The funds include $400 million for early-stage investments and a $200 million "opportunity fund."
Even if the crypto bear market is still going strong, Blockchain Capital is still doing well. Blockchain Capital, a venture capital firm, announced the closing of two new funds with a combined value of $580 million for investments in consumer and social technologies, gaming, infrastructure, and DeFi.
The $580 million is split between the two venture funds, its sixth early-stage fund, and its first "opportunity fund," nearly two-thirds and one-third of each, according to Bogart. The company's fifth early-stage fund, its most recent investment vehicle, had a $300 million cap as of June 2021.
“It’s doing more of what we’ve been doing for the past decade,” Bogart said.
“This is our bread and butter, and we wanted to stay aligned with LPs [and] think about prior fund sizes, but still grow a bit.”
The financing will concentrate on six sectors: decentralized finance, centralized finance, centralized infrastructure, decentralized infrastructure, gaming, and consumer/social.
Bogart stated that when considering fund size, a $2 billion fund would be excessive given the current state of the cryptocurrency investing market. Finding investments that allow for [that amount] while maintaining a high level of conviction is difficult.
According to a press release from Blockchain Capital:
“The end game is to elevate personal empowerment by granting individuals control over their digital and financial lives through innovative blockchain-enabled applications and services. It’s this vision of a democratized and distributed future that guides our passion and investment decisions.”
Its LPs are divided into two groups: long-term committed capital, which includes university endowments, family offices, and sovereign wealth funds, and strategic LPs, such as Visa and PayPal, who will continue to sign up for funds "as long as we produce returns."
“The strategic partners like Visa and PayPal are more limited because it’s more active,” Bogart said.
“It’s not just an LP investment; they don’t care about returns as much, but want us to be the eyes and ears on the ground for who else they should work with.”
But according to the press announcement, Blockchain Capital's strategy "isn't about sectors; it's about harnessing blockchain technology to realign incentives, reestablish user trust, and reengineer the social contract of our increasingly digital world."
“Indeed, the crypto market’s volatility these past 20 months revealed the hazards of short-term thinking, exposing many who misjudged this nascent technology,” writes Blockchain Capital in the release, adding later that
“over the past 20 months we’ve invested more capital into the next generation of innovators than any other time in our history.”
The opportunity fund will be used to invest money in ventures that the company would have been unable to fund during its seed or Series A rounds.
The company intends to spread out the capital deployment over a roughly three-year period, but depending on the opportunities, it may go as quickly as two years or as late as five.
Although Blockchain Capital hasn't always taken the lead in rounds, Bogart noted that it currently does so in "most" of the ones in which it takes part. This means that Blockchain Capital routinely invests more than 50% of the investment rounds it participates in, in addition to pricing the deal and drafting the term sheet while also holding a board seat.
"That's a shift for us that allows us to increase fund sizes and have a say in financing, real governance oversight, and opens up more allocation opportunities."
What comes next, then? The company intends to carry on investing in blockchain-based firms with a long-term perspective, as it did for the previous ten years.
“There’s always been temptation across VCs to experiment in new sectors, but we have no intent to expand and become an AI fund or hedge fund and trade tokens,” Bogart said. “We want to keep fund size relatively constrained; we don’t see them becoming much larger than what you see here.”