Venture capital giant Andreessen Horowitz, also known as a16z, has been affected by the ongoing crypto winter, with the company’s flagship cryptocurrency fund losing nearly half of its value in the first six months of 2022.
The declining performance is a massive difference from the gains experienced last year when the company’s investments grew over 1,000%.
A16z Not Immune to Crypto Winter
According to the Wall Street Journal on Wednesday (October 26, 2022), a16z’s flagship crypto fund, launched in 2018, has seen a sharp drop in value at 40%, as revealed by anonymous sources. The decline is significant compared to other venture funds, which shed between 10% and 20%.
Previously, the VC’s first crypto fund saw its initial investment grow almost 11-fold as of the end of 2021. Following the success of its crypto bets, Andreessen Horowitz went ahead to create more funds, launching a third one worth $2.2 billion in June 2021 and the latest in May 2022.
The decrease is a result of the ongoing market downturn, a decline in consumer demand for some of the a16z-backed crypto companies, and increased regulatory scrutiny on startups backed by some of the funds. Consequently, the VC has reduced its involvement in cryptocurrency deals. In Q3 2022, a16z participated in nine crypto startup deals, compared to 26 deals in Q4 2021.
Also, the bear market adversely affected the company’s cryptocurrency investments. In June 2021, a16z, along with Polychain Capital, led Solana’s private token sale, which raised over $314 million.
However, Solana has seen an 80% drop in its value since the start of the year. Andreessen Horowitz’s bet on Coinbase seems to have also gone awry, with the VC losing nearly $3 billion of its remaining stake in the major crypto exchange following the collapse of the exchange’s stock price.
But a16z general partner Chris Dixon, who has been a crypto proponent, seems unfazed by the current market condition, stating that it is instead an opportunity to continue investing in cryptocurrency startups.
“What I look at is not prices. I look at the entrepreneur and developer activity. That’s the core metric.” – Dixon added.
2022’s Harsh Crypto Winter
This year is by no means crypto’s first bear market. However, the market is larger today than it was during the last bear winter that lasted between 2018 and 2020.
The prices of major crypto assets such as bitcoin and ether tanked significantly in 2022 after reaching all-time highs in November 2021. This year-long downtrend has caused companies in the industry to downsize, reduce spending, and even file for bankruptcy.
Also, amid the harsh market condition, there has been an increase in the number of top executives leaving their companies. As previously reported by CryptoPotato, Alex Hoeptner, BitMEX CEO, stepped down from his position. Crypto’s revolving door in the C-suite has impacted numerous companies and is even the subject of regulatory scrutiny in the United States.