Many venture capital firms have emerged in the past few decades, often funding startups and investing in innovative projects all around the world. Recent technological breakthroughs resulted in skyrocketing demand for investments and venture capital. Today, more funds are concentrated in investment pools than ever before, representing a great opportunity for companies big and small.
The venture capital firm Andreessen Horowitz is preparing for something big. The firm is getting ready for its second-ever cryptocurrency investment fund which shall be worth $515m. This is an unprecedented event, overtaking the company’s 2018 fund worth a whopping $300m.
The report says that “two people briefed on the matter,” as experts and enthusiasts in the community are confused by the decision. The 2018 investment fund of $300m was a major success and the first significant step for the company into the crypto industry which is expanding fast with Bitcoin dominating the sector.
Many people do not know much about how do cryptocurrency markets work and why they matter. The first decentralized cryptocurrency Bitcoin was introduced back in 2009. The latter remains the most significant, well-known, and widespread virtual currency on earth, making headlines on a daily basis. Yet, the crypto market is ever-expanding with new currencies being launched more often than ever before. Smaller cryptos are gradually overtaking major ones as the interest in the market grows from year to year.
The pandemic could be a major challenge for the VC firm
However, the decision of Andreessen Horowitz is rather unclear amid the global coronavirus outbreak which has already infected more than 2.5 million people around the world while death toll nears 200,000. The pandemic is creating a whole range of serious problems for players in the financial industry while threatening even some of the strongest economies on earth.
The International Monetary Fund (IMF), as well as the world bank, have reported that the pandemic will cost the globe the biggest recession since the great depression. Billions around the world are ordered to remain home as scientists warn that creating the effective vaccine and then producing it will take up to 18 months. Some others say that the COVID-19 pandemic will change the way we live forever. Yet, everyone agrees that the world is bracing for the worst economic aftermath of any global event in almost 100 years.
Why could this be bad timing for Andreessen Horowitz?
The global pandemic is affecting everyone on earth as the scale of the current situation is absolutely unprecedented. Without any specific timeframe for the pandemic to fade away, the world has dived into the pool of uncertainty and political chaos. Many scientists are arguing that the novel coronavirus, unlike others we have known before, does not respond to temperature in any way. This could be true considering the immense spread of the virus in warm nations across southern Europe and the Americas. Yet, this is yet to be proved by scientists who are working ‘round the clock to discover new facts and characteristics about this invisible deadly enemy.
Not having a prognosis even for the nearest future makes it harder for many businesses and investors to act in the right way. Investors in major financial hubs around the world are panicking amid the falling indexes and strict lockdown measures which has stopped economies. Many of them have turned towards safe-haven assets and here is where cryptos jump in for their part.
Safe-haven assets are valuables that are bought by investors during uncertain times and market slumps or under particularly dangerous circumstances. Obviously, even the early stage of the pandemic caused many to turn towards safe-havens. Soon, many media sources were reporting that Bitcoin, the most well-known and influential virtual currency was gradually establishing itself as a safe-haven asset amid the outbreak.
This to some extent was true at the time as many investors found themselves trusting Bitcoin the most. The price of this dominant cryptocurrency was on a steep and a stable increase back then, bracing for the halving event coming in May. However, from that point on, this minor trend of the investor trust towards Bitcoin faded away.
Therefore, the decision to raise such a massive amount of money for crypto companies is rather risky during the crisis. The company has an extensive history in this niche, being one of the frontrunners in supporting crypto-based or related businesses. In 2013, Andreessen Horowitz was in charge of the fundraiser for the most popular US-based crypto exchange called Coinbase. This event raised $25m in Series B which represented the biggest sum for the crypto-operating company for the time being.
The biggest achievement yet for Andreessen Horowitz was the 2018 investment fund which raised $300m. The company aimed to spend this substantial amount of money on newly emerged cryptos, as well as early-stage ones such as Bitcoin. Moreover, they aimed to hold the assets for 10 years, significantly longer than other companies.
This extensive experience might be the cause of optimism for the announced fund in these unprecedented times.