The crypto industry's latest milestone: its own corporate VCs
Earlier this month, NFT marketplace OpenSea became the latest big crypto company to set up a venture arm.
Why it matters: Despite the recent boom in VC money now focused on backing cryptocurrency and web3 companies ($32 billion invested in 2021 alone), these corporate VCs still believe there’s something unique they can bring to the table.
The big picture: During the crypto boom of 2017-2018, companies like exchanges Binance and Coinbase, digital wallet Blockchain.com, and Ethereum-focused incubator Consensys set up early venture arms. The emergence of even more big companies in the industry has led to a slew of newcomers.
Between the lines: Pumping capital into startups to help expand their industry is at the core of crypto corporate VCs' raison d'être, above everything else.
- "We had gone through a lot of hard years where it was difficult as a crypto company to raise money and we wanted to support entrepreneurs," Coinbase Ventures head Shan Aggarwal tells Axios. "It was really a mindset of benevolence."
- For Alex Atallah, OpenSea co-founder and head of ventures, it's about making sure that the companies most beneficial to the NFT sector are getting funding. OpenSea is able to "spot holes in the market and orient founders towards them," he says.
- It's not a new playbook: Before the crypto boom, enterprise companies like Salesforce and Slack took a similar approach to spur more startups to build apps on top of their tech.
State of play: Some commonalities run through most crypto corporate VCs, like flexibility to invest via equity or tokens, and an embrace of collaborating with peers.
- "We have funds and individuals that we frequently invest with and we would be happy to give up some ownership in order to bring in a strategic investor in," FTX Ventures head Amy Wu tells Axios.
- And like traditional corporate VCs, they tout their ability to provide unique know-how, or help with areas specific to their parent companies — though every fund connected to an exchange explicitly told Axios that it's walled off from token listing decisions. (And it leads to sometimes awkward conversations with startups.)
Yes, but: There are also some differences, namely in the specific types of companies they each back.
- While OpenSea, for example, is focused on NFT-related companies and projects, most others are open to a wider variety of crypto startups.
- And though some are solely focused on writing very early checks, others, like FTX Ventures, are prepared to invest at any stage — or even in other funds, as Crypto.com has done.
- FTX Ventures is also unique among the cohort: it's solely financed by FTX co-founder and CEO Sam Bankman-Fried — not the company itself — and aims first and foremost to generate investment returns, according to Wu.
The intrigue: Along with other investors native to the cryptocurrency industry, these corporate VCs are in a position to rethink some of the historical norms.
- Anonymous startup founders are one phenomenon crypto investors are running into (just think of the recent controversy over whether Bored Apes Yacht Club's founders, whose parent company is in talks to raise funds at a $5 billion valuation). Nearly every corporate VC told Axios it's open to investing in anonymous founders, though they admitted it hasn't yet become common.
- Some are even quite experimental — Coinbase Ventures considered purchasing virtual land in certain "metaverse" projects, according to Aggarwal.
The bottom line: With so much money eager to get into cryptocurrency and web3 deals, these corporate VCs will have to make their case to entrepreneurs, and adapt to the quickly expanding financing landscape.