Let's talk how FINPR can help you with Web3 marketing & PR
Blog

Top Crypto VC Funds: Who Invests In Web3 In 2023

Top Crypto VC Funds: Who Invests In Web3 In 2023
Top Crypto VC Funds: Who Invests In Web3 In 2023
The ever-evolving landscape of the crypto and blockchain space has been attracting significant interest from various stakeholders. One group that has played a pivotal role in fostering the growth of this industry is venture capital (VC) funds.
These professional investors provide financial backing, strategic guidance, and industry connections to help startups grow and succeed. In the crypto and blockchain sector, VC funds have been instrumental in supporting and driving the development of numerous projects that are shaping the future of finance and technology.
This blog post provides an in-depth look at the top venture capital funds investing in the crypto and blockchain industry, their background, investment strategies, some notable success stories, and their impact on the ecosystem.

10 Best Crypto VC Firms

A16Z Crypto

A16Z Crypto
A16Z Crypto is a venture capital fund that has been investing in crypto and web3 startups across all stages since 2013. The fund is part of Andreessen Horowitz (also known as "a16z"), a private American venture capital firm founded by Marc Andreessen and Ben Horowitz in 2009. The firm's investments span various industries, including mobile, gaming, social, e-commerce, education, and enterprise IT (including cloud computing, security, and software as a service).
A16Z Crypto has been a major player in the crypto space, with a keen focus on backing innovative startups that are pushing the boundaries of decentralized technologies. Some of their notable investments include Coinbase, MakerDAO, Compound Labs, Celo, Dfinity, and Filecoin. By providing financial support and strategic guidance to these companies, A16Z Crypto has helped shape the industry's future landscape.

Paradigm

Paradigm - site image
Paradigm is a research-driven technology investment firm that invests in, builds, and contributes to companies and protocols across various funding stages, with investments ranging from $1M to over $100M+. The firm often gets involved in the earliest stages of a project and continues to support its portfolio companies over time. With a deeply hands-on approach, Paradigm assists projects in reaching their full potential, from the technical (mechanism design, security, engineering) to the operational (recruiting, go-to-market, legal, and regulatory strategy).
Founded by Fred Ehrsam (co-founder of Coinbase) and Matt Huang (former partner at Sequoia Capital), Paradigm has quickly emerged as a leading VC fund in the crypto space. Some of their notable investments include Uniswap, Chainlink, Optimism, and StarkWare. By investing in cutting-edge decentralized technologies and protocols, Paradigm is contributing to the growth and maturity of the crypto ecosystem.

Pantera Capital

Pantera Capital - site image
Pantera Capital is the first U.S. institutional asset manager focused exclusively on blockchain technology. Founded in 2013 by Dan Morehead (former CFO and Head of Macro Trading at Tiger Management), Pantera has been at the forefront of investing in digital assets and blockchain companies, providing investors with the full spectrum of exposure to the space.
Pantera launched the first cryptocurrency fund in the U.S. when bitcoin was at $65/BTC in 2013. The firm subsequently launched the first blockchain-focused venture fund and, in 2017, became the first to offer an early-stage token fund. As of May 31, 2023, Pantera had $3.5bn in assets under management, with three fund strategies, 75% of deals led (Blockchain Fund), 100 venture investments, 110 early-stage token investments, and 40% of investments outside the U.S.
Some of Pantera's most notable investments include Circle, Ripple, Solana, Bitstamp, Zcash, Brave, and 0x. By investing in a diverse range of crypto and blockchain projects, Pantera Capital has established itself as one of the premier venture capital funds in the space.

Draper Associates

Draper - site image
Founded in 1985 by Tim Draper, Draper Associates is a seed-stage venture capital firm that helps entrepreneurs drive their businesses to greatness. Originally established as Tim Draper's personal investment vehicle, Draper Associates opened its doors to outside Limited Partners with the launch of Draper Associates V in 2015.
In the crypto and blockchain space, Draper Associates has made a significant impact by backing promising early-stage startups. Some of their noteworthy investments include Coinbase, Ledger, Tezos, Bancor, and Boost VC – an accelerator program focused on blockchain startups founded by Adam Draper.
As a result of their early involvement and support for disruptive projects in the sector, Draper Associates has played a crucial role in shaping the crypto and blockchain ecosystem.

Polychain Capital

Polychain - site image
Polychain Capital is an investment firm committed to exceptional returns for investors through actively managed portfolios of blockchain assets. Founded by Olaf Carlson-Wee, the first employee of Coinbase, the firm believes in the emergence of Bitcoin and subsequent blockchain technologies that have generated a new digital asset class based on mathematical properties.
Polychain Capital employs a diverse range of strategies, including active trading, algorithmic market-making, and long-term venture investments. By leveraging deep industry knowledge, technical expertise, and strong relationships with leading crypto projects, Polychain has built a reputation for identifying and investing in high-potential startups.
Some of their notable investments include Compound, MakerDAO, Filecoin, and Algorand. Through their financial support and strategic guidance, Polychain Capital has played an essential role in promoting innovation in the crypto and blockchain space.

Blockchain Capital

Blockchain Capital - site image
Blockchain Capital is a leading venture firm in the blockchain industry, founded in 2013 by Brock Pierce, Bart Stephens, and Brad Stephens. With a primary focus on blockchain-enabled technology companies, Blockchain Capital has been a pioneer in the space and has built a diverse portfolio of investments.
The firm is known for its rigorous investment process, which involves evaluating potential investments based on their technology, team, market opportunity, and business model. By investing in promising projects that are pushing the boundaries of blockchain technology, Blockchain Capital has played a critical role in driving innovation within the industry.
Some of their notable investments include Circle, Ripple, Kraken, BitGo, Chain, and Block.one. Through their support of these companies and many others, Blockchain Capital has contributed to the growth and success of the crypto and blockchain ecosystem.

Digital Currency Group (DCG)

DCG - site image
Digital Currency Group (DCG) is an investor and operator in the crypto industry that has been investing since 2012. Founded by Barry Silbert with HQ in Sanfrancisco, DCG has made over 200 equity investments, 50+ fund investments, and holds 30+ token & digital asset holdings across a wide range of areas such as payments, privacy, stablecoins, trading tools, platforms, wallets, custody, Web3 infrastructure, banks, blockchains - L1s & L2s, data, analytics, DeFi, enterprise blockchain, exchanges, identity, compliance, security, metaverse, NFTs, and gaming.
By supporting early-stage startups and established companies alike in various facets of the crypto ecosystem, DCG has played a significant role in shaping the industry's growth and development. Some of their notable investments include Coinbase, Chainalysis, BitPay, Blockstack (now Stacks), and Decentraland.

Union Square Ventures (USV)

USV - site image
Union Square Ventures (USV) is a thesis-driven venture capital firm founded in 2003 by Fred Wilson and Brad Burnham. Since its inception, USV has invested in over 100 companies that use the power of the internet to reshape markets. The firm has backed several successful companies, such as Twitter, Tumblr, Etsy, and MongoDB, and has a strong focus on large networks of engaged users, infrastructure for the new economy, and enablers of open decentralized data.
In the crypto and blockchain space, USV has made strategic investments in projects that align with their broader investment thesis. Some of their notable investments in the sector include Algorand, Arweave, Axoni, Circle, Coinbase, Dapper Labs, Filecoin, and Polkadot.
Through these investments, New York-based Union Square Ventures has demonstrated its commitment to supporting innovative startups in the crypto and blockchain industry.

Coinbase Ventures

Coinbase Ventures - site image
Coinbase Ventures is the investment arm of Coinbase, one of the world's largest and most trusted cryptocurrency exchanges. Founded in 2018, Coinbase Ventures invests in exceptional founders who share Coinbase's mission of creating more economic freedom for the world. The firm backs entrepreneurs working to advance the crypto/Web3 ecosystem and support Coinbase's mission.
Coinbase Ventures has already invested in hundreds of teams building a wide range of projects, including layer 1 protocols, Web3 infrastructure, centralized on-ramps, decentralized finance, NFTs, metaverse technologies, developer tooling, and more. Some notable investments include Compound, Etherscan (Ethereum explorer site), OpenSea, and Uniswap.
By financially supporting and providing strategic guidance to these innovative projects, Coinbase Ventures is actively contributing to the growth and development of the broader crypto and blockchain ecosystem.

Sequoia Capital

Sequoia - site image
California-based Sequoia Capital is a renowned venture capital firm that helps daring entrepreneurs build legendary companies. Founded in 1972 by Don Valentine, Sequoia Capital has a long history of partnering with entrepreneurs to drive their ideas, products, and services to market. The firm has backed some of the most successful technology companies in history, including Apple, Google, Oracle, and Cisco.
In recent years, Sequoia Capital has turned its attention to the crypto and blockchain space, recognizing the potential for decentralized technologies to transform various industries. Some of their notable investments in this sector include Blockstack (now Stacks), Chain, Chia Network, DFINITY, Fireblocks, and Sky Mavis (creators of Axie Infinity). They practically are interested in lots of blockchain-based Web3 projects.
Through its financial backing and strategic guidance for these innovative projects, Sequoia Capital has become an influential player in the crypto and blockchain industry.

Bonus: 5 More Crypto Venture Capital Firms

Crypto market is constantly changing. Since first crypto winter of 2018 landscape of crypto investment space have changed as well. So of VC funds stoped fundraising new money from investors, others started focusing on investments in crypto only on Series A, and others - on Series B. Lots of venture capitalists even stoped investing in early-stage projects or in projects at incubation stage. And while some were reducing crypto in their portfolio, others were doing vice versa.
We’ve added here 5 more crypto VC funds who proved to be also among top private equity investors on blockchain market.

Binance Labs

Binance Labs - site image
VC division of world’s biggest crypto exchange, Binance.

GGV Capital

GSV - site image
Based in Menlo Park, California, the U.S. Among their portfolio investments are Animoca Brands, Trust Token, The Block, etc.

Multicoin Capital

Multicoin Capital - site image
Texas-based fund with investments in Algorand, Bakkt, CabinDAO, Dfinity, Flow and FTX (yep, that was the bad one).

3AC (Three Arrows Capital)

3AC - site image
Unlike other funds in our list who are based in U.S. this one HQ are in Singapoure.

AU21 Capital

AU21 Capital

How VC Funds Evaluate Crypto Projects for Investment?

Venture capital funds have various criteria when evaluating potential investments in the crypto and blockchain space. Some key factors they consider include:
  • Technology: Assessing the project's underlying technology and its ability to solve real-world problems or enable new capabilities
  • Team: Evaluating the founding team's expertise, background, and ability to execute on their vision
  • Market potential: Analyzing the project's target market, growth prospects, and competitive landscape
  • Tokenomics: Understanding the project's token model, distribution, and token utility
  • Legal/regulatory compliance: Ensuring the project adheres to relevant laws and regulations in its jurisdiction(s)

The Role VC Funds Play in Portfolio Companies

Venture capital funds play a crucial role in their portfolio companies by providing:
  1. Financial backing: Injecting capital to support the project's growth and development
  2. Strategic guidance: Assisting with strategic decision-making, business development, and go-to-market strategies
  3. Industry connections: Leveraging established industry networks to support partnerships, customer acquisition, and talent recruitment
By fulfilling these roles, VC funds can help drive the success of their portfolio companies in the highly competitive crypto and blockchain space.

Successful Exits and Multi-Baggers

Venture capital funds in the crypto and blockchain space have seen a number of successful exits and high-return investments. These success stories highlight the significant potential for growth and wealth creation within the industry. Some examples include:
  • Coinbase: Both A16Z Crypto and Union Square Ventures were early investors in Coinbase, which went public in 2021 with a market capitalization exceeding $85 billion at the time of listing.
  • Chain: Acquired by Lightyear Corporation (a subsidiary of Stellar Development Foundation) in 2018, Chain investors, including Blockchain Capital and Sequoia Capital, saw their investments pay off through this strategic acquisition.
  • Bitstamp: Pantera Capital was an early investor in Bitstamp, one of the world's longest-standing cryptocurrency exchanges. In 2018, Bitstamp was acquired by Belgium-based investment company NXMH, resulting in significant returns for its investors.

Risks and Challenges for VC Funds in the Crypto Space

While venture capital funds can drive significant returns by investing in innovative crypto and blockchain projects, they also face unique risks and challenges, such as:
  1. Volatility of digital assets: The highly volatile nature of cryptocurrencies can make it challenging for VC funds to manage their portfolio value and risk exposure.
  2. Regulatory uncertainties: The evolving regulatory landscape for crypto assets and blockchain technology can create compliance challenges for both VC funds and their portfolio companies.
  3. Scaling and adoption challenges: Many crypto projects need to overcome scaling limitations and drive user adoption in order to succeed – a complex task that can make or break a startup.

The Future of VC Investments in Crypto and Blockchain

The future outlook for venture capital investments in the crypto and blockchain space remains promising. As the industry continues to mature, more institutional investors are expected to enter the space, attracted by its growth potential and transformative power. Key trends and projections for VC investments in the sector include:
  • Increased participation from traditional VC funds: As the crypto and blockchain space gains mainstream acceptance, more traditional venture capital firms are likely to start investing in the sector.
  • Focus on infrastructure and decentralized applications (dApps): VC investments will likely target projects that build upon the core infrastructure of blockchain networks (e.g., layer 1 protocols) and decentralized applications that solve real-world problems.
  • Continued investment in DeFi and NFTs: Decentralized finance (DeFi) and non-fungible tokens (NFTs) have experienced explosive growth in recent years and will likely continue to attract significant VC investment.

Conclusion

Venture capital funds have played a vital role in the growth of the crypto and blockchain industry, supporting innovative startups, driving technological advancements, and fostering the development of the broader ecosystem. As the industry continues to evolve, VC funds will remain key players in shaping its future trajectory. With a focus on due diligence, long-term investment strategies, and an eye toward emerging trends, venture capital investments in the crypto and blockchain space will continue to drive innovation and growth for years to come.