It’s a little hard to sit down and write up some jaunty notes on the current state of the technology startup market when news just broke that Russia is expected to invade Ukraine in short order. If you are a believer in democracy over autocracy, it’s a pretty dark day. And geopolitical clouds on our very-near temporal horizon promise more bad news.
And yet, the news engine grinds forward, and we have to do someting with this space, so let’s talk about capital recycling in the crypto market to stay occupied.
Round and round it goes
One result of today’s increasingly rapid cadence of innovation in the technology world is that corporate venture capital work — both defensive and offensive — seems to start earlier and earlier in the lives of companies.
OpenSea is the latest example of the trend. The company said earlier today that it will launch OpenSea Ventures and a program it calls “Ecosystem Grants,” both of which are “aimed at supporting the creators, teams, and emerging technologies advancing the global growth of web3 and NFTs.”
Companies that take capital from OpenSea will receive access “to OpenSea leadership,” and OpenSea investors, including a16z, naturally.
As The Block notes, “OpenSea joins a number of crypto startups that have launched their own venture units, including unicorns Alchemy and FTX.” All of which, I’ll note, are private companies. It’s common, then, that rapidly-growing blockchain firms with extra cash to begin to reinvest that capital into other groups.
Gone are the days when Intel Capital was the paradigm for corporate venture dealmaking; Coinbase is probably the most respected corporate investing team these days, but its rivals are looking to take it on.
Or are they? There’s a weird nuance to all of this:
- Coinbase was backed while private by a16z
- Marc Andreessen remains on Coinbase’s board, along with Katie Haun, who recently launched her own crypto fund
- Coinbase Ventures backs OpenSea
- a16z backs OpenSea as well
- OpenSea is now doing its own investing, in theory in conjunction with a16z to some degree, given its pledge
That’s quite a web. a16z is also an investor in Alchemy, which is doing its own investing. OpenSea uses Alchemy tech, it’s all very integrated. (That this level of centralization and familial fraternization is the exact opposite of decentralization, or democratization, goes without saying.)
At what point does this capital-chasing-crypto-chasing-capital whirlpool start to de-thread, and get more internally competitive? If Coinbase is going to launch its own NFT product as it has promised, how long will OpenSea want to stay close to their shared investor? What if Coinbase wants to sell infra and gets into Alchemy’s space? How could Coinbase not want to do that, frankly, given how much activity the latter company is seeing?
Today it’s whimsical that OpenSea is recycling capital into other ventures before it finds its own exit; but the pace of change in the larger crypto market appears to have made even companies with simple business models speculators if not in majority, at least to a more than modest degree. Wild! And weird!
I’m trying to keep tabs on the closed-network of leading crypto players and their financial sponsors. To me it’s even more centralized than most venture categories, which is a bit weird. I can’t get the bitter taste of bullshit out my mouth when I keep reading about folks pushing decentralized autonomous organizations, zero-trust setups and the like when it appears that the same people who made a huge chunk of the Web 2.0 money appear set to reap most of the rewards for whatever Web3 becomes.
Alright I’m going to fuck off now and worry about free society now and the fate of democracy. Let’s hope by Monday Russia has not invaded Ukraine. — Alex