Andreessen Horowitz launches a $300MM Crypto Fund

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Notable News


Andreessen Horowitz Launches $300 Million Crypto Fund Co-Led By Its First Female General Partner

What's the Story?

  • A16Z has raised its first cryptocurrency-only venture fund
  • The fund has raised $300MM
  • The firm has added its first female GP, Kathryn Haun

What do I think?

A16Z's dedicated cryptocurrency fund is a great bullish indicator for the industry. Not because A16Z is launching it, but because traditional LPs are investing in an investment entity dedicated to cryptocurrency and blockchain. The fund also marks the first time A16Z has added a female GP to their roster. A16Z's thesis, which is outlined here, is a good read. The fund's thesis is that trust will bring a new wave of innovation. The invention of blockchain enables applications such as digital money, open financial instruments, and transacting without intermediaries. One of the questions I have for A16Z is benchmarking. $300MM worth of Bitcoin is about 48600BTC in today's price. Is this fund expected to outperform BTC or the VC benchmark rate? The other question is if $300MM is too much money. I am very bullish on the venture model for cryptocurrency. There is a lot of upside in finding the next Coinbase not just the next Bitcoin. I expect the equity model to have success as the ICO model dies off. There is still uncertainty if tokens or equity is the most significant way to capture upside in the space. If I am launching XYZ company, that issues XYZ token, would I want to own the token or the equity? That is where things get blurry. The past few months have made me question the token model for many firms because the incentives aren't aligned between the firm and token-holders. In an equity model, the incentives are usually aligned. I'll continue to think deeply about the equity vs. token dilemma, but until then I'll watch and see how the fund invests.


Crypto Influencers Pump Up Markets With $105,000-a-Pop Tweets

What's the Story?

  • YouTube Influencers are telling investors about the next hot ICOs
  • Influencers are receiving tokens in return for promoting these ICOs
  • Some promoters like John McAfee collect over six figures for endorsing tokens

What do I think?

There is a reason the SEC regulates promoters of stocks and punishes bad actors such as people who pump penny stocks. These people are bad for the market. YouTube cryptocurrency influencers are the equivalent of people who pump and dump penny stocks. It's wrong to receive compensation for a token and then promote it to 100,000 followers. You aren't supporting it because you think it's a sound token, but because you are being paid to promote the token. Saransh Sharma of 4NEW, compares Youtube influencers to stock options. This thinking couldn't be farther from the truth. Stock options vest and require an employee to work at a firm for a certain amount of time or risk losing their options. Employee stock options ensure alignment. Employees will do what is best (in theory) for the company because the more valuable the firm becomes, the more their options are worth.  A Youtube Influencer is pulling a hit and run. They will promote the token, it'll spike and then they could sell the token. The biggest irony is one of the Youtuber's interview said, 

"There might be people that go in solely based on watching my video -- I hope that’s not the case, ... You shouldn’t listen to YouTubers."

Why should someone listen to him, but not other YouTubers? I don't want to stereotype and say all cryptocurrency Youtuber promoters are bad, but if you accept compensation in token form and then promote it, people shouldn't listen to you.


Commentary


Privacy Is Vital to Crypto – And the Global Economy

What do I think?

There is a reason why people used cash to transact. It was private and only the two parties engaging in the transaction knew about it. As society has moved to a digital age, fewer people transact in cash. I rarely carry cash around, and many other millennials I know are the same way. Privacy tokens and other innovations around privacy in cryptography are needed for a vibrant economy. People in countries with high restrictions on freedom need privacy tokens. The state shouldn't need to know what you are buying nor should it punish you arbitrarily for suspicious spending patterns (e.g., RICO Act). Michael Casey is right that monetary fungibility is critical for a thriving society around the world. Countries such as China want to create social credit scores based on spending habits to measure reputation. Tokens such as Z-Cash and Monero need to succeed if we are to have any hopes of separating our privacy from the state.


Other Interesting Things


Ben Horowitz profiles A16Z's newest crypto partner, the SEC shares its thoughts on ICOs, Robinhood is expanding its footprint in crypto land, and our favorite Yale economist talks about Bitcoin again.