Why this crypto VC firm is confident of raising $100m fund in a bear market

Global venture funding into Web3 startups took a sharp nosedive of 76% in the second quarter of 2023 compared to a year earlier, as investors turned their focus to AI and more traditional sectors, Crunchbase data showed.

In that quarter, Web3 startups managed to secure slightly over US$1.8 billion across 322 deals. This was an over 4x decline in the funding amount in contrast to the same period a year earlier, when these startups received well over US$7.5 billion. Deal flow, too, dropped 51% in Q2 2023.

In this bleak investment climate, Kraken Ventures, the VC arm of US crypto exchange Kraken, is looking to raise US$100 million for its second fund.

Photo credit: Shutterstock

Kraken Ventures will focus on startups that are integrating real-world assets onto blockchain, such as on-chain carbon markets and new Layer 1 and Layer 2 projects.

“While many strategic investors in the ecosystem are cutting back on investments due to profit and loss constraints, our dedicated capital structure is actually allowing us to expand the team and double down on investing in the crypto ecosystem,” Brandon Gath, managing partner at Kraken Ventures, tells Tech in Asia.

Interest in crypto remains strong among large financial institutions and investors looking for early access to new companies in the space, Gath adds.

As his VC firm “lives and breathes in this space,” it can quickly identify new trends and the importance of a new technology long before the mainstream VCs, which gives Kraken Ventures confidence to raise its second fund.

Gath further speaks about the strategy for its latest fund and how the VC firm is navigating the current market.

What are the types of startups you are looking to invest in with this new fund?

Gath: When we evaluate investments, we remain focused on people, product, and potential, while looking for a technical differentiation between companies working on infrastructure versus those in consumer-facing applications.

Some of the companies we have backed out of Fund I and look forward to continuing this in our next fund include Blockdaemon, Messari, LayerN, and Rightfoot.

Kraken Ventures managing partner Brandon Gath/Photo credit: Kraken Ventures