Crypto fund Variant raises $450 million to invest in DeFi and Web3 projects
Crypto markets are down, dampening the industry, but that’s not stopping venture capital firm Variant, which announced Thursday that it has raised $450 million in two funds aimed at Web3 and decentralized finance startups.
Variant is a crypto-focused early-stage investment fund founded by Andreessen Horowitz veterans who have backed well-known Web3 and crypto projects, including decentralized crypto exchange Uniswap, decentralized non-fungible token marketplace Magic Eden, and Ethereum scaling project Polygon, among others.
The money is part of Variant Fund III, which is intended to “invest in the builders of the user-owned web,” Variant partners Li Jin, Spencer Noon and Jesse Walden wrote in the announcement.
The fund is split into two parts: a seed fund of $150 million designed to help startups and the remaining $300 million for an opportunity fund for projects within Variant’s own portfolio that have proven their value.
“What we have learned in recent years has reinforced our thesis that user-owned networks are growing larger and faster than their traditional centralized counterparts, with more favorable financial terms for users,” the partners wrote. “Beyond that, it has also shown that ownership is a vast design space, with diverse experiences ranging from participation in a community to financial exposure to governance.”
The fund will specifically target DeFi projects, blockchain computing, consumer-oriented Web3 projects and new forms of ownership such as non-fungible tokens.
Web3 is the name computer experts gave to the next evolution of the World Wide Web, also known as the decentralized web, which allows financial transactions to be done peer-to-peer via blockchain technology. These transactions are governed by smart contracts that execute trades without the need for intermediaries or centralized institutions, thereby allowing developers to create software that allows communities to control their own resources.
This is the basic philosophy behind DeFi, or decentralized finance, which uses blockchain technology to create crypto-token economies. These economies have been used to reproduce decentralized versions of traditional finance, including exchanges for securities trading, interest generation, lending, and more, all using crypto-assets.
Web3 has also led to allowing the virtual ownership of digital assets through non-fungible tokens, something Jin said Fortune Variant is also focused on. Although most NFTs have been digital collectibles and artwork, they can also represent items in video games, music, video, documents, concert tickets, and other virtual consumer goods.
“Web2 was digital feudalism, and Web3 is digital capitalism,” she said. “Web3 is a paradigm shift, in that it introduces capitalism to the internet. It introduces the possibility for people to actually own capital and become capital owners of their own production.”
Using NFTs, it is possible to incentivize users by giving them ownership of assets in an ecosystem, such as game items, collectibles, or their avatars in virtual worlds. Token models can also be used as part of loyalty systems that can allow users to trade them not only for goods on a platform, but to exchange them on external markets for money, making the tokens valuable to earn. According to Jin, these new use cases combine multiple social and economic systems in ways not possible in older systems.
Variant raised $22.5 million and $110 million in the previous two funds.
The partners said the small size of the funds is deliberate: It is intended to allow the firm to remain close to its portfolio companies and guide them. They added that the next three to five years will be critical for the crypto and Web3 industries, and what happens now will determine the future.
