Tech
Big Tech VCs have been making massive bets on cryptocurrencies, and they’re starting to pay off.
Over the years, cryptocurrency companies have attracted significant funding from traditional venture capital startups focused on the technology sector.
Who can forget the once-seemingly unstoppable cryptocurrency exchange FTX’s whopping $900 million raised in a Series B round in July 2021? At the time, the world’s second-largest cryptocurrency exchange was the talk of the town in Silicon Valley, with investors including Paradigm, Sequoia Capital, and SoftBank all vying for a slice of Sam Bankman-Fried’s $18 billion pie.
The second-largest crypto funding round on record was the $725 million Series B raised by blockchain gaming platform Forte in November 2021. NFT marketplace Sorare wasn’t far behind with its successful $680 million Series B round, also a Series B, which closed in September of that year.
Readers could be forgiven for thinking that those VCs wasted an incredible amount of money. As everyone knows, FTX investors had no choice but to write off their multi-million dollar stakes in that crypto exchange after its shocking collapse in late 2022. Meanwhile, the silence from Forte and Sorare has been deafening. A quick Google search reveals that Forte’s last major headline was in February 2022, with this rather unexciting story about how she managed to secure a Money Transmitter License and a BitLicense from the New York State Department of Financial Services.
Under the radar
But this kind of thinking belies the reality of the cryptocurrency industry, where it is not uncommon for startups to spend several years unnoticed, quietly focused on developing their products, far from the critical attention of the community and the specialized press.
The fact is that many cryptocurrency companies are making great strides, but they don’t always get the attention they deserve in an industry that prefers to revel in cryptocurrency tokens, Bitcoin evolutions, and the latest cyber attacks and multi-million dollar scams.
A good example of this is Space and timewhich represents a 20 million dollar bet from major VCs, including Microsoft’s M12, Framework Ventures, HashKey Capital, SevenX Ventures, and Foresight Ventures. Space and Time is the creator of a blockchain-based decentralized data warehouse platform and has had plenty of updates to share since closing its latest funding round in September 2022.
One of its most notable partnerships has been with OpenAI, the creator of the legendary ChatGPT chatbot, on a project to let regular users perform data analysis using natural language commands instead of the highly complex SQL programming language. Space and Time has also been expanding its network, recently launching the privacy-focused Layer-2 blockchain zKSync, while its relationship with Microsoft is also starting to bear fruit. Earlier this year, the company announced it had partnered with Microsoft Azure to launch a verifiable data indexer for developers to verify their AI training data.
Another cryptocurrency company that has been under the radar for a while is Filecoin, which is building a decentralized storage network as an alternative to traditional cloud-based storage offerings like Amazon Web Services. The company, whose supporters including Sequoia Capital, which made big promises to revolutionize the storage world back in 2017, when it raised a whopping $257 million through one of the largest ICOs in the cryptocurrency industry.
Clearly, Filecoin hasn’t managed to knock out the likes of Amazon, but that doesn’t mean it isn’t going somewhere, as a quick look at its lively blog page reveals. The company has been quietly going from strength to strength, with recent posts including the creation of a public goods design and development team, regular updates on its network growth, and the launch of a new storage service called Curio Storage among its recent successes. It’s the perfect example of a cryptocurrency company slowly but surely increasing its presence and importance.
We can also point to Immutable, the highly scalable gaming-focused Layer-2 Ethereum that has raised over $200 million from high-profile backers like Temasek, Animoca Brands, Tencent, Coinbase Ventures, Veem, and Google Ventures. Immutable has since emerged as one of the leading lights in blockchain gaming, partnering with companies like Ubisoft in an ongoing effort to build the next generation of more immersive AAA-style Web3 games. It’s all part of a concerted push by Immutable to attract traditional gamers to the space and establish blockchain as the standard for every video game.
It’s an ambitious goal, perhaps, but Immutable’s plans have so far gone smoothly. Ultimately, if it succeeds, that $200 million investment from a cohort of Silicon Valley VCs in March 2022 will look like one of the shrewdest bets they’ve ever made, such is the scale of the multibillion-dollar video game industry.
The bottom line
The cryptocurrency industry has attracted some significant funding from traditional tech-focused VC giants, but such is the nature of the cryptocurrency industry that it’s too early to tell whether those investments will pan out. But cryptocurrency is no different from any other segment of the tech industry in that while some startups will inevitably fall by the wayside, many others will grow into established giants that make their early investors very rich indeed.
With Web3 on the rise and the cryptocurrency sector making a comeback following Bitcoin’s gains earlier this year, Silicon Valley VCs may not have to wait long before they start seeing the fruits of their cryptocurrency-focused investments.
Disclaimer: The content of this site should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.