Andreessen Horowitz has a new crypto fund — and its first female general partner is running it with Chris Dixon

Silicon Valley powerhouse Andreessen Horowitz (A16z) has some big, and bigger, news today. First, it closed a dedicated crypto fund late last week from a subset of its limited partners, who’ve provided the firm with $300 million in capital commitments. The fund had become the worst-kept secret in the venture industry, largely because so many other venture firms are trying to figure out their own related strategies and have been watching closely A16z’s slow but growing number of investments in crypto-related startups over the past five years.

Nine-year-old Andreessen Horowitz has also, at long last, brought aboard its first female general partner: Katie Haun, whose star has quietly been rising in the Bay Area over for the past couple of years. Haun — who is leading Andreessen’s crypto fund with general partner and renowned crypto enthusiast Chris Dixon — is kind of a big deal, so it’s no surprise that A16z nabbed her.

Among her other many accomplishments, Haun spent more than a decade as a federal prosecutor with the U.S. Department of Justice, where she focused on fraud, cybercrime, and corporate compliance no-no’s alongside the SEC, FBI, and Treasury. According to Haun’s bio, she was also the DOJ’s first-ever coordinator for digital assets, and she led investigations into the Mt. Gox hack and the task force that investigated and ultimately took down the online drug marketplace Silk Road. Haun is also a lecturer at Stanford Business School and she’s a director on the board of the digital exchange Coinbase, which was backed early on by a16z and where Haun got to know Dixon, who is also on the board. (Both are keeping their seats.)

We talked with Dixon earlier today to learn more about the fund, including how he and Haun are thinking about “exits” in the cryptocurrency world when there haven’t been a whole bunch. Our conversation has been edited lightly for length.

TC: You’ve raised $300 million from some of the same investors who fund Andreessen Horowitz’s flagship funds. Will this fund in any way impact the next flagship fund? Does the firm intend to spend more time on crypto and less on other, more traditional investments?

CD: No, we’re still full-speed ahead on all traditional areas. The fund is a way for us to double down on crypto and not in any way reduce our commitment to enterprise, consumer, or bio investing.

TC: Can this new fund invest in other investors’ crypto funds, as Union Square has been actively doing?

CD: It could, but we don’t plan to. We invested in Polychain and a few others about one-and-a-half years ago when we were figuring out our new crypto strategy. Now, with the full fund and investing in both early-stage and later-stage in crypto projects, the mandate is to be investing directly, though [we] never say never to anything.

TC: How many crypto investments has the firm made over the years, and will any of them be tucked into this new fund?

CD: We’ve made about 20 crypto investments over the last five years. [Bitcoin competitor] Ripple was my first investment in January 2013 and Coinbase later in 2013, then we did, which became Earn [and sold earlier this year to Coinbase]. We did a few others — OpenBazaar and Mediachain —  then the space got a lot more interesting with the rise of Ethereum and talented entrepreneurs entering the space. Those [investments] will remain in the funds where we put them in.

TC: Have you made investments from this new fund?

CD: We’re in process with a few, but nothing that’s finalized.

TC: How have you been structuring these investments?

CD: Some are equity investments, but with token provisions in investments [meaning if the teams create a token, investors get access to them]. SAFTs are another thing we’ve done. We’ve also done direct, over-the-counter purchases of Bitcoin and Ethereum. But we were running into limits with what we could do out of the main fund. Now we’ll be able to do all sorts of things, as long as [we’re talking with] great entrepreneurs who are working on big and important projects with economic terms that make sense.

TC: What’s an exit going to look like with these deals?

CD: It’s a good question. To date, we’ve never sold any of our crypto assets. A lot of people in the market are day trading but we very much see this as investing. We’d expect any investment to have a five- to ten-year holding period. Some of these projects could have tokens that are freely tradable, so there’s the potential to have an exit that way.

The most likely outcome is we invest in an early-stage project and we receive coins or tokens in exchange for [our commitment] and if the project becomes successful, those digital assets appreciate when that thesis is played out. But if we invest in some project that will be used by hundreds of millions of people, we wouldn’t want to exit until that’s realized.

TC: Presumably, you will not be paying your investors back in tokens?

CD: No. We have LPs who prefer fiat money.

TC: How do you think about ownership stakes in these companies?

CD: The traditional venture model of owning 10 to 20 percent of a company isn’t realistic in this world. We do think that if a project is very early stage, the valuation should reflect that. But we’re thinking more in terms of value: can this investment be big enough that it returns the fund on its own? So we don’t think in terms of percentages but value. We think this next wave of companies could be 10 times as big [as their predecessors].

TC: How are you thinking about ICOs? Are you investing in companies that will later sell shares to non-accredited investors?

CD: If done the right way, we think democratizing access is a great concept. We’re fans of the idea that more people can participate. But we don’t think [ICOs as they’re widely considered today] are regulatory compliant and we’ve never gotten involved in one of those. We participated in Filecoin, for example, but [its offering] was made only to accredited investors.

TC: What about conflicts? It’s very early days, so I wonder if the rules around backing similar companies are different. In traditional VC, obviously, it’s pretty much verboten.

CD: The norm in the crypto world is different than the traditional venture world. Typically in VC, you won’t invest in a direct competitor. But with crypto, there’s a different ethos. It’s more cooperative. People would rather grow the pie together rather than fight over the size of the pie. We always make sure that projects are okay with any investments that we’re considering that might be overlapping. But in emerging spaces, it’s hard to think about categories as it’s kind of fluid. I’d say standards are evolving, but I’d also say it’s okay to [back more than one currency, for example].

TC: How about so-called stable coins, specifically? You backed Basis, a company that’s building a price-stable currency, which the world very much needs in order for cryptocurrencies to come into wider use. Do you think there’s room for more than one stable coin?

TC: We’ve backed both Basis and Maker, though the mechanics are pretty different and we think can be complementary. We also spoke with both when we made our investments.

We do think it’s a really important idea, to have a coin pegged to something like the U.S. dollar in order to make the experience more mainstream and accessible, [versus a world rife with] these volatile coins. We think it’s such an important piece of infrastructure that there could be multiple winners.

Orchid Labs is in the process of raising $125 million for its surveillance-free layer atop the internet

Orchid Labs, a San Francisco-based startup that’s developing a a surveillance-free layer on top of the internet, has raised a bunch of funding, according to a newly processed SEC filing that shows the year-old startup has closed on $36.1 million. The money comes just five months after Orchid closed on a separate, $4.5 million in funding from investors, including Yes VC, cofounded by serial entrepreneurs Caterina Fake and Jyri Engeström.

Others of its earliest backers include Andreessen Horowitz, DFJ, MetaStable, Compound, Box Group, Blockchain Capital, and Sequoia Capital, according to its site.

The stated goal of the Orchid is to provide anonymized internet access to people across the globe, particularly individuals who live in countries with excessive government oversight of their browsing and shopping. Part of the point also seems to be to insulate users from the many companies that now harvest and sell their data, including walled gardens like Facebook and other giants like AT&T.

In a word where one assumes the Cambridge Analytica scandal is merely the tip of the iceberg when it comes to data abuse, it’s easy to see the project’s appeal. So far, says the filing, the company has raised that $36.1 million via a SAFT agreement, an investment contract offered by cryptocurrency developers to accredited investors (42 of them in this case).

But the filing shows a target of $125,595,882 million, and based how hot particular blockchain ideas are getting, and how aggressively they’re being funded (see the Basis deal earlier this week), you can imagine more money will flow to the company if it hasn’t already. That’s also an awfully specific target on its filing.

We’ve reached out to the company for more information. You can also check out its white paper if you’re curious.

In the meantime, it’s worth noting that Orchid has five founders with varied and interesting backgrounds. They include Stephen Bell, who spent seven years as a managing director at Trilogy Ventures, shopping for opportunities in China, before returning to the states in 2015; Steve Waterhouse, long an investor with the digital currencies-focused firm Pantera Capital; former Ethereum Foundation developer Gustav Simonsson; software engineer Jay Freeman; and Brian Fox, who is credited with building the first interactive online banking software for Wells Fargo in 1995 and who was the first employee of the legendary programmer Richard Stallman’s Free Software Foundation, among other things.

Between the money involved, the mission, and the founders, this one looks like a Big Deal. Stay tuned.

CryptoKitties raises $12M from Andreessen Horowitz and Union Square Ventures

CryptoKitties, the virtual collectible kitten game that turned into a viral sensation has raised $12M in funding and will be spun out from Axiom Zen, the Vancouver and San Francisco-based design studio that originally built the game.

The round is being led by Andreessen Horowitz and Union Square Ventures, both of which have quickly developed a reputation for backing fast-growing cryptocurrency startups like Coinbase. A bunch of notable angels also participated, including Naval Ravikant (CEO and founder of AngelList), Mark Pincus (founder of Zynga) and Fred Ehrsam (founder of Coinbase) among others.

So what are CryptoKitties? They’re essentially digital collectibles built on top of the Ethereum blockchain. Each one is unique and has certain attributes that make them rare and desirable, almost like a digital beanie baby. And users are spending tons of real money on them, with some of the rarest kitties fetching over $100,000 when the game first launched.

While the startup is being pretty mum on what the future looks like and what they’re planning on using this funding for, it’s almost certain that the long term goal is to expand beyond CryptoKitties and use the same Ethereum ERC-721 collectible standard to create other game experiences, especially ones that can be played by regular people who are unfamiliar with cryptocurrency.

To this note, Fred Wilson of USV quickly outlined the firm’s thesis behind investing in CryptoKitties, saying “we think digital collectibles is one of many amazing things that blockchains enable that literally could not be done before this technology emerged. We also think digital collectibles and all of the games they enable will be one of the first, if not the first, big consumer use cases for blockchain technologies.” 

If you want to find out more about how CryptoKitties works check out our original story here.