention-grabbing with the rise of Ethereum and gifted entrepreneurs coming into the house. These [investments] will stay within the funds the place we put them in.
TC: Have you ever made investments from this new fund?
CD: We’re in course of with a couple of, however nothing that’s been finalized.
TC: How have you ever been structuring these investments?
CD: Some are fairness investments, however with token provisions [meaning if the teams create a token, investors get access to them]. SAFTs are one other factor we’ve performed. We’ve additionally performed direct, over-the-counter purchases of Bitcoin and Ethereum. However we had been working into limits with what we might do out of the principle fund. Now we’ll be capable of do all kinds of issues, so long as [we’re talking with] nice entrepreneurs who’re engaged on huge and necessary tasks with financial phrases that make sense.
TC: What’s an exit going to appear to be with these offers?
CD: It’s query. Thus far, we’ve by no means bought any of our crypto property. Lots of people out there are day buying and selling however we very a lot see this as investing. We’d anticipate any funding to have a five- to ten-year holding interval. A few of these tasks might have tokens which might be freely tradable, so there’s the potential to have an exit that approach.
The most definitely consequence is we put money into an early-stage venture and we obtain cash or tokens in change for [our commitment] and if the venture turns into profitable, these digital property respect when that thesis is performed out. But when we put money into some venture that will probably be utilized by tons of of hundreds of thousands of individuals, we wouldn’t wish to exit till that’s realized.
TC: Presumably, you’ll not be paying your traders again in tokens?
CD: No. We now have LPs preferring fiat cash.
TC: How do you concentrate on possession stakes in these firms?
CD: The standard enterprise mannequin of proudly owning 10 to twenty p.c of an organization isn’t practical on this world. We do suppose that if a venture could be very early stage, the valuation ought to mirror that. However we’re considering extra by way of worth: can this funding be large enough that it returns the fund by itself? So we don’t suppose by way of percentages however worth. We predict this subsequent wave of firms may very well be 10 occasions as huge [as their predecessors].
TC: How are you fascinated about ICOs? Are you investing in firms that can later promote shares to non-accredited traders?
CD: If performed the suitable approach, we predict democratizing entry is a superb idea. We’re followers of the concept that extra individuals can take part. However we don’t suppose [ICOs as they’re widely considered today] are regulatory compliant and we’ve by no means gotten concerned in a kind of. We participated in Filecoin, for instance, however [its offering] was made solely to accredited traders.
TC: What about conflicts? It’s very early days, so I ponder if the principles round backing related firms are completely different. In conventional VC, clearly, it’s just about verboten.
CD: The norm within the crypto world is completely different than the normal enterprise world. Usually in VC, you received’t put money into a direct competitor. However with crypto, there’s a unique ethos. It’s extra cooperative. Individuals would moderately develop the pie collectively moderately than struggle over the dimensions of the pie. We at all times guarantee that tasks are okay with any investments that we’re contemplating that is perhaps overlapping. However in rising areas, it’s laborious to consider classes because it’s sort of fluid. I’d say requirements are evolving, however I’d additionally say it’s okay to [back more than one currency, for example].
TC: How about so-called steady cash, particularly? You backed Basis, an organization that’s constructing a price-stable foreign money, which the world very a lot wants to ensure that cryptocurrencies to come back into wider use. Do you suppose there’s room for a couple of steady coin?
TC: We’ve backed each Foundation and Maker, although the mechanics are fairly completely different and we predict might be complementary. We additionally spoke with each after we made our investments.
We do suppose it’s a very necessary concept, to have a coin pegged to one thing just like the U.S. greenback so as to make the expertise extra mainstream and accessible, [versus a world rife with] these unstable cash. We predict it’s such an necessary piece of infrastructure that there may very well be a number of winners.