Jun 25, 2018 8:43 PM

Andreessen Horowitz Lends Credence to Crypto With New Fund

The high-profile VC firm hires a former federal prosecutor as its first female general partner to manage the $300 million fund.

Venture capital firm Andreessen Horowitz is bringing in a former federal prosecutor, Katie Haun, as its first female general partner to help manage a new $300 million fund—a fund dedicated to investing in cryptocurrency and blockchain-related efforts.

Andreessen Horowitz has long invested in cryptocurrency firms, including the digital-wallet company Coinbase and the gamemaker Cryptokitties. But in addition to signaling its commitment to the technology, general partner Chris Dixon says that creating a fund will give the firm more flexibility to make different types of investments. The new fund will invest not just in traditional equities, but in digital tokens as well. In other words, it will invest not just in companies but in the cryptocurrencies created by those companies. An Andreessen Horowitz spokesperson said investors in the fund are among the firm’s usual investors.

Haun got her start in cryptocurrency by investigating two of its best-known scandals: the charging and convicting of two federal agents during their own investigation of the black-market site Silk Road, and the imploding of the bitcoin-exchange service Mt. Gox. In 2015, she established the government's first cryptocurrency task force to help the government get up to speed on the technology.

"In that process, I ended up working alongside and getting to know the entrepreneurs in that space," Haun says. "I started realizing how transformative all this technology was." She also started teaching Stanford Law School's first cryptocurrency course in 2015, and as the technology grew and new projects emerged, she wanted to get more involved. So Haun left her job in government and joined the board of Coinbase in 2017, where she got to know the partners at Andreessen Horowitz.

Despite her background as a prosecutor, Haun says she's not at Andreessen Horowitz to root out fraudulent cryptocurrency projects, but rather to work on good projects. Still, her legal expertise could be a major asset to both the firm and to its funded companies.

VC firms are still seeking their footing in cryptocurrency amid legal uncertainties and the rise of the new style of funding called "initial coin offerings," or ICOs. During an ICO, the makers of a new cryptocurrency sell certain amounts of their digital tokens in advance to investors, helping fund the creation of their technology without necessarily selling ownership stakes in the business to venture capitalists. The creation of a dedicated fund by Andreessen Horowitz, one of the best-known venture firms in Silicon Valley, will add legitimacy to the nascent industry.

ICOs have raised more than $11.4 billion so far this year, according to the website CoinSchedule. Some cryptocurrency companies have pursued hybrid models. For example, the decentralized storage and publishing company Protocol Labs presold $52 million in cryptocurrency tokens to advisers—including VC firms like Andreessen Horowitz, Sequoia, and Union Square—before offering an ICO to accredited investors that raised an additional $205 million.

Dixon says the firm is able to offer entrepreneurs things that an ICO can't. "We have 80 people in our operating team whose job it is to support the companies we invest in, and we have people here with deep expertise in regulatory issues, recruiting, marketing, general management, etc.," he adds. "We think the onus is on us to prove that we are indeed great partners to entrepreneurs, and as long as we do that entrepreneurs will want to work with us."