Crypto VC’s to Crash: “YOLO”

Despite cratering crypto markets and a slowdown in venture funding, crypto VC’s are upping the ante. From a report out yesterday in Reuters:

Even as the crypto sector shivers in the bleak winter, venture capitalists are pouring money into digital currency and blockchain startups at a pace that’s set to outstrip last year’s record.

In the first half of the year, VCs bet $17.5 billion on such firms, according to data from PitchBook. That puts investment on course to top the record $26.9 billion raised last year, a warmer and happier time for bitcoin and co.


Get the blog before anyone else…subscribe!


Overall US venture funding fell in the first half of the year. But US crypto investments are on pace to increase almost 50% over 2021.

Why are crypto VC’s behaving so differently? Because they don’t have much choice.

Numerous venture firms recently raised huge crypto funds. Predictably, Andreessen Horowitz is at the front of the conga line, raking in $4.5 billion in May.

Electric Capital pulled in $1 billion, and Bain Capital launched a $560 million fund.

All that money has to go somewhere. But deploying giant crypto funds today could be a big mistake.

Giant funds have to focus on late stage deals. After all, there’s no way a16z is going to hand out 1,000 seed-stage checks of $4.5 million.

It’s simply more meetings, diligence, and oversight than any firm could handle.

So they’ll put a lot of that in late stage megarounds. Since the startups are close to going public, their valuations depend on public markets.

But markets in public tech stocks and crypto tokens are extremely unpredictable right now.

These firms may pay prices that public markets soon find laughable.

If that weren’t bad enough, the SEC could soon be breathing down the necks of VC firms.

Yesterday, the SEC announced that it’s investigating Coinbase for offering unregistered securities. Crypto VC’s have likely sold similar securities.

The crypto venture market looks seriously overheated. I see companies with no product or customers getting valuations of $100 million or more regularly.

You don’t often see that in non-crypto deals. And there’s no reason why the rules should be any different for crypto.

I think crypto could have some awesome applications. Cheap international money transfer may be the best use case.

But thus far, speculation has been rife and useful projects few.

Meanwhile, I’m going to keep investing in great early stage companies with awesome products and happy customers. And if a crypto company can deliver that, a salute!

More on tech:

Inside the Seed Funding Slowdown

Why Technical Founders Win

The Top 5 Things I’ve Learned from Angel Investing

Get the blog before anyone else…subscribe!

If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Misfits Market

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order.

One thought on “Crypto VC’s to Crash: “YOLO””

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s