Polychain Capital and CoinFund raise new crypto-focused VC funds

Crypto-focused VC firms Polychain Capital and CoinFund have raised new funds amidst the global slowdown for startup investment in the sector.

Why it matters: The days of crypto megafunds might be over, but after a brutal 18 months for crypto startups, LPs still see some promise.

Driving the news: Polychain Capital raised $200 million in the first close of its fourth fund, with plans to raise a total of $400 million.

• CoinFund, meanwhile, announced it has raised $158 million for its fourth fund.

Context: Crypto venture funding has collapsed from 2021 highs, with startup investment in the second quarter down 71% from the same period in 2022.

• VC financing in the sector was at its lowest level since the fourth quarter of 2020.
• Just six deals raised over $100 million in the first half of the year.

Flashback: The outlook for crypto investors has changed dramatically in just 18 months, following a bonanza of VC fundraising announced in 2021 and 2022.

• Prior to the sector's collapse, Andreessen Horowitz raised a $2.2 billion crypto fund in mid-2021, and a16z alum Katie Haun raised $1.5 billion across two new funds in early 2022.
• They were joined by Sequoia, which announced a $600 million fund focused on crypto tokens in February 2022; Bain Capital, which introduced a $560 million dedicated crypto fund in March; and Bessemer, which dedicated $250 million to invest in web3 companies.

Yes, but: The crypto funding slowdown over the past year means there is an unprecedented amount of dry powder just waiting to be deployed.

The big picture: Late-stage crypto startups might struggle to raise their next rounds, but early-stage funds and their backers still see opportunity in the category.