Flagship A16z Crypto Fund Lost 40% in First Half of 2022: WSJ

Venture funding in the crypto space has been on the decline this year compared to 2021, according to a second quarter 2022 report




key takeaways

  • The report comes months after the firm announced the biggest crypto venture fund in history
  • Before this year’s drop in performance, Crypto Fund I had been one of a16z’s highest-performing investments

Crypto-friendly venture capital firm Andreessen Horowitz’s digital asset investments may be struggling more than the industry initially believed, according to a new report from the Wall Street Journal. 

The firm’s flagship crypto fund, Crypto Fund I, which launched in 2018 with $350 million, lost around 40% in the first six months of 2022, the Wall Street Journal reported Wednesday. 

Crypto Fund I was revolutionary for bringing traditional firms into the developing crypto space. The firm launched its second crypto fund in 2020 with $515 million. 

Before this year’s drop in performance, Crypto Fund I had been one of a16z’s highest-performing investments.

The crypto fund ended 2021 more than ten times its original amount. Andreessen Horowitz’s first-ever venture fund, launched in 2009, saw 7x returns at the end of 2021. 

Andreessen Horowitz — also known as a16z — has adjusted its crypto portfolio in the second half of the year, though, according to data provider PitchBook.

In the third quarter of 2022, the firm sealed nine crypto startup deals, down from its record 26 startup deals in the fourth quarter of 2021.

Venture funding has been on the decline this year compared to 2021, according to a second quarter 2022 report. In 2021, 999 venture funds launched, compared with 415 in 2022 as of June 30. 

These 415 funds have collectively brought in more than $121 billion, largely driven by a16z’s fund. This marks 2022 as the second-highest crypto venture funding year on record. 

The firm’s crypto portfolio holds several dozen companies, including big names such as Dapper Labs, OpenSea, Solana and Uniswap. 

Andreessen Horowitz bullish on crypto builders

Five months into 2022, as crypto token prices were continuing their downfall, the firm released its inaugural “State of Crypto” research report. 

Bitcoin’s total market capitalization sat at around $570 billion at the time, down more than 50% from its November 2021 high of about $1.2 trillion. 

Crypto follows a “price innovation cycle,” the report noted. Talent is drawn to the space when prices are high, Chris Dixon, general partner at Andreessen Horowitz, said at the Permissionless conference in Palm Beach in May 2022 following the release of the report. 

“Not to minimize the bad stuff that’s going on,” Dixon said. “But I do think if you step back and look at the broader trends, it’s promising.”

A16z launched its fourth crypto fund in May 2022. At $4.5 billion, it is the largest-ever crypto venture fund and brings the firm’s total crypto venture capital holdings to $7.6 billion.  “Our frequent conversations with builders have given us the confidence to go big, and we’re grateful to be your partner,” Dixon wrote in a blog post about the latest fund.

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