What Can VCs Get from the Crypto Industry?

Venture capital (VC) firms have their eyes set on the crypto industry and they surely have a lot to gain.


Venture capital firms capitalize on potential. Given that tech investors believe there is a lot of potential in the crypto industry, it’s only logical that VC firms jump in the crypto bandwagon.

However, investing into the crypto industry isn’t that easy. A lot of thought and planning has to be put into the decision, especially given the volatility for which cryptocurrencies are known.

Below, we discuss how a VC firm can capitalize on the crypto industry as well as the pros of cons of their options:

  • Launch a crypto fund

To launch a crypto fund, VC firms raise funds, segregate a set pool of capital, and invest it exclusively in crypto-related projects. They can invest in startups, initial coin offerings (ICOs), and even existing cryptocurrencies.

Launching a crypto fund is not unheard of. A good example would be Andreessen Horowitz with its new $300 million crypto fund.

The pros of this option include it being a way to circumvent a legal limitation on venture capital operations. VC firms are only allowed to hold up to 20 percent of their money in crypto. Another pro is that venture capitalists would be able to focus on what’s important to them.

The only problem with this option is the uncertainty of the industry itself. If the crypto industry would prove to be failure in the coming years, so would their investments.

  • Dedicate money from an existing fund for crypto

Instead of committing 100% to the crypto industry, VC firms can choose to just use some money in an existing fund on crypto-related projects.

While this option is good for attracting investors who want to venture into cryptocurrency but stay on the safe side of things, they will not be able to circumvent the 20 percent rule.

  • Invest in other crypto funds

This option allows VC funds to still have a taste of the crypto industry. This common strategy is just about investing in crypto funds that other people have set up.

This option gives VC funds the freedom to invest in multiple funds at the same time. But, given that they are merely just investors of another fund, they will not have power and control over how the fund is managed.


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