Electric Capital, a crypto venture capital firm, has made it to the big leagues.The Bay Area investment business announced on Tuesday that it has raised a total of $1 billion for the development of two new funds: a $400 million startup fund and a $600 million token fund.
It’s a step higher from Electric’s previous fund, a $110 million vehicle unveiled in August 2020, and cements the firm’s status as one of crypto’s venture kingmakers — but with a different strategy. Andreessen Horowitz (a16z) and Paradigm have both announced multibillion-dollar investments in recent months.
The funds will focus on decentralised finance (DeFi), non-fungible tokens (NFTs), decentralised autonomous organisations (DAOs), layer 1s, and blockchain infrastructure, according to a press statement sent to CoinDesk.
Curtis Spencer and Avichal Garg, co-founders of the funds, said in an interview that while the funds will evaluate a wide range of investments, they will focus on projects with a strong community focus and fair launch token allocation.
Retail investors have long objected to light vesting timelines and large venture capital commitments, claiming that these bootstrapping techniques harm typical market participants – and that these ownership models are anathema to blockchain’s open, permissionless ethos.
Projects with more community ownership, in Electric’s opinion, are also starting to look like better investments. According to Spencer, Electric aims to own no more than 10% of a project’s token supply and tends to own “1% -5 percent” of the networks it invests in.
Electric routinely stakes and locks its assets, such as its FRAX holding, according to Garg, and they bought a big percentage of that investment on the open market.
Although strong community allocations and the need to buy tokens on the market make investment more difficult in some aspects, Garg feels that long-term investing in a fledgling, high-growth industry still offers huge upside.
The funds’ structure also encourages long-term thinking. The liquidity suppliers to the new ventures, according to Garg, will be locked in for 10-12 years. He further stated that “roughly 90%” of the limited partners are NGOs, foundations, and university endowments, all of which are known for making long-term investments.