Web3 institutional investors are keeping busy regardless of the recent market turmoil. Last week a major fund announced another $450M for Web3 businesses, a global investment bank that advised over $3.5 trillion in transactions since inception announced the formation of a team focused on blockchain and digital assets, and an up-and-coming rival to Solana from the creators of Meta’s defunct Diem project received an additional $150M in funding, bringing their total funding for the 2022 up to $350M.
- Variant Fund will invest another $450M in Web3 companies
- Moelis & Company, a leading global investment bank, launches Global Blockchain Group
- Aptos Labs, a potential rival to Solana and Ethereum, raised $150M in a round led by FTX
- DSCVR, a Web3 decentralized social media (DeSo) company, raised a $9M seed round led by Polychain Capital
- Unstoppable Domains, an NFT domain provider and rival to Ethereum Name Service (ENS), raised a $65M Series A at a $1B valuation led by Pantera Capital
- Topl, an impact blockchain company, raised a $15M Series A round led by Mercury, Republic Asia, and Cryptology Asset Group
- Crypto SNACK, a developer of an iGaming token called SNACK, raised $50M from GEM Digital
- Quasar Finance, a Cosmos-based DeFi project, raised $6M
- Aurigami, a DeFi protocol on the Aurora network, raised $12M in a token round led by Dragonfly Capital and Polychain Capital
1. The next huge VC fundraise has arrived. Variant Fund will invest $450M into early stage Web3 companies through a $150M seed fund and a $300M opportunity fund. This is a major increase in fund size for the New York VC, with their prior 2 funds reaching $22.5M and $110M respectively. Variant Fund will focus on 1) DeFi, 2) blockchain infrastructure, 3) Web3 consumer applications, and 4) projects experimenting with new forms of ownership. Variant Fund is led by Jesse Walden, Le Jin, and Spencer Noon.
Combined with the launch of Andreessen Horowitz’s massive $4.5B crypto fund in May of 2022, it’s clear that the recent crash in crypto prices has not killed off the venture community’s appetite to support Web3. Along with this positive news, it’s worth keeping in mind that the recent trend for VCs is to make a higher number of small bets, as evidenced by Cruchbase’s report that H1 2022 crypto investments shrunk year over year in spite of showing an increase in total deal flow. When you look for opportunities to invest in the same projects as these mega funds, be aware of the size of their bets/investments relative to their total fund size. Venture capitalists are still diving into Web3, but they are diversifying.
2. A major global investment bank that advised over $3.5 trillion in transactions since inception announced the creation of a new team that will work exclusively on crypto. Moelis & Company (NYSE: MC) launched its Global Blockchain Group which will advise blockchain and Web3 companies.
This is encouraging to see because investment bankers get involved later in a company’s lifecycle than venture capital firms. As the market cap in the blockchain space grows and Web3 companies mature, M&A activity becomes inevitable and that is where investment bankers like MC step in. In 2021 Ken Moelis, the billionaire CEO of MC, compared the crypto market to the 1848 gold rush, and the recent market downturn has not changed his view about crypto.
3. An extremely well-funded potential rival to Solana and Ethereum and with a high-profile team of founders is on the way. Aptos Labs, a Layer 1 blockchain (L1) startup founded by former employees of Meta who worked on the defunct Diem project, raised $150M in a round led by FTX Ventures and Jump Crypto with participation by Andreessen Horowitz, Apollo, Franklin Templeton, Griffin Gaming Partners and Circle Ventures. This follows their $200M seed round in March 2022.
Aptos hopes to accelerate Web3 adoption by creating a L1 blockchain with more scalability, higher security, better performance, and more upgradability than existing L1 blockchains. Aptos has no coin or whitepaper yet but it warrants monitoring, especially if you hold a potential L1 blockchain rival like Solana. During Aptos’ hiring spree they snatched up people who worked on Solana, and both projects share some of the same VCs. Aptos’ mainnet launch is currently scheduled for this Fall.
4. Social media giants may be competing against Web3 alternatives sooner rather than later. DSCVR, a Web3 decentralized social media company (DeSo), raised a $9M seed round that was led by Polychain Capital with participation by Upfront Ventures, Tomahawk VC, Fyrfly Venture Partners, Shima Capital and Bertelsmann Digital Media Investments.
The company built a blockchain social network on Dfinity’s Internet Computer protocol. The decentralized platform is owned and controlled by its users, who create token-gated communities which create buzz around NFT projects with airdrops to users.
In general, DeSo seems like a fairly obvious Web3 use case. There is a lot of angst against existing Web2 social media platforms due to how they handle user data, how they choose to moderate discourse, and the limited economic power held by users. The decentralized nature of Web3 and ability to democratize governance could be a solution to the above problems if a Web3 platform is able to get the tokenomics right.
Opportunity: Beyond the NFTs that can be obtained in private user groups via airdrops, it’s possible to obtain two types of tokens that are part of DSCVR’s governance model. Each token type accounts for 50% of total voting rights on governance decisions. Social tokens are obtained by participating and receiving upvotes. Service tokens are obtained by funding the platform.
5. NFT domains are increasing in popularity, and NFT domain providers are capitalizing on this opportunity. Unstoppable Domains (UD), an NFT domain provider, raised a $65M Series A at a $1B valuation led by Pantera Capital with participation from others including Mayfield, Gaingels, Alchemy Ventures, Redbeard Ventures, Spartan Group, OKG Investments, Polygon, CoinDCX, and CoinGecko.
Domain names can be registered forever with a one-time payment and no renewal fees. Per the company, this permanent domain “is your cryptocurrency address, your login to the decentralized web, and your universal username.”
Unstoppable Domains’ main competitor is Ethereum Name Service (ENS). Both of their offerings are similar, but ENS is decentralized and airdropped a governance token, while Unstoppable Domains is a traditional for-profit company. Over 2.5 million domains have been registered on UD, and major brand and celebrities have been scooping up ENS domains. There will likely be room for both services in the long run, and it’s encouraging to see a major investment going into making Web3 more user friendly.
6. Impact investing is coming to Web3. Topl, an impact blockchain company, raised a $15M Series A round led by Mercury, Republic Asia, and Cryptology Asset Group.
Topl’s blockchain enables users to track their impact and sustainable initiatives across borders. Per the company, “The Topl Blockchain tracks cacao from farm to chocolate bar, and diamonds from mine to marriage. It can ensure that COVID-19 tests remain cold and fully effective. The Topl Blockchain is revolutionizing supply chain, finance, sustainability, agriculture, and a growing number of other areas.”
According to the 2020 survey by the Global Impact Investing Network, impact investing in 2020 reached $715B. As long as there are relevant use cases in Web3, a lot of additional money could be coming into this space.
7. iGaming (a form of online gambling) token developer received a major investment to enable further connectivity with top crypto exchanges. Crypto SNACK, developer of the SNACK token, raised $50M from GEM Digital.
SNACK is accepted as payment by over 800 businesses and over 300 iGaming platforms. Transactions aren’t limited to online betting, and will expand as Crypto SNACK secures more partnerships. For example, as the official partner of RCD Espanyol (a Spanish esports team), fans are able to use SNACK to buy tickets, food items, and jerseys
8. A decentralized app-chain for asset management has received funding and will be issuing tokens in the future. Quasar Finance, a Cosmos-based DeFi project, raised $6M from Polychain Capital, Blockchain Capital, Figment Capital, Lightshift Capital, and Galileo.
Essentially, Quasar looks to make it easier to fundraise and execute asset management strategies on the blockchain. Ben Perszyk from Polychain said “Quasar abstracts away some of the complexity involved in earning lending yield, providing liquidity to AMM pools, or structuring delta-neutral strategies, and hides those capabilities behind an approachable, user-friendly frontend. By deploying their own application-specific IBC chain, Quasar then offers a powerful new suite of DeFi tools for end users, and positions themselves as a liquidity hub for the ever-expanding Cosmos DeFi ecosystem.”
Opportunity: Currently at Phase 1 of their road map, Quasar plans to have their Mainnet launch around November, though it is unclear when exactly the token will be released. Per the company, “Quasar will become the capital management chain on Cosmos, starting with inter-chain yield maximization strategies all the way to protocol owned liquidity and tailored capital solutions for $QSR holders.”
9. An overcollateralized lending platform claims to use a unique method to attract liquidity without creating selling pressure. Aurigami, a DeFi protocol on the Aurora network, raised $12M in a token round led by Dragonfly Capital and Polychain Capital, with participation by Coinbase Ventures, Alameda Research, Jump Crypto, Amber Group and QCP Capital.
Aurigami is a decentralized money market that enables users to deposit to earn a passive yield, or borrow in an overcollateralized fashion. Aurigami’s edge comes from their concept of Liquid Locked Token. Their native token is PLY, and PULP represents locked PLY. PULP is a “Liquid Locked Token” because it can be traded, or it can be held to obtain future PLY at a discount. Both PLY and PULP are distributed in liquidity mining.
Opportunity: Aurigami is owned and governed by PLY token holders. The token is available to trade on multiple exchanges.
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