In the traditional market, venture capital (VC) always looks for high growth potentials in early-stage startups or emerging companies. They calculate the risk of the doomed startups so that the successful ones will build up their portfolios. It’s about probabilistic and risk management.
Since the dawn of Bitcoin, thousands of new crypto startups, groups, communities, and funds in the competitive and high volatility market have emerged. Most of them were deprecated and some survived through crypto winters.
Andreessen Horowitz, a.k.a a16z, is one of the earliest crypto venture capitals that made it through the winters and often led massive crypto investment deals. And in this article, we will walk you through a16z, which covers:
- a16z Overview.
- The portfolio analysis.
- The performance of a16z.
- The investment thesis.
Let’s find out how Andreessen Horowitz (a16z) paved the way to a crypto giant.
What is Andreessen Horowitz (a16z)?
Andreessen Horowitz (a16z) is a US-based venture capital founded in 2009 by two co-founders, Marc Andreessen and Ben Horowitz, who took the fund after their name. In the early days, a16z determinedly invested in early-stage startups with bold technology ideas.
Apart from investing in crypto in the last few years, a16z’s investments include gaming, social media, education, IT, etc. In August 2021, a16z was reported to manage $18.8B in assets (not just crypto assets).
Note: a16z is the abbreviation for Andreessen Horowitz since between the first and the last letter is 16 letters of the alphabet. The a16z name is wide-used as the venture capital name is hard to remember and write for new crypto entrants.
After 5 years of investing in crypto, in 2018, a16z released a $300M crypto fund as a sign of this venture capital to publicly step into crypto land.
Besides Marc Andreessen and Ben Horowitz as the leaders of a16z, it has a specialized team for each investment sector. The team includes general partners responsible for making investment decisions in the crypto land for a16z.
The a16z Crypto team with 42 members operates as a company with a suite of different positions. And general partners might play the most critical role in decision-making progress. There are now 3 general partners at a16z, and they’re big names with a considerable number of followers on social media.
The partners are quite active on Twitter, and they launch their own personal web-based blogs. It’s the informative and insightful source of information that we can glean from.
Marc Andreessen born in 1971, is the co-founder and general partner of the venture capital firm Andreessen Horowitz based in California, United States. He has 30 years of experience in software engineering, entrepreneurship, and investments.
- Marc founded Netscape and Loudcloud, acquired with $4.3B and $1.6B, respectively.
- In 4 years between 2005-2009, Marc and Ben Horowitz invested over $80M in over 45 startups (Twitter included).
- Starting with a $300M capital, Andreessen Horowitz has multiplied the fund x9 to become $2.7B in just 3 years by investing in various tech companies, including Facebook, Github, Pinterest, Twitter, etc.
Ben Horowitz, born in 1966, is the co-founder of the venture capital Andreessen Horowitz based in California, United States. He began his career as a software engineer, then he worked at Netscape and Loudcloud with Marc Andreessen. Then they decided to found a venture capital firm Andreessen Horowitz after their names.
At Andreessen Horowitz, Marc and Ben built the portfolio with an initial capital of $300M to become $2.7B within 3 years. At the beginning of 2022, Ben Horowitz announced that a16z raised $9B from investors who have been accompanying the fund for over a decade.
Chris Dixon is the general partner of a16z. Before joining a16z, he previously invested in tech startups, including Pinterest, Stack Overflow, Stripe, etc., and co-founded SiteAdvisor and Hunch, which were acquired by McAfee and eBay correspondingly.
On personal Twitter, he often tweets posts expressing the thoughts and investment theses in his point of view. In his Tweetstorms, there are some valuable insights into the crypto land that might lead.
After bumping into the Bitcoin whitepaper in 2018 while he was at Stanford University, Ali Yahya joined the crypto land. Ali is a general partner at a16z where he researches the market and proposes investments.
Arianna Simpson is a general partner of a16z in crypto. As we see on her Twitter, she focuses on Web3 and cites a notable motto, “into crypto before it was cool”. She also founded Autonomous Partners, focusing on crypto assets. Furthermore, she previously worked for Facebook and BitGo so that she can handle a solid role in a16z.
Having participated in crypto for years, a16z owns a humble portfolio compared with other prominent VCs such as Alameda Research, Binance Labs, etc., in terms of the investment number (60+ projects). Let’s look at the following infographic to grasp the overview of a16z’s portfolio.
In the list, only crypto projects covered on the website of a16z are mentioned. A16z invests in other projects as an investment participant, not the lead one. As a result, we will also cover all invested projects by a16z in the following sections.
The a16z Crypto team decided to invest in crypto projects vertically across the ecosystem. The investments concentrated on Layer-1, Infrastructure, and NFT/Metaverse projects that might satisfy the investment criteria of a16z.
Layer 1 Blockchains
- Solana is indeed the most promising investment deal of a16z and other major VCs since the blockchain platforms have had exponential growth in the second half of 2021. Polychain Capital, a16z, and other popular VCs led a $314M investment round for Solana Labs in Sep 2021. They want to boost Solana to acquire 1B users in the next phase of expansion.
- Near Protocol concluded a $21.6M investment funding round from a16z and other investors (most of them are undisclosed) in May 2020. A16z invested in Near Protocol in the very early stage (mainnet) and the outcome is transparent when climbed to the top 20 crypto projects with the highest market cap.
- DFINITY has the ambition to create a decentralized “Internet Computer” to compete with AWS. In 2018, the idea was invested $102M in the funding round led by a16z and Polychain Capital.
- Avalanche, in 2020, was invested in $6M by a16z, meaning the venture capital firm was the earliest fund investing in Su Zhu’s favorite blockchain platform.
- Helium, a 5G blockchain network, raised $111M in a token sale led by a16z, Alameda Research, and Multicoin Capital, including other popular VCs. SBF said that 5G would be a huge opportunity to enrich the quality of lives around the world.
- Celo raised $20M from a16z and Electric Capital in Feb 2021. The invested project aims to build a mobile-orientated blockchain payment platform on top of Ethereum.
- Oasis Network raised $45M in a funding round led by a16z along with other VCs (Binance Labs, Pantera, Polychain, etc.) in Jul 2018.
⇒ By investing in blockchain platforms in the very early stages, a16z’s position in crypto is a pioneer. Those blockchains were performing well in 2021 in every aspect (token price, development, community,…). But in 2018 - 2019, a16z made only a few investment deals, such as DFINITY, which might be a safe move for this venture capital firm since the crypto market was harsh then.
In 2020, the firm invested heavily in blockchain platforms with multiple deals, including Avalanche, Helium, Celo, etc., a16z timed the crypto market quite precisely as 2020 - 2021 was epic for crypto. In 2021, a16z concluded a massive investment deal with Solana that made the drumbeat of SOL louder.
- Arweave raised $5M in a funding round led by a16z in Nov 2019 to build a decentralized network to unlock the potential of permanent and immutable data storage.
- Optimism concluded $25M in the Series A funding round led by a16z in Feb 2021. It is an L2 solution on top of the Ethereum blockchain, which is trusted by a16z to compete in the L2 race to be the next destination for Ethereum-based projects to board.
- Forta was launched in Sep 2021 with $23M from the major investor Andreessen Horowitz to deliver security solutions for smart contracts.
- Aleo received $28M in a fundraising round led by a16z and other venture capitals, including Coinbase Ventures, Galaxy Digital, Placeholder VC, etc., in Apr 2021. The development team plans to build a platform that is able to enhance the privacy of data.
⇒ Andreessen Horowitz venture capital firm made bets on some projects in the infrastructure category. Blockchain-based storage and L2 solution are the niches that a16z got on the board before the 2021 bull run.
- Diem is one of the latest investments of a16z since the venture capital wants to invest $36M in this blockchain platform in the Series A funding round in Dec 2021 as a lead participant. The project is led by the former staff of Facebook.
- Anchorage was invested $17M in Jan 2019 which is another Series A investment of a16z. The target of Anchorage is to hold and safeguard crypto assets for institutions and hedge funds. In addition, service users of Anchorage can earn rewards, unlike cold storage.,
- Friends with Benefits DAO (FWB) raised $10M in a round led by a16z in November 2021. The DAO is open for crypto enthusiasts to become members with a minimal entrance of 75 FWB tokens.
- Compound is a DeFi startup in 2019 that raised $25M in a Series A funding round led by Andreessen Horowitz a16z. a16z planned with Compound to dominate the crypto market with full support. The investment turned out to be successful since the market cap of CMP reached $4B in ATH value.
- MakerDAO got backed by a16z crypto fund since the firm purchased 6% of the total supply MKR. As one of the MKR holders, a16z can participate in the on-chain governance, which decides the future of the protocol and the DAI Credit system. DAI has been the decentralized stablecoin that owns the most market cap in crypto land.
- Goldfinch is the latest deal of a16z in 2022 as this credit protocol raised $25M in a Series A extension round led by a16z crypto fund. Previously, a16z also led an $11M funding round for Goldfinch to realize the idea. The venture capital firm might aim for a bigger target for Goldfinch than it might with Compound and MakerDAO.
⇒ By investing in two Ethereum-based DeFi projects in lending and yield farming categories, a16z got massive returns from them. Compound and MakerDAO investments were made in 2018 and 2019 after the Bitcoin $20k bubble busted. A16z invested strongly in Goldfinch to reach out to the bigger user base to keep up the pace.
Phantom was invested $9M in a funding round led by a16z for a bigger vision of this Solana wallet in Jul 2021. In Nov 2021, Phantom reached a new milestone when there were over 1 million active users for the first time.
A16z received massive returns just by investing one wallet project on Solana, which was later invested in by this firm in Sep 2021.
- TrustToken raised $12.5M in a funding round led by a16z, BlockTower, and Alameda Research in Sep 2021. TrustToken is the operator of the lending protocol TrueFi and the stablecoin TUSD. The venture capitals bought TRU in the funding round for bigger user acquisition.
- Reflexer Labs concluded a $1.68M investment deal led by Paradigm with the a16z participation in Aug 2020. The team was planning to build a reflective asset named RAI that closely follows the price of ETH.
- Fei Labs that builds the capital-efficient stablecoin Fei Protocol, has raised $19M in a funding round led by a16z, Framework Ventures, Coinbase Ventures, and other big investors as well as KOLs in Mar 2021.
⇒ In 2020 - 2021, a16z has strongly distributed funds for crypto projects that build stablecoins. The stablecoin race is now being dominated by giants such as USDT, USDC, DAI, and UST. However, a16z bets on stablecoins that still have a long way to go in the crypto land to have a solid position.
- Uniswap, the biggest DEX in crypto in terms of market cap, raised $11M in a Series A round led by a16z, Union Square Ventures, and other investors in Aug 2020. The success of Uniswap is indisputable since it’s the biggest Ethereum-based DEX in crypto. In Dec 2021, the DEX announced to successfully add Polygon network on the platform. This movement of Uniswap indicates the shifting capital from Etherum to other L2 blockchains (specifically Polygon).
- CoinSwicth Kuber was invested $260M in a funding round led by the biggest crypto venture capitals, including a16z, Coinbase Ventures, Paradigm, Sequoia Capital, etc., in Oct 2021. The $260M investment gives the India-based exchange CoinSwitch Kuber the value of over $1.9B.
⇒ After the Uniswap investment in 2020, a16z shifted to a more uncharted land in India with over 1 billion people. The fund believes $260M is a humble number to take over the Indian crypto market. Both investments satisfy the long-term holding thesis of a16z.
dYdX, a derivatives market, raised $65M from a16z, Paradigm, and other venture capitals to expand beyond Ethereum in a Series C. Previously, it raised $10M in a Series B round led by 3AC and DeFiance Capital with investors in January 2021.
The trading platform previously raised $10M in a Series A round led by a16z and Polychain capital. With triple staggering investment deals from top VCs, dYdX is now leading the derivatives market in terms of market cap and revenue.
⇒ Participating in the Series A and C round, a16z keeps going on with the derivatives market dYdX to achieve the future target. Like Uniswap, dYdX expanded its platform to the L2 solution Polygon running parallel with Etherum on the exchange.
NFT & Metaverse
- Dapper Labs, the builder of CryptoKittes, raised $11M in an investment round led by a16z with other VCs to collaborate with Warner Music to build a scaling blockchain Flow. The target of Flow is to reach out to tens of millions of users to have access to decentralized games.
- OpenSea raised $100M in a Series B funding round led by a16z to scale the leading NFT marketplace. A16z yearned for OpenSea to become a cross-chain NFT marketplace in crypto.
- SkyMavis (Vietnam’s company behind Axie Infinity) raised $152M in a Series B round that includes a16z as one of the investors. SkyMavis will build a sidechain Ronin to continue the scaling progress since the game on Ethereum was limited itself.
⇒ A16z’s vision on NFT & Metaverse is as clear as the sky since the crypto fund invested in only leading companies in the category. After the success of OpenSea and SkyMavis’s success with Axie Infinity, over hundreds of million-dollar from a16z poured into them so as to launch the two projects beyond the Ethereum blockchain.
In Which Ecosystem Andreessen Horowitz a16z Invested?
Ethereum and L2 solution
Andreessen Horowitz’s a16z crypto fund was launched in 2018 when the crypto bubble busted. However, most investments of a16z were in the 2019-2020 period as they might do research on what would come in the following years in crypto.
As the a16z firm is now managing billions in various assets, the team prefers investments in later funding rounds (Series A, B, C) to the seed round.
There are some controversial drawbacks of the Ethereum blockchain. A16z understands that L2 solutions of Ethereum are inevitable. As a result, the fund generously bagged some crypto projects working on/with L2 as follows:
- Optimism - L2 solution.
- dYdX added Polygon.
- Uniswap added Polygon.
- OpenSea added Polygon.
- SkyMavis built a sidechain named Ronin.
Should we follow a16z’s portfolio?
A16z has been focusing on diversifying the portfolio with massive investments, and let’s see the performance of those project tokens that were invested in by the a16z crypto fund (ATH prices with prices at the beginning of 2021) as follows:
- SOL (Solana): 15,000%.
- Helium (HNT): 3,800%.
- Arweave (AR): 3,000%.
- Avalanche (AVAX: 5,000%.
- Uniswap (UNI): 1,100%.
Since the investments of the a16z crypto fund were mostly in later funding rounds (Series A, B, C,...), the ROIs are humble compared to other venture capitals’ seed investments. However, Andreessen Horowitz’s crypto fund manages billions of dollars in various assets. They'd rather invest in reliable grown projects than risky ones.
A16z Investment Thesis
Andreessen Horowitz is led by two co-founders with experience in speculative investments in hundreds of startups multiplying the fund’s total capital. Through the investment deals of a16z, we can glean some notable insights about the taste and the investment thesis of a16z to catch up with the fund in the following years.
- Rarely in seed round: a16z often invests in the projects that survived the early stage that go into the scaling stage. It’s not in the seed round but still speculative since a16z bets on the future when the invested project reaches its full potential.
- Massive funds for big ideas: a16z unhesitatingly gave 2-figure and 3-figure millions of dollars in each investment round for founders who think big such as OpenSea, SkyMavis, CoinSwitch Kuber, Solana, DFINITY, Helium,...
- As lead investor but not alone: a16z is a significant and renowned VC in crypto, so the team often leads the investment deals with other VCs and angel investors. Being mentioned a lot in the investments above, Polychain Capital and Coinbase Ventures have a close partnership with a16z since the duo occasionally joins the same investment as lead investors.
A16z in 2022
Starting 2022 with an investment in Goldfinch, a16z is investing in projects that can connect to the mass. Besides investing in various categories in crypto, a16z looks for projects like Goldfinch that can reach most users and have a huge potential impact on the space.
On the website of a16z crypto, there are articles from in-house authors responsible for the firm’s investments. They occasionally publish articles to express their ideas as well as predictions in the crypto market. It’s a resource from a16z for us to glean valuable insights.
We’ve been through the detailed information and some insights about a16z, and then we can conclude some quick takes for readers’ convenience.
- Two experienced co-founders lead a16z with successful tech investments, and they have an active crypto-focused team with social-active general partners.
- They were investing in projects that raised funds in growing and scaling rounds (Series A, B, C, and later) to lift the idea to the majority.
- The venture capital fund flexibly invests in various categories (even some unnamed categories) across the crypto land. Therefore, it manages to maintain the lead position in crypto with close VCs as partners.
- A16z plays big since it often invests a vast amount of money and support in practical and tech-backed ideas.
And that is all you need to know about venture capital a16z. I hope you’ve gained the overview, and our insights will be helpful to you. There will be more articles for other VCs. Stay tuned!
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