CoinFund, an investment firm that only works with cryptocurrencies, started a $300 million venture capital fund to support blockchain projects in their early stages. This shows that investors are confident in an industry where a bear market has hit.
In an interview with CoinDesk, David Pakman, CoinFund’s managing partner and head of venture investing, said that the CoinFund Ventures I fund will invest in companies that are already making money and are part of a crypto sector with a large total addressable market. Layer 1 blockchains, Web3 infrastructure, non-fungible tokens (NFTs), games, and asset management are all areas of interest.
During the first half of 2022, the value of venture capital investments in the crypto industry dropped by 26% compared to the same time last year. However, the number of deals stayed steady, which suggests a shift toward earlier, smaller funding rounds. After raising $83 million for its first venture capital vehicle a little over a year, the company announced the new purse.
CoinFund was started in 2015, and before that, it focused on bitcoin and early-stage investments in projects that use decentralized finance (Defi). Some of the companies in its portfolio are Dapper Labs, which made NBA Top Shot, and Blockdaemon, an infrastructure platform for blockchain.
The Graph is a data indexing protocol. Successful portfolio companies that went on to raise Series A rounds wanted to keep working with the company, but the company didn’t have a way to invest at that point.
“Our CEOs kind of pushed us to see this gap in the market, “Pakman said. “We thought we could be very useful and effective at that point, so we set up an early-stage fund.
Each company that CoinFund Ventures I backs will get a check for between $6 million and $10 million. This means that the fund will probably back 30 to 40 companies. Pakman said that most of the money would go to companies that CoinFund has never worked with before. However, a small number of portfolio companies could get more money.
CoinFund said that private market investment firms Adams Street Partners and StepStone Group, fund of funds Accolade Partners, and the Teachers Retirement System (TRS) of Texas are among the limited partners who are backing the new fund. TRS joined the small but growing number of pension funds that are investing in cryptocurrencies.
Pakman spent 13 years at the traditional venture capital firm Venrock before joining CoinFund last year. Einar Braathen has now made the same switch from traditional to crypto-native deal flow. He left technology firm Accel to focus on early-stage investments at CoinFund.
When asked about starting a fund during a bear market, Pakman said that CoinFund has been around for three downturns and that the new fund will last between six and eight years.
“These kinds of changes in the market are pretty normal,” he said. “At some point, the markets will work with you as long as you’re focused on making something important that will be worth a lot over time.”