Andreessen Horowitz raises $4.5 billion for record-breaking crypto fund

Andreessen Horowitz on Wednesday regained its crypto crown, raising the largest-ever venture capital fund dedicated to web3 startups and projects.

The big picture: It's always sunny in the metaverse.

Backstory: A16z was one of venture's earliest and most aggressive movers into crypto, raising $350 million for its first fund in 2018. Its third fund nabbed $2.2 billion last year, but was surpassed by a $2.5 billion first-time fund from Paradigm (led by Coinbase co-founder Fred Ehrsam and ex-Sequoia Capital partner Matt Huang). It also saw partner Katie Haun leave to raise $1.5 billion for her own eponymous firm.

• The new a16z fund totals $4.5 billion, split between two "sleeves": $1.5 billion for seed-stage opportunities and $3 billion for more mature efforts.

The big question is if a16z is raising record sums at the wrong time, based on what the firm itself wrote in its recent "State of Crypto" report:

"Whereas prices are often a lagging indicator of performance in some industries, in crypto they are a leading indicator. Prices are a hook. The numbers drive interest, which drives ideas and activity, which in turn drives innovation."

Prices, of course, are down. Both Bitcoin and Ethereum are down around 50% over the past six months, while Coinbase shares are off nearly 80% over that same time period.

What they're saying: Arianna Simpson, a general partner with a16z Crypto, talked past that discrepancy during a conversation with me about the new fund, emphasizing long-term opportunity over short-term price fluctuations

"Many of the best companies are really built in quieter markets, and many of the best builders are today are drawn to web3" she said. "The same way that the Internet now powers all sorts of businesses that aren't viewed as tech businesses, crypto components are being embedded into games and online communities and other things that aren't traditionally crypto."

• She also addressed the skepticism of many Web 2.0 titans toward web3, which wasn't exhibited a decade ago by Web 1.0 entrepreneurs.

"The critical difference is that Web 1.0 was about open platforms and foundational protocols, with a really strong open-source ethos," she argues. "That went away and was replaced by walled gardens in Web 2.0. So it makes sense that the pillars of Web 2.0 aren't in favor of these new models, taking away power — and eventually money — from them ... Platforms like Twitter and Facebook have been extractive, taking without giving back to users. Web3 can incentivize participation by giving both some ownership and financial upside."

The bottom line: There are some signs of a crypto VC slowdown, but the market's biggest player is still sprinting forward.