Venture capital heavyweight Andreessen Horowitz, also known as a16z, is doubling down on crypto. Though the firm has been bullish on the industry for years, it has been recently accelerating the pace at which it’s pouring money into the sector.
Crypto is now a core part of a16z’s business. Overall, it boasts a mammoth $3.1 billion under management across three crypto funds, and in the past few years, has funded at least 55 crypto startups.
“A16z sees crypto tapping into almost every single industry and market,” said Robert Le, a senior emerging technology analyst at PitchBook, in an email. But it’s not just a16z: “The idea that ‘every company will be a fintech company’ a few years ago can now be rearticulated as ‘every company will be a crypto company.’”
So where is a16z making its biggest crypto investments? After its earlier plays like Coinbase paid off, it’s now infusing cash into newer crypto ventures, such as NFTs and games. Here’s a glance at where Andreessen Horowitz thinks the crypto industry is going:
Crypto consumer applications, from art to gaming
Crypto applications have long drawn niche interest from technogeeks and financiers, but in 2021 mainstream consumers jumped into the market through more user-friendly applications, such as art marketplaces and games. Non-fungible tokens (NFTs) exploded early in the year, with digital art pieces like Beeple’s $69 million collage Everydays—The First 5,000 Days selling for seven to eight figures. Eager amateur and seasoned investors alike have sustained the momentum, pouring money into pixel art collections.
Out of all of its crypto investments, a16z’s biggest bet is on NFTs and gaming. This year it has funneled millions of dollars into companies like NFT marketplace OpenSea and Dapper Labs, maker of CryptoKitties, where people can buy, breed, and sell digital collectible cats.
A16z’ has said it’s particularly interested in play-to-earn games like Axie Infinity, in which players earn in-game tokens that can be cashed out for fiat money. It sees blockchain-based gaming becoming a full-time career for players.
Here’s a list of some of a16z’s recent investments in crypto consumer applications:
🖼️ NFTs: Onchain Studios (Cryptoys), Dapper Labs (CryptoKitties), Royal, Ozone Networks (OpenSea), Bitski, RTFKT, Foundation, Manifold
🎮 Gaming: Yield Guild Games, Forte Labs, Sky Mavis (Axie Infinity), Faraway, Mythical Games, Virtually Human Studio
📱Social media: Friends With Benefits, BitClout, OB1 (OpenBazaar), Mirror.xyz, Rally
Technical infrastructure to scale
A16z has also been funding projects working to solve blockchain’s technical problems. Blockchain infrastructure—i.e., the technical foundations spanning developer tools to data structures—is less sexy than artsy jpegs and blockchain monsters that you can battle with, but is critical to ensuring that consumer apps can perform well and scale up.
Ethereum is the most popular blockchain to develop on, but demand has far outpaced its processing ability, which has made it slow and expensive to transact on. A16z has backed a number of companies developing faster blockchains or smart contract platforms, including Solana and Chia Network. (Solana, in particular, has become popular—its coin price surged as much as 14,000% this year.)
The other issue a16z is homing in on is privacy. Public blockchains, like Bitcoin and Ethereum, are open ledgers. Every single transaction is recorded with the address of the sender and receiver, the amount of money exchanged, and various other revealing details. Anonymity is difficult to preserve if someone knows your digital wallet address.
A16z is has been investing in companies trying to protect that information, including Matter Labs and Aleo. They develop applications leveraging zero-knowledge proofs: a cryptographic method to prove or authenticate what’s in a wallet without disclosing any information about it.
Here are infrastructure companies that have recently received a16z funding:
⛓️ Blockchain: Solana Labs, Chia Network, Near Protocol, Optimism
🔒 Privacy: Matter Labs, Nym Technologies, Aleo, Orchid
🏗️ Other infrastructure: XMTP, Helium, Alchemy, Forta Protocol
Crypto finance
Decentralized finance (DeFi) applications—which offer crypto-backed financial products and services like loans, derivatives, or margin trading without intermediaries—began taking off in earnest in mid-2020. A16z began funding DeFi startups well before that, but has continued to funnel cash into them this year. These are some of the firm’s recent crypto finance bets:
🏦 Financial services and capital markets: Eco, Anchor Labs (Anchorage Digital), Talos, Polychain Capital
👛 Decentralized finance: Uniswap, Goldfinch, dYdX, TrueCoin (TrustToken), Element Finance, Syndicate Protocol
💰 Digital currency: Celo, Angle Labs, Fei Labs