Variant raises $450 million for web3 projects despite crypto winter

Each “crypto winter” is different from the last, but each winter – or what non-crypto people would call a bear market – has one thing in common: It gives rise to a new wave of innovation.

That’s why Variant, an early-stage crypto-focused fund, sees great opportunities in the current state, say co-founders Jesse Walden and Li Jin. Fortune.

“We feel that over the next three to five years we’re going to see a wave of really high-quality projects that then propel us towards the mainstream [crypto] adoption,” Jin said.

Jin and Walden will have an opportunity to invest in such projects as Variant announced Thursday that it has raised $450 million for a third fund that will focus on the “user-owned web.” This will consist of a $150 million seed fund and a $300 million opportunity fund to double existing projects across Web3, the blockchain-based decentralized iteration of the internet.

Variant’s two other funds, which previously raised $22.5 million and $110 million respectively, invested in prominent Web3 names such as Uniswap, Mirror, Foundation, Magic Eden and Polygon, among others.

Walden admits that the size of Variant’s latest fund is “relatively small compared to other funds,” such as Andreessen Horowitz (a16z) or Paradigm. But it is “for a reason”.

“We want to be the marquis seed fund in Web3,” said Walden, who also worked as a partner at a16z with Jin previously, “and we’ve always felt it’s important to make sure that the strategy of being the marquis seed fund in Web3 dictates the fund size, and not the other way around.”

For their third fund, the strategy will be to continue to focus on projects that enable ownership for users in the space in various ways, Walden and Jin said, including token distribution that equates to control in a project or belonging in a community.

Web2 feudalism to Web3 capitalism

Walden, Jin and Variant’s third co-founder Spencer Noon stand out in the crypto VC world as among the youngest investors in many of the best-known projects in the industry. Although the sphere of crypto-focused funds is still relatively new and emerging, and has been dominated by a16z, Paradigm and Haun Ventures, Variant has made a name for itself by sticking to its investment mission: focusing on using ownership to drive mainstream adoption of crypto.

Variant is a “full-stack, Web3 investor,” meaning Walden and Jin aren’t focused on just one particular category in the space.

Web3 is usually defined as an Internet owned and operated by its users, and while that is accurate, Jin describes it by comparison to Web2, or the Internet we use most today, which is arguably controlled by large companies like Google or Facebook.

“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.”

Although capitalism has a “bad rap among this generation,” she said, “I think most people would agree that it’s an improvement over feudalism. This trend is empowering the individual over large corporations that can unilaterally decide the politics of their platforms .”

So far, Variant has invested across the board in Web3 – from decentralized finance (DeFi) protocols like Cozy Finance, to projects focused on underlying blockchain infrastructure like Polygon, to consumer applications like Foundation. A core theme of the fund’s investments has been platforms that focus on user experience and ownership, including decentralized autonomous organizations such as PleasrDAO and Friends with Benefits.

“We’re seeing users become owners of digital pieces of capital across a number of different projects and categories, which is very exciting,” Jin said. For example, Mad Realities, an interactive dating show, allows viewers to purchase non-fungible tokens (NFTs) that grant management rights over the show. By purchasing a Mad Realities NFT, viewers can decide what happens next in the show and have a say in the future, Jin explains.

With many of Variant’s current games among the most famous and successful in Web3, Walden and Jin’s instinct seems to be spot on. But whether they retain the Midas touch or not will be seen over time.