VC Fund Attracts $2.5 Billion for Crypto Startups and Web 3.0

Venture capital is more bullish than ever on the cryptocurrency space. Crypto investment firm Paradigm has a history of backing high profile companies, such as Chainalysis, BlockFi and Coinbase, as well as decentralized trading protocol Uniswap, among others. Now the firm is gearing up to back the next generation of crypto and Web 3.0 startups and protocols.

Paradigm founders Fred Ehrsam and Matt Huang have raised $2.5 billion for their maiden VC fund, Paradigm One. It is the largest investment vehicle of its kind dedicated to the crypto and Web 3.0 space, according to the Financial Times. The fund ended up being twice as large as Paradigm expected. Reddit co-founder Alexis Ohanian, who runs VC firm 776, cheered the massive haul.

New Frontier

Huang, a former Sequoia partner, called crypto and Web 3.0 “the most exciting frontier in technology,” while Ehrsam, who co-founded Coinbase, said that it’s “just getting started.” They have made themselves approachable to what Huang described as “builders on the frontier” looking for backers.

Just getting started https://t.co/V8fXb3hCTt

— Fred Ehrsam (@FEhrsam) November 15, 2021

While Paradigm only launched in 2018, it has racked up an impressive portfolio. They are active in backing DeFi protocols, Bitcoin mining, stablecoin protocols, and Layer 2 scaling solutions on Ethereum.

Their first fund amassed $400 million, which generated an IRR of over 200% in the first six months of 2021, according to the Financial Times. A couple of Paradigm’s successful exits include Coinbase and DeFi protocol Compound, as per Crunchbase.

The gigantic size of Paradigm’s new fund is a testament both to the burgeoning pace of innovation in the crypto and Web 3.0 spaces as well as the demand among venture capital and LPs to be a part of it. The next largest VC fund focused on crypto is run by Andreessen Horowitz, at $2.2 billion.

Crypto Adoption

While cryptocurrency has come a long way, it still remains early innings in many ways. According to Paradigm, less than 10% of the world’s population owns some crypto. And while the DeFi market has more than $250 billion in total value locked,  it still pales in comparison to the size of the “traditional financial system,” Huang argues. Web 3.0 similarly has a long way to go before it reaches wide-scale adoption.