Venture capital giant Andreessen Horowitz (a16z) has launched a $2.2 billion crypto fund, doubling down on investments in blockchain startups amid a surge in artificial intelligence venture capital.
The new vehicle, called “Crypto Fund 5,” will invest in cryptocurrency entrepreneurs at all stages, with capital deployed over more than a decade, according to a company spokesperson. The company said it is targeting founders building real-world applications on crypto infrastructure, particularly in areas such as payments, financial services and decentralized systems.
The firm’s partners see the current cryptocurrency market as an opportunity to invest in founders building “durable” projects that will last even after the hype cycle ends.
“We are now in one of our quietest moments. The signals being sent are among the most encouraging in years,” a blog post by the company’s partners said on Tuesday.
“The founders we support with this $2.2 billion fund are working on the part of the cycle that gets less attention and generates more lasting value: turning new infrastructure into products that people use every day,” the company’s partners said in a blog post.
What does the fund invest in?
The fund will focus on industries that transform these capabilities into tangible and lasting products.
One area where a16z sees this pattern is with stablecoins. The market value of the digital dollar market recently surged to $320 billion, and its adoption continues to grow during the economic downturn, with users relying on it for cross-border payments, savings, and daily transactions. This is especially true when compared to legacy systems that are “slow, expensive and unreliable,” a16z said.
Other areas seeing “meaningful growth” include perpetual futures, blockchain-based lending, prediction markets and tokenized assets.
The launch of the new fund comes as venture capital firms recalibrate their strategies amid a boom in artificial intelligence funding. Recent industry trends have seen aggregate investors shift money toward artificial intelligence startups, forcing crypto-focused funds to strengthen their positioning.
This is where a16z believes that the role of cryptocurrencies as the financial and coordination layer of artificial intelligence systems is more important than ever.
“Software is becoming more complex and harder to trust. Artificial intelligence systems are powerful but largely opaque. The infrastructure that the internet runs on is more entrenched than ever before. In this environment, the properties that encrypted networks are designed to provide become more valuable, not less,” the blog said.
While the new fund is almost half the size of the fourth fund, which raised $4.5 billion in 2023, it is still higher than the $1 billion recently raised by Huan Ventures (founded by former a16z partners) and the $650 million raised by Dragonfly Capital, another prominent cryptocurrency VC firm.
These recent gains may indicate that, while market sentiment is not as high as in the 2021 bull run, it now reflects a gap between hype and underlying activity.
“We believe that while market sentiment may be lower, the fundamentals of the cryptocurrency industry are at an all-time high,” the spokesperson said.
