- Blockchain investment firm CoinFund has raised $83 million for a third crypto fund.
- CoinFund has previously invested in projects such as Dapper Labs, The Graph, polkadot and Rarible.
- The CEO breaks down the investing strategy for the fund and his outlook for the crypto VC ecosystem.
- See more stories on Insider’s business page.
Blockchain investment firm CoinFund has raised $83 million for its third venture capital fund in an oversubscribed offering backed by venture firm Venrock Partners as well as a number of institutional allocators and leading crypto founders.
The crypto landscape is seeing a lot more volatility right now. A number of major tokens including bitcoin have lost 50% in value just a couple of months after hitting all-time highs in April – the point at which exchange Coinbase went public.
Regulatory concerns and a crackdown on mining in China ignited a sell-off. Bitcoin is currently trading around $29,700 struggling to find support at the $30,000 level.
However, institutional investors aren’t deterred by the volatility, or the retreat from record highs. They’re starting to take the industry much more seriously, CEO and founder of 7-year-old CoinFund Jake Brukhman said.
“Today, more than 50% of our capital across the firm comes from institutional investment,” Brukhman said. “We think that’s going to continue based on our conversations with these folks, they see the blockchain space is similar, or analogous to the internet-era disruption. They’re taking a long-term view.”
The third fund will focus on the early stages of mainstream crypto adoption, so products and services that are geared towards the end consumer and end-consuming businesses.
CoinFund’s first fund in 2015 looked beyond bitcoin at a time when everyone was very focused on bitcoin. The second fund, which launched in 2018, was focused on decentralized protocols and applications with fundamental value, rather than on the initial coin offerings (ICOs) that were all the rage at the time.
The firm’s success in scoring major investment deals comes in part from management’s technical expertise.
“We’re a pretty technical set of folks, we understand the tech deeply,” Brukhman said. “And that informs how we invest and what recommendations we make.”
Since launching in 2015, CoinFund has grown in tandem with the blockchain space, expanding from a team of two to a team of 18.
“We are a very strategic fund,” Brukhman said. “We help teams with everything from technology issues that they face to hiring to positioning within their trends and go to market strategies, and of course, forming partnerships across the industry with investors and partners.”
An active start to 2021
This strategy is paying off. In the first half of this year, the company either led, or co-led, eight deals.
Two examples of recent deals that align with the third fund’s philosophy of focusing on the end user is a lead investment in Community Gaming, a company that creates automated esports tournaments, and an investment in Zapper, a user-friendly decentralized finance dashboard.
“I feel like we have a great reputation in this space as someone who works closely with teams, really as a strategic value-add investor,” Brukhman said. “And for that reason, many, many companies have chosen us as the lead”
This reputation means CoinFund gets a lot of inbound pitches from founders, but they also keep a strong presence at technology conferences and hackathons to find investment ideas.
Attending a hackathon in 2018 uncovered one of their biggest investments – The Graph – after observing how engineers were excited by the project.
“[Most VCs] didn’t understand it, but we were pretty plugged into the technical side of things, we were able to source that deal and became one of the earliest investors in what is now a key piece of infrastructure in the ethereum ecosystem and is now expanding across other networks as well,” Brukhman said.
Crypto VC competition heats up
Brukhman expects this to continue to be an advantage going forward. He’s not threatened by the sudden rise of interest from traditional VCs to get into the space.
Legendary investment firm Andreessen Horowitz (a16z) recently launched a $2.2 billion crypto fund.
And while a16z got into crypto investing early with stakes in Coinbase and Ripple, several VCs told Insider reporter Margaux MacColl that firms that haven’t historically invested in crypto are now scrambling to catch up and get into deals.
“Well, I would say that throughout the years, it’s always been extremely difficult to get into deals,” Brukhman said.
And although later-stage VC firms might be catching up to the blockchain technologies, they are often unable to answer company questions around being a strategic partner and understanding the technology.
“There’s a much smaller number of crypto investors who are at the level that we are at in terms of our understanding the space, the issues, the best practices, how to work with founders, how to add value, how to be strategic, and for that reason we’re constantly getting into rounds,” Brukhman said.