Crypto.com, a popular cryptocurrency exchange, has expanded the fund size of its venture arm to $500 million, looking to more aggressively support early-stage startups to help the nascent ecosystem grow, following similar moves by rivals. Binance, Coinbase and FTX.
The expansion of Crypto.com Capital comes less than a year after the Singapore-based company unveiled its inaugural fund of $200 million. The fund, unlike many of its rivals, does not have LPs (i.e. it is fully funded from the company’s balance sheet).
The inaugural fund, whose individual checks top $10 million, has been deployed so far to support around 20 startups, including popular game YGG SEA, multi-chain cryptocurrency portfolio tracker DeBank, cross-chain token infrastructure Efinity and the Ethereum Matter Labs scaling solution.
Crypto.com will continue to focus on supporting early-stage startups, Jon Russell, who joined the company as a general partner this month, said in an interview with Ploonge.
With the fund, Crypto.com is largely focusing on gaming, decentralized finance and startups innovating cross-chain solutions. But he warned that the industry could change and expand, as it has in recent years, into areas “we don’t know about,” so the company is keeping an eye on everything.
Tuesday’s announcement also further illustrates the growing involvement of cryptocurrency exchanges in being the rainmakers – and beneficiaries – of the ecosystem that encompasses the industry in which they operate.
FTX, which has supported more than 15 startups, last week announced a $2 billion cryptocurrency fund. Its founder, Sam Bankman-Fried, also owns Alameda Research, a venture company that has backed around 100 web3 startups.
Coinbase Ventures, the investment arm of the only publicly traded cryptocurrency exchange, and Binance, the world’s largest cryptocurrency exchange by trading volume, are also among the most prolific investors in the web3 space.
Crypto / web3 venture investing in 2021 by category (image credits: Galaxy Digital)
Funding activity in the space, even though most of the names mentioned frequently co-invest in startups, is on the rise. VCs invested more than $33 billion in crypto/web3 startups in 2021, more than all previous years combined, Galaxy Digital, another prolific investor in the space, wrote in a recent report.
“Valuations in the crypto/blockchain space were 141% higher than the rest of the VC space in Q4, highlighting a founder-friendly environment and intense competition among investors for deal allocations,” the report added.
Dozens of venture capital firms have also raised new funds for their cryptocurrency investments. Last year, Andreessen Horowitz added a $2.2 billion cryptocurrency fund, Paradigm unveiled a $2.5 billion fund, and Hivemind Capital Partners announced a $1.5 billion fund. Katie Haun, who co-led a16z’s $2.2 billion cryptocurrency fund, left the company to launch her own cryptocurrency-focused fund.
Russell – a former journalist who has worked at Ploonge, The Next Web and The Ken – said that Crypto.com is supporting startups to help the ecosystem grow.
“If you’re in the industry, it’s in your best interest to help companies grow in the ecosystem and the ecosystem itself to grow,” he said. (It’s worth noting that Solana, Avalanche, Polkadot — as well as some of their top investors — are also aggressively supporting startups that are building applications for the native blockchains.)
The startups Crypto.com supports are under no obligation to list their tokens on Crypto.com over any of their rivals or offer the exchange any other preferential treatment, he said. Likewise, the foreign exchange team does not have a soft spot for portfolio companies in the investment arm, he added.
(What’s up with the career change? “I’ve been curious about cryptocurrencies for several years now, but I wasn’t eager to dive in full-time. This project appeals to me because Crypto.com is ambitious, but still does the things that Crypto.com does). There’s certainly a lot of hype and hot air on cryptocurrency and web3 right now, but it’s impossible to ignore the talent that is pouring into the industry,” he said.)
Crypto.com, which started its life as a blog by professor Matt Blaze (who sold the domain to the cryptocurrency exchange), has aggressively expanded in the past year, looking to attract more users. The Singapore-based company last year agreed to pay more than $700 million for the naming rights to the Staples Center in Los Angeles. The downtown Los Angeles complex was renamed the Crypto.com Arena for the next 20 years.
The company, which calls itself the “fastest growing” cryptocurrency exchange, said at the time of the announcement that the move is positioned to make cryptocurrencies popular. Crypto.com, which processes trading volumes of over $2.5 billion every day, also teamed up with Hollywood star Matt Damon last year to promote the brand and cryptocurrencies.
An ad starring Damon, which equated the purchase of cryptographic tokens and NFTs with one of the biggest and boldest accomplishments in human history, went viral but also drew criticism.