Newly launched FTX Ventures faces fierce competition in crypto, but the corporate venture fund hopes to distinguish itself with a founder-friendly approach.
Cryptocurrency trading platform FTX launched the venture vehicle with $2 billion in backing. It has a particular interest in companies in the Web 3 space and companies using crypto and crypto-related technologies within sectors like gaming, healthcare and fintech.
FTX Ventures’ sole LP is parent company FTX, and it has no plans to seek outside LPs.
Amy Wu, general partner at FTX Ventures, told Venture Capital Journal that the fund will invest in the greater crypto ecosystem but plans to do so a little differently than most VCs.
“Founders and stakeholders in the community are a little bit different, so it’s our belief we need to be more founder-centric. So, what’s the purpose of an investment committee? Because it’s not for the founder; it’s for the funds, so we can eliminate that,” Wu said.
She added FTX Ventures want to remove as much inconvenience for founders as possible, so the firm plans to work as closely as possible with founders.
Wu said the venture fund’s size will allow it to be more flexible with investment decisions and the amount of money it can invest in a company. FTX Ventures will also be open to investing in either equity or pre-launch tokens – essentially a discounted price in cryptocurrency tokens – in a company. Wu said that the fund would not be limited to investing in crypto alone, as it may make opportunistic investments in companies outside of the sector.
FTX Ventures is also interested in advancing the move towards decentralized finance. DeFi uses blockchain technology to provide banking services, theoretically eliminating the need for some fees charged by financial institutions.
Wu’s fellow GP Ramnik Arora pointed out some investors still lacked a sophisticated understanding of the crypto world.
“We’ve been thinking very deeply about how to make things more flexible and asked what kind of venture fund would we love to interact with,” Arora said. “What we’re creating in FTX Ventures matches the kind of fund we want to be a portfolio company of.”
Arora said that the fund is not interested in investing for the sake of finding potential acquisitions.
“We’re at an inflection point, so now more than ever, if we care about crypto, we need to think about the entire crypto ecosystem and the infrastructure,” he said. “So that’s the prime focus; acquisition isn’t the criteria on which we determine to invest or not invest.”
He added that while FTX itself is acquisitive, the fund’s goal is to invest in companies which can build stronger crypto or digital infrastructure for FTX to do its business.
VC interest in crypto has exploded in recent years. They invested a record $32.8 billion in nearly 1,900 cryptocurrency/blockchain deals last year, up from $6.7 billion invested in 830 such deals in 2020, according to PitchBook.
Besides FTX Ventures, newcomers to the crypto investor world include Patron, which launched in October and is interested in exploring the intersection of crypto and gaming, and KRH, which was launched by Katie Haun, one of the general partners at Andreessen Horowitz’s crypto-fund.