As I and others have been reporting over the last couple weeks, crypto VC has been dealt a blow from the FTX collapse. But lots of these firms still have dedicated crypto funds to spend, while many VCs remain optimistic about the space long term. So the question now is, where the hell are they going to invest that money?
I recently asked a few VCs what areas they’re eyeing going into 2023, especially in light of the FTX bankruptcy catastrophe and its effects on the crypto industry at large. And, perhaps surprisingly, some are not only still hopeful for the industry’s future but argue crypto could play an important role in the fallout.
“I do think crypto is part of the solution here, honestly. It sounds a little bit ironic to say that in light of what’s just happened,” Ethan Kurzweil, a partner who focuses on crypto, among other things, at storied VC firm Bessemer Venture Partners, recently told me.
Kurzweil is among those VCs with cash to spend on crypto startups; Bessemer has been deploying a $250 million pool of funds dedicated for crypto, announced in March, and Kurzweil tells me they’ve made “about nine to 10 investments” in the category. He’s not deterred by the recent turmoil and says he’s eyeing a few areas that could help address some of the concerns brought to light by FTX’s implosion.
One is identity on the blockchain: “Imagine if FTX had a very easy-to-parse identity that someone could then search all the different chains in the world and see all their assets in a verifiable way,” he says. “You’d know that, ‘Wait, hold on,’ like, ‘a big portion of their balance sheet is in this particular coin,’ or, ‘Hold on, aren’t they using this as collateral for something else?’ They would have been asked to explain that a lot sooner before it got to such a massive scale,” suggests Kurzweil.
As part of DeFi, or decentralized finance, he says he’s looking at companies that are public-facing analytics tools and those that…
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