A16Z announces $4.5B fund for crypto and blockchain startups

https://www.theblockcrypto.com/post/148685/a16z-announces-4-5-billion-fund-for-crypto-and-blockchain-startups

by marban • 4 years ago

33 46 4 years ago

theblockcrypto.com

jstx1• 4 years ago

That's a lot of money. And what a time to do it too.

leona_m• 4 years ago

Great timing for those blockchain startups who held all their cash in crypto and are now feeling the pain.

zer0110• 4 years ago

Proper treasury management for raised funds is something that needs done by everyone regardless of the business they’re in.

In the non crypto world orgs usually hold short term t-bills or other cash equivalents to help offset inflation. In the crypto space I see a lot of teams holding stablecoins, which is similar. Some hold their entire allocation in something super volatile which is a bad idea in the same way it’s a bad idea to take VC money and buy Tesla stock with it or gamble on GME options.

IMO treasury management is just another risk to manage as part of a business. If not managed properly you go out of business and if it’s because you were dumb with VC money by betting it all on Bitcoin then you likely won’t get more VC money again.

mrkramer3• 4 years ago

This guys are clueless; wasting billions investing in Crypto hoping that they will hit killer app but not realising Bitcoin itself is the killer app.

Also they invested over $100M in Clubhouse just because it became popular at the time(Pandemic and lockdowns) not because they think Clubhouse will have any reasonable long term value because it won't.

dqpb3• 4 years ago

Bitcoins proof-of-waste system is a dealbreaker for me.

mrkramer3• 4 years ago

There is also a lot of waste when mining gold and other metals[1] but nobody cares because gold and other metals have value in conducting electricity and heat and they are used in number of industries and in electronics.

Bitcoin is digital commodity which conducts information and is used in order to enable decentralized communication.

Bitcoin's uptime[2] is 99.99%, now compare that to centralized software applications and you will be in a better understanding on why Bitcoin is valuable.

[1] https://arstechnica.com/science/2022/05/new-study-estimates-...

[2] https://www.buybitcoinworldwide.com/bitcoin-uptime/

klyrs• 4 years ago

They aren't clueless, they're raking in profits by exploiting the clueless.

sexangel• 4 years ago

Bitcoin would be absolutely nothing without its first mover advantage. nothing. its boomer tech. get with the times

drumhead2• 4 years ago

Have they found a reservoir of greater fools that no one else has exploited yet?

A fund investing in snake oil and perpetual motion machines would add more value to the world economy

zer0110• 4 years ago

You know, I think if you take a time machine back to the early 90s you’d see similar sentiment about the internet and internet based companies.

“You want to put CREDIT CARDS on the INTERNET?!”

“You want to replace the POST OFFICE with the INTERNET?!”

“You want people to post details about their day on the INTERNET?!”

Those “snake oil” investments at the time eventually became Amazon, E-mail, and Facebook. The first ideas funded aren’t always the final execution of it (Facebook was not the first social media platform) but the idea is that VC funding spurs innovation and people taking risks with new ideas, which pushes the entire space forward.

People who see the entire crypto space as a “scam” are (in my experience) unaware of the real cryptographic research currently being done. Threshold based signatures, multi party computation, zero knowledge proofs, etc are new tools and primaries to build a better internet and give us better, concretely provable, tools to shape society.

Are there scams in the space? Yep, and I don’t like them just as much as you don’t since they delegitimize the real work being done. But I also see the future Googles, Amazons, and Facebooks of the world emerging from this unique space to do some truly amazing things despite those scammers in the same way that those companies rose from the early internet cesspool of scams and ads.

LawrenceX2• 4 years ago

This conflict between I call "technological enthusiasts" and "economic realists" is extremely prevalent in any discussion on cryptocurrencies.

I find this extremely fascinating and I think stems from both understanding things that the other side doesn't fully appreciate. I wrote about this more on my blog: https://lawrencexie.wordpress.com/2022/05/13/on-crypto-misco...

drumhead2• 4 years ago

I was there, and the difference between crypto and the products and services you mentioned is that email, Amazon Facebook, digital banking were all delivering useful outcomes to users. I can't see anything useful from crypto other than laundering the proceeds of criminal activities.

gamblor9563• 4 years ago

Email predates the internet by several decades, as do blogs. Technically, even credit cards were being used "online" before the internet was readily accessible.

And what we call the "internet" today was already being used by companies and research institutions prior to becoming commercialized. The pre-web was useful from the moment it was created. It didn't need to "find" a use case; the use was immediately obvious.

OTOH, we're still waiting for cryptocurrencies to present a use case that isn't better solved by an existing technology.

ec109685• 4 years ago

What really is striking is that other VCs are talking about a downturn, and these folks don’t even acknowledge there are people who lost huge amounts of money in the crypto space.

It’s cultish.

johnwheeler2• 4 years ago

Elon Musk, Jack Dorsey, and Cathie Wood have been putting these livestreams on YouTube where they talk about the future of Crypto and offer BTC to lucky viewers. These go on for like 5 hours and are largely Elon talking with the other two nodding. To me, it comes off like an attempt to pump up the price in the short term, because Elon knows he can do that.

This announcement from a16z sounds and feels the same.

truthslinger2• 4 years ago

this about sums up the level of depth and knowledge on the crypto industry that HN crypto skeptics are at:

Those live streams are not run by Elon Musk, Jack Dorsey or Cathie Wood. They are low effort scams aiming at getting people to send BTC, its just recycled video content with text put beside it.

zer0110• 4 years ago

What you’re describing is a popular scam where a scammer rebroadcasts a previously run live stream with famous people and instructions to send crypto to an address for a “giveaway”. Since the livestreams are about crypto, people tune in and see a banner saying “send crypto here for a chance to win more crypto”, see a conversation that seems live with people they know, and fall for the scam.

These people you mentioned are not actually doing a giveaway, and YouTube is completely asleep at the wheel for combating these sorts of scams (they’ve been around for a couple years now, and automated detection is a harder engineering problem than scraping tweets).

The problem is that they’ve very lucrative for scammers since the scam is confusing enough for people that they think they’re credible, doubly so when they use hacked channels with changed names but have hundreds of thousands of followers to do the broadcast.

IMO YouTube absolutely needs to step up their game here - I’ve fought this sort of fraud at larger orgs and Twitter and Facebook both have pipelines established for security teams to escalate these things, meanwhile YouTube takes a report, let’s the scam run to its entirety, then picks up the pieces after the damage has already been done.

twox2• 4 years ago

With any given thing there are going to be lot's of people that lose money. Don't VC's lose on the majority of their bets to begin with?

Comevius2• 4 years ago

There has been a major computing cycle every 10-15 years.
We believe blockchains will power the next major computing cycle, which we call crypto or web3
For example, with mobile computing, the golden era was 2009-11, when companies like Uber, Venmo, Snap, and Instagram were started.
We think we are now entering the golden era of web3.

Prior cycles were pushed by demand after a key innovation (computers, internet, smartphones) changed our habits. Uber became popular because taxi companies were slow to adapt to smartphones. Venmo become popular because the banks were slow to adapt to smartphones. Snap and Instagram become popular because everyone suddenly had a camera on them.

Cryptocurrencies became popular due to distrust in the economy, but they did not prove to be a viable replacement. The dream of buying a pizza with Bitcoin is still a dream. At some point venture capitalists realized that they can pump and dump shitcoins, they just have to convince greater fools that they are useful, that they are the future. This is why we have this NFT and Web3 bonanza. There is no demand for them, they don't solve any problem, nor they try to. They are just shiny things for bagholders to look at. Rather than blockchain technology, it's distrust, desperation and greed what's behind it all.

truthslinger2• 4 years ago

Cryptocurrencies became popular due to distrust in the economy, but they did not prove to be a viable replacement.

I mean BTC or ETH were a lot better place to keep your capital in the last X years (where you can pick any X since the GFC/Bitcoins inception) than keeping it in dollars or euros.

Of course some people had access to a) the free money that the US gov has been printing over that same period, b) connections to early investment opportunities , and so may have had better places to put their capital.

But for regular people who didn't have the connections to invest in AirBnB during the earlier rounds and put their capital to work (doing all the good work that AirBnB has done) it seems to have actually worked pretty well if you distrusted the economy. I'll leave it up you to work the ratio of how many people exist in those two groups.

Also this comment seems to assume that it's over and everyone trusts the economy now, and that bitcoin & crypto have failed in that use case. Doesn't seem that way to me.

You can certainly criticize the actions of VCs in the space, and a bunch of other groups, and I wouldn't disagree, but believe it or not there is people in crypto who still have the original principals, and what is more is there is a constant influx of new people with those same principals.

zer0110• 4 years ago

Replace your arguments for crypto with arguments for the internet, and zoom back to the mid 90s.

There were a ton of shady internet companies capitalizing on this sort of hype and swindling people out of their hard earned money. Beanie babies were also huge.

Do you know what else was happening? The IETF was finding its feet as an org, RFCs were being written and iterated on, the building blocks of the modern internet were being built behind the scenes, and companies like Amazon were realizing that their value was not selling books but building a massive logistic network that could compete with brick and mortar stores. Porn companies (widely seen as morally reprehensible/unsightly) were also figuring out video streaming and PayPal was figuring out how to deal with online payments.

Yet, if you read the news and weren’t building in the space, you’d probably come to the same conclusions as you are today - the internet is a fad that will die out soon because there’s nothing of substance to it and it’s all just greater fool hype.

Zooming back to today - I’d implore you to go look at the research being done right now in the cryptography space - things like zero knowledge proofs, multi party computation, and threshold signature schemes are becoming more viable as building blocks every day. Same with a shift in mentality from centralized trust to decentralized control enabled by some of these cryptographic primitives.

Is every crypto project going to be the next Google? Of course not, but the entire point of putting VC money into the space is to push the space forward as a whole (along with spurring research), eventually leading to the next Amazon/Google/Facebook/etc. and pushing humanity forward in some direction.

New tools mean fertile ground for innovation, and VCs are interested in finding and pumping money into fertile ground since they usually have massively outsized returns.

Are they always right? Nope, but Marc Andreessen was around in the 90s, built one of the first web browsers, and co founded Netscape. So if nothing else he’s seen what unrealized fertile ground looks like, and a $4.5B fund signals that he sees it again in the space. Of course a more cynical view is that he purely sees the ability to enrich himself and his fund via pump and dump schemes without caring how it’s done but that’s something that only time will tell I suppose.

Comevius2• 4 years ago

The internet was just as viable in 1995. We were doing commerce over phone lines using computers for 20 years at that point. By the time there was an internet nobody had a reason to question it, or desperately try to find use cases for it.

The cryptography space has a lot of promise, but the VC money is not being pumped into better privacy or confidence (which is better than trustlessness). It's being pumped and dumped, because securities fraud is where the money is. The idea is to prop up the image of crypto until you can dump.

Blockchain technologies are not the right tool for everything. They can eliminate the double spending problem in a decentralized way, but there are trade-offs involved in being able to tolerate a large amount of faulty or malicious nodes (for problems that require coordination) and they are fundamental. Blockchain technologies lock you out of efficiently solving a lot of problems.

The Web3 projects I have seen so far would not be able to compete with their Web2 counterpart. They don't know their customers, they are hard to understand, difficult to use, they are trying to bank on artificial scarcity as if it's a new invention no one else tried. If your mother can't understand your Web3 project chances are you aren't going to get your big break.

loceng2• 4 years ago

Eventually the gamblers and gullible will run out and those already financially vested in coin of your choice who on the weekly or monthly buy $x more, also adding to and keeping a reserve of $y to buy during dips which also helps to make the price look artificially more stable than it is [not to mention when billion dollar reserves get spent to counter the bottom completely falling out]. After that it will only be through aggressive tactics including regulatory capture that force more people, let's say 50% of population adopted, they will need the remaining 50% to adopt - to give them the basket, leaving them holding it - with no one else to buy it from them.

What will, and is happening, you just don't see it as much - it's not as obvious because no one is making money or wanting to make money by taking a stand against Bitcoin, and draw the attention of the heavily invested ideological mob of HODLers - whereas everyone taking a stand for Bitcoin is financially incentivized to promote it with whatever true or false rhetoric and propaganda they find works best in the present climate; perhaps the best simplified comparison I heard is that Bitcoin is like Mary Kay for men.

clpm4j2• 4 years ago

a16z is really sticking to their beliefs that there must be a major computing cycle every 10-15 years, and that it must be blockchains. Personally, I think its the public cloud, but I'm not nearly as rich as Chris Dixon et al.

WFHRenaissance• 4 years ago

Public cloud was the computing cycle of the 2010s

msarrel• 4 years ago

These guys can't throw money away fast enough.

ungerik• 4 years ago

Awesome, time to build!

A16Z announces $4.5B fund for crypto and blockchain startups

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