a16z dials back crypto investing as flagship fund gets rekt

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Crypto-loving Andreessen Horowitz (a16z) has had a rough year, reporting a 40% drop in its flagship crypto fund in the first half of 2022 — yet execs continue to regurgitate unwavering loyalty to its crypto-long vision.

A16z has historically bet big on web3 and cryptocurrency. Its fourth and largest crypto fund, established in May to the tune of $4.5 billion, was perhaps the worst timing ever.

Amid a crypto bear market that began shortly after, a16z’s funds are down hard. Some of the major crypto startups that received funding from a16z have been wiped off the map; others are under regulatory scrutiny, the Wall Street Journal (WSJ) reports.

First a16z crypto fund down 40%

A16z’s flagship crypto fund, established in 2018, is down 40% in the first half of this year, sources told WSJ — a major blow compared to other VCs that have invested in crypto as of late. Fund investors reported that a16z’s heavy investments in volatile cryptocurrencies played a role in the downturn.

Since 2018, the firm has launched three more crypto funds and bet big on web3. Its aggressive approach to investing in crypto startups like NFT marketplace OpenSea proved lucrative in a bear market but has now led to abysmal results. Sources reveal its other crypto funds have experienced declines, yet none as severe as its flagship crypto fund.

Solana, bought by the firm in June 2021, is down 80% this year. Coinbase’s stock price is down over 80% over the same time period, resulting in a loss of $2.9 billion for investor a16z.

The firm has since tapped the breaks on its investment strategy. A16z announced only nine deals with crypto startups in Q3, compared to 26 made in the last quarter of 2021. Yet top crypto-loving execs like a16z partner Chris Dixon remain optimistic.

“We have a very long-term horizon,” Dixon said in an interview with WSJ. Crypto is still in its early stages and, as such, he remains hopeful that mainstream adoption will see a16z’s high stakes crypto bets pay off.

“What I look at is not prices. I look at the entrepreneur and developer activity,” Dixon said. “That’s the core metric.”

Businesses hated on a16z even in a bull run

While it’s almost certain that crypto will see another bull run, a16z’s appetite for crypto investments had begun to sit poorly with businesses even when the market was up. In March, sources revealed that Meta was considering ousting its longest-sitting board member and a16z co-founder Marc Andreessen, for continually investing in rival web3 businesses — many formed by ex-Facebook employees.

A16z was quick to deny the rumors and Andreessen has maintained his seat on the board, despite crypto chief Dixon openly sounding off on Meta. Following a $450 million funding round in Yuga Labs, Dixon told The Verge:

“To me, Yuga Labs, combined with these other emerging web3 companies, are an important counterweight to companies like Meta.

“There’s a dystopian future where Meta is this kind of dominant digital experience provider, and all of the money and control goes to that company,” added Dixon.

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