Crypto.com, a popular cryptocurrency exchange, has increased the fund size of its venture arm to $500 million as it seeks to more aggressively support early-stage startups to help the burgeoning ecosystem grow after similar moves by competitor Binance , Coinbase and FTX have been undertaken.
Crypto.com Capital’s expansion comes less than a year after the Singapore-headquartered company unveiled its first $200 million fund. The fund, unlike many of its peers, has no LPs (meaning it’s funded entirely off the company’s balance sheet).
The maiden fund, whose individual checks total up to $10 million, has been used to support about 20 startups so far, including YGG SEA, multi-chain crypto portfolio tracker DeBank, cross-chain token Infrastructure Efinity and Ethereum scaling solution Matter Labs.
Crypto.com will continue to focus on supporting early-stage startups, Jon Russell, who joined the firm as a general partner this month, said in an interview with TechCrunch.
With the fund, Crypto.com is largely focused on gaming, decentralized finance, and startups innovating for cross-chain solutions. But he warned that the industry could change and expand, as it has in recent years, into areas “we don’t know about,” so the firm is keeping a close eye on everything.
Tuesday’s announcement also highlights the growing involvement of cryptocurrency exchanges as rainmakers — and beneficiaries — of the ecosystem that encompasses the industry in which they operate.
FTX, which backed over 15 startups last week announced a $2 billion crypto fund. Its founder, Sam Bankman-Fried, also owns Alameda Research, a venture firm that has backed nearly 100 web3 startups.
Coinbase Ventures, the investment arm of the only publicly traded crypto exchange, and Binance, the world’s largest cryptocurrency exchange by trading volume, are also among the most prolific investors in the Web3 space.
Venture Investments in Crypto/Web3 in 2021 by Category (Image credit: Galaxy Digital)
Funding activity in this space is at an all-time high, even though most of the above names often co-invest in startups. VCs invested more than $33 billion in crypto/Web3 startups in 2021, more than all previous years combined, wrote Galaxy Digital, another prolific investor in the space, in a recent report.
“Valuations in the crypto/blockchain space were 141% higher than the rest of venture capital in the fourth quarter, underscoring a founder-friendly environment and intense competition among investors for deal allocations,” the report added.
Numerous venture capital firms have also raised new funds for their crypto investments. Just last year, Andreessen Horowitz added a $2.2 billion crypto fund, paradigm introduced a $2.5 billion fund, and Hivemind Capital Partners announced a $1.5 billion fund. Katie Haun, who co-led a16z’s $2.2 billion crypto fund, did just that left the firm to launch her own crypto-focused fund.
Russell — a former journalist who previously worked at TechCrunch, The Next Web, and The Ken — said Crypto.com backs startups to help the ecosystem grow.
“If you’re in the industry, it’s in your interest to help companies grow in the ecosystem and the ecosystem itself grow,” he said. (It should be noted that Solana, Avalanche, Polkadot — as well as some of their key investors — are also aggressively backing startups building applications for the native blockchains.)
The startups that Crypto.com supports are not required to list their tokens on Crypto.com over their competitors or offer any other preferential treatment to the exchange, he said. The trading team also doesn’t have a soft spot for the investment arm’s portfolio companies, he added.
(What’s up with the career move? “I’ve been curious about crypto for a number of years, but I didn’t want to dive full-time. This project appeals to me because Crypto.com is ambitious, but still doing things the right way. There certainly are currently.” a lot of hype and hot air in crypto and Web3, but it’s impossible to ignore the talent pouring into the industry,” he said.)
Crypto.com, which began life as a blog by Professor Matt Blaze (the sold the domain to the crypto exchange), has expanded aggressively over the past year as it attempts to woo more users. The Singapore-based company last year agreed to pay more than $700 million for the naming rights to the Staples Center in Los Angeles. The downtown Los Angeles complex was renamed the Crypto.com Arena for the next 20 years.
The firm, which bills itself as the “fastest-growing” crypto exchange, said at the time of the announcement that the move was aimed at bringing cryptocurrencies mainstream. Crypto.com, which processes over $2.5 billion in daily trading volume, also partnered with Hollywood star Matt Damon last year to promote the brand and cryptocurrencies.
The ad, starring Damon, equated buying crypto tokens and NFTs with one of the greatest and boldest achievements in human history. Exaggeration to be sure, but having the mainstream American actor as a celebrity sponsor of Crypto.com has certainly helped bring the trading platform and everything it sells into the mainstream. The ad went viral and also drew criticism for being pathetic.
