Venture capital executive Andreessen Horowitz (a16z) has launched a $2.2 billion crypto fund to double down on investments in blockchain startups amid a surge in venture capital into artificial intelligence.
The new vehicle, called Crypto Fund 5, will invest in crypto entrepreneurs at all stages and the capital will be deployed over 10 years, according to a company spokesperson. The company said it is targeting founders building practical applications on crypto infrastructure, especially in areas such as payments, financial services, and decentralized systems.
The firm’s partners see the current crypto market as an opportunity to invest in founders who build projects that are “durable” and can continue beyond the hype cycle.
“We are in a quieter period right now, and the signals coming through are some of the most encouraging we’ve seen in years,” the company’s partners said in a blog published Tuesday.
“The founders we’re supporting with this $2.2 billion fund are working on a part of the cycle that gets less attention and creates more lasting value: turning new infrastructure into products people use every day,” according to a partner blog.
What the fund invests in
The fund will focus on sectors where these capabilities translate into tangible and durable products.
One area where a16z is seeing patterns is stablecoins. The digital dollar market, which recently soared to a market capitalization of $320 billion, continues to grow in adoption despite the recession, with users relying on it for cross-border payments, savings, and everyday transactions. This is especially true when compared to legacy systems that are “slow, expensive, and unreliable,” says a16z.
Other areas seeing “meaningful growth” include perpetual futures, blockchain-based lending, prediction markets, and tokenized assets.
The new fund comes at a time when venture capital firms are recalibrating their strategies amid the AI funding boom. Recent industry trends show that generalist investors are moving money into AI startups, forcing crypto-specific funds to strengthen their positioning.
And here at a16z we believe that leveraging the role of cryptography as a financial and coordination layer in AI systems is more important than ever.
“Software is becoming increasingly complex and difficult to trust. AI systems are powerful, but largely opaque. The infrastructure on which the Internet runs is more integrated than ever. In such an environment, the properties that cryptographic networks are designed to provide become more valuable, not less,” the blog said.
The new fund is roughly half the size of its fourth fund, which raised $4.5 billion in 2023, but is still larger than the $1 billion recently raised by Huan Ventures (founded by former a16z partners) and the $650 million raised by Dragonfly Capital, another prominent crypto VC firm.
These recent gains, while not as high as the 2021 bull market, likely reflect a gap between hype and underlying activity.
“While sentiment may be depressed, we believe the fundamentals of the crypto industry are at an all-time high,” a spokesperson said.
