Key Takeaways
- • Kraken Ventures, the venture capital arm of crypto exchange Kraken, is raising its second fund with a target of $100 million, according to three sources who spoke to The Block.
- • The target would exceed the $65 million the firm raised for its first fund, which closed in 2021.
- • Managing partner Brandon Gath confirmed the fundraise and said the firm will "double down" on its existing thesis of supporting founders from initial capital through IPO.
- • The raise is taking place during a sharp downturn in crypto venture investment, with Q3 2023 investment on pace for roughly $2.5 billion versus over $6 billion in Q3 2022, per The Block Research Pro.
Summary
Kraken Ventures, the venture capital unit of crypto exchange operator Kraken, is raising its second fund and is actively engaging with potential investors, according to three sources with knowledge of the matter cited by The Block. One of the sources said the firm aims to raise $100 million, which would exceed the $65 million the unit amassed for its first fund, which closed in 2021.
Brandon Gath, managing partner of Kraken Ventures, confirmed the firm is seeking another fund. He said the unit will "double down" on its existing thesis and continue supporting founders "through their full journey from initial capital to IPO." Gath emphasized the team's experience, noting it has completed hundreds of early-stage investments across blockchain, fintech and deep tech, and argued that smaller funds serve entrepreneurs and investors better because founders get a more hands-on partner, adding that "data overwhelmingly shows that small funds outperform large funds." He also said that although Kraken Ventures is an independent entity with outside capital, it maintains "a strong relationship" with Kraken. Gath noted the firm reserves a significant portion of its fund for follow-on investments, contrasting this with many strategic investors that do not set aside dedicated capital.
The fundraise comes amid a difficult crypto venture climate. According to The Block Research Pro, investment in crypto startups has declined for five consecutive quarters and is expected to keep falling in the current quarter, with Q3 on pace for nearly $2.5 billion in total investment compared with over $6 billion in Q3 of the prior year. Investor confidence has been weighed down by the collapses and bankruptcies of major crypto firms, including Terraform Labs, Three Arrows Capital and FTX. Some companies have still secured large later-stage rounds, including Tools for Humanity ($115 million), LayerZero Labs ($120 million) and Ledger ($108 million).
Kraken Ventures' prior portfolio includes staking infrastructure firm Blockdaemon, liquid staking platform Kiln, custody firm Anchorage and Ethereum scaling network LayerN, and the second fund is intended to back similar companies.
Brandon Gath, managing partner of Kraken Ventures, confirmed the firm is seeking another fund. He said the unit will "double down" on its existing thesis and continue supporting founders "through their full journey from initial capital to IPO." Gath emphasized the team's experience, noting it has completed hundreds of early-stage investments across blockchain, fintech and deep tech, and argued that smaller funds serve entrepreneurs and investors better because founders get a more hands-on partner, adding that "data overwhelmingly shows that small funds outperform large funds." He also said that although Kraken Ventures is an independent entity with outside capital, it maintains "a strong relationship" with Kraken. Gath noted the firm reserves a significant portion of its fund for follow-on investments, contrasting this with many strategic investors that do not set aside dedicated capital.
The fundraise comes amid a difficult crypto venture climate. According to The Block Research Pro, investment in crypto startups has declined for five consecutive quarters and is expected to keep falling in the current quarter, with Q3 on pace for nearly $2.5 billion in total investment compared with over $6 billion in Q3 of the prior year. Investor confidence has been weighed down by the collapses and bankruptcies of major crypto firms, including Terraform Labs, Three Arrows Capital and FTX. Some companies have still secured large later-stage rounds, including Tools for Humanity ($115 million), LayerZero Labs ($120 million) and Ledger ($108 million).
Kraken Ventures' prior portfolio includes staking infrastructure firm Blockdaemon, liquid staking platform Kiln, custody firm Anchorage and Ethereum scaling network LayerN, and the second fund is intended to back similar companies.
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