Andreessen Horowitz Debuts $600M Web3 Gaming Fund

Key Insights:

• a16z wants a massive slice of the Web3 gaming and metaverse pie.
• The firm plans to channel millions into firms building the next iteration of the internet.
• Centralization questions are raised if VCs control so much of what should be a decentralized internet.

The venture firm known colloquially as a16z confirmed on Wednesday, May 18, that it is ramping up its bets on Web3 despite a broader crypto asset market decline.

The company’s $600 million fund will target gaming startups in the Web3 and blockchain space. Web3 refers to the next iteration of the tokenized and decentralized internet, unlike the current Web2 version that is dominated and controlled by corporate tech giants.

According to the WSJ, a16z used the example of the billions of dollars in annual revenue that top games such as “Fortnite” and “Minecraft” generate.

“Games infrastructure and technologies will be key building blocks of the metaverse, an opportunity that dwarfs the current $300 billion game industry,”

Building The Next Internet

The firm stated that it would be investing in a broad spectrum of gaming services and decentralized applications (dapps) and startups building technology for the Metaverse.

A16z has been very vocal about its Web3 ambitions and even said that the “internet as we know it is flawed” in its latest industry report. It looked at current Ethereum (ETH) usage and claimed that “compared to the internet, that puts us somewhere around the year 1995.” Ethereum is the industry standard for Web3, smart contracts, decentralized finance, and nonfungible tokens (NFTs).

The firm’s most recent and third fund dedicated to crypto-based startups totaled $2.2 billion. However, the significant funding move comes as digital asset markets have plunged to their lowest levels for almost a year. Total crypto market capitalization is down to $1.28 trillion, a 58% decline from its peak in November.

This poses a risk for Web3 games and Metaverse platforms with a tokenized economy, reliant on crypto assets for in-game items or play-to-earn incentives.

Will VCs Own Web3?

Web3 has been hailed as the evolution and decentralization of the internet, putting users back in control of the content and their own data. However, with massive venture capital firms such as a16z buying up swathes of shares in startups and tokens in private sales, it begs the question; how can Web3 be decentralized if centralized VC giants control so much of it?

If a venture firm owns a sizeable chunk of a protocol’s tokens, it has more significant influence over governance votes and can steer the direction of the platform in its favor. This is not exactly in line with the decentralized vision or community-driven DAO (decentralized autonomous organization) platforms many of them make out to be.

A16z has already invested heavily into several crypto, DeFi, Metaverse, and Web3 firms, including Alchemy, Compound, Dapper, Dfinity, dYdX, Lido, Maker, Near, OpenSea, Sky Mavis, Solana, Uniswap, and Yield Guild to name a few.