Blockchain Capital raises $580M for two new funds

Blockchain Capital has raised $580 million for two new investment funds.

One is the San Francisco-based company’s sixth early-stage fund — in line with such funds it has launched previously — while the other is its first so-called Opportunity Fund.

The $580 million marks the company’s largest raise in its ten-year history, according to Blockchain Capital executives Spencer Bogart, Bart Stephens and Jason Di Piazza.

Such funding coming during a bear market “reflects our investors’ trust in our long-term perspective,” they said in a Monday blog post — adding that innovation often thrives during tough economic times.

“Despite the downturn in liquid pricing, we see a space that is teeming with exceptional innovators and founders, each aligned with the first principles of open source innovation, credible neutrality and censorship resistance,” Stephens told Blockworks.  

The firm’s first Opportunity Fund was conceived as “a post-dislocation investment vehicle,” according to Blockchain Capital founder Bart Stephens. It was designed with a “high-conviction, concentrated mandate” to pursue financing opportunities at the later stage, he added.

Stephens told Blockworks that with the inflow of capital at the seed and pre-seed stage during the bull market in 2020 and 2021, valuations became distorted at the later stages. 

“We felt generalists and newcomers misjudged the opportunity-set,” he added. “In contrast, today the fundraising environment for late stage crypto companies is barren, creating a unique and compelling opportunity for targeted capital that understands Web3 technology.”

Crypto private financing declined 75% in the first half of 2023 compared to the prior year period, according to data from advisory firm Architect Partners. While the number of financings has remained fairly flat in recent quarters, the amount raised has dropped, particularly for later-stage rounds.

Blockchain Capital’s limited partners include “forward-thinking” university endowments, private foundations, financial institutions, sovereign wealth funds and US pension plans, such as the Teacher Retirement System of Texas.

Visa and PayPal are strategic investors of the firm, but have not finalized commitments for Blockchain Capital’s latest funds.

The company declined to comment further on specific investors.

Where the opportunities lie

Blockchain Capital has invested more capital into innovators over the past 20 months than at any time in its history, executives said in the Monday blog post. 

During the span, it has focused on investments in infrastructure, gaming, DeFi and “consumer and social sectors.” 

A key theme has been scalability, as reflected in the company’s investment into zero-knowledge proof tech pioneers Matter Labs and Risc Zero, Stephens told Blockworks.

Matter Labs’ zkSync Era — an EVM-compatible zk proof-based rollup with open-source code — opened on mainnet to all users in March.

Read more: ‘ZK embodies integrity, privacy and magic’: Matter Labs

Risc Zero said last month it would open-source its “Type 0” zkEVM, Zeth, in an effort to make zk infrastructure more accessible to developers.

Blockchain Capital is also exploring opportunities across consumer-focused segments as blockchains have the potential to democratize digital ownership and let individuals monetize online activities and contributions. 

“Recent technical improvements are creating smoother onboarding and improved user experiences, creating potential tailwinds to adoption and opening different avenues for distribution,” Stephens said. 

The company has also invested in Web3 social platforms and gaming during the bear market. From a research standpoint, it has focused on privacy, loyalty programs, security and the intersection of artificial intelligence and crypto. 

“Though we maintain an open-minded approach, we are not yet fully convinced of their immediate viability due to existing challenges in technology, value accrual or market demand,” he said.

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