Mergers & Money: Once Dubious, Traditional VC Firms Lead More Of The Charge In Crypto Deals

Editor’s note: This is Mergers & Money, a monthly column by Senior Reporter Chris Metinko that covers dealmaking and the flow of venture capital.

So far this year, crypto startups have taken in nearly $16 billion of funding—far outpacing any prior year.

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While interest and acceptance in crypto has increased among the general public—Bitcoin hit a new all-time high of more than $66,000 this week—that also is true among many traditional venture capital firms that seemingly had a lukewarm feeling for the industry not so long ago.

In the past, crypto used to be dominated by venture firms laser focused on the sector, but this year has seen increased involvement from large VC players often associated with other big categories of consumer and enterprise tech. While firms such as Andreessen Horowitz are not newcomers to the crypto space—it was an initial investor in Coinbase and just this summer announced its third crypto fund, a $2.2 billion tranche—many of the investment world’s big-name cohorts, such as Tiger Global Management, Coatue, Lightspeed Venture Partners and others, are participating in rounds at a rate never seen before.

Leading the charge

Many of these more traditional venture firms were likely drawn into the crypto world by the legitimization of the currency in the last couple of years.

While once questioned by many and thought of as a finance tool used only by cybercriminals, cryptocurrency’s more recent acceptance by large banks, investment institutions and companies seems to have ushered in new investors.

Large financial services companies like Visa and PayPal have helped validate the sector, and even Facebook is planning its own digital wallet and currency—now called Diem. Large crypto players such as Coinbase—with a market cap of $65.5 billion—Circle and Robinhood have gone public, further justifying the space and showing venture investors the size of the space and the volume of transactions they handle.

Those events likely have driven many of these large growth firms to double or triple—or 7x in the case of Tiger—their bets in the crypto world from past years.

Many of these firms are not just increasing how many crypto companies they invest in, but are also bringing the large growth-equity checks with them that have helped push venture funding to levels never seen before in the space, helping mint more than 25 new unicorns this year alone.

Those large checks allowed these firms to take the lead—or co-lead—in many of these rounds, and produced high valuations only a few crypto companies previously reached. Firms such as Andreessen Horowitz, Tiger Global and Coatue have led more rounds in crypto this year than ever in their firms’ histories.

Some of the large rounds led or co-led by those not normally associated with the crypto space this year include:

• Miami-based MoonPay, a crypto payments infrastructure developer, reportedly raised $400 million in funding led by Tiger Global and Coatue earlier this month. The deal reportedly will value the company at $3.4 billion.
• New Jersey-based cryptocurrency lending firm BlockFi raised a $350 million Series D led by Tiger Global, Bain Capital Ventures, partners of DST Global, and Pomp Investments in March at a valuation of $3 billion.
• New York-based Fireblocks, which helps with a variety of business issues around digital assets—from security to compliance to governance—raised a $310 million Series D co-led by Sequoia Capital, Coatue, Stripes, Spark Capital, DRW Venture Capital and SCB 10X at a $2.2 billion valuation in July.

Leading the charge

So far this year, there have been 39 large growth rounds of $100 million or more in crypto—with 14 of them being led or co-led by the firms mentioned above, according to Crunchbase data. Last year saw only seven such rounds, with one being led or co-led by one of those firms, and in 2019, the crypto space saw eight large growth rounds with only one led by those firms.

Those numbers further indicate the amount of cash many of these firms bring to the table in deals—something that until this year crypto had not seen.

The almost $16 billion in venture capital invested in crypto so far this year dwarfs the $3.7 billion invested all of last year. The amount of money in rounds led this year in crypto by Coatue, $1.9 billion; Tiger Global, $1.4 billion; and Andreessen Horowitz, $759 million, alone surpass all of last year’s funding.

While some uncertainty hangs over the industry due to China making crypto transactions illegal and talk of further government regulations in the U.S.—large venture firms now seem more certain than ever that crypto is a large economic opportunity that cannot be missed.

Even if many seemed unsure just a few years ago.

Methodology

Crypto, as defined in this article, includes startups in the Crunchbase dataset that are working within the industries of cryptocurrency and blockchain.

Illustration: Dom Guzman