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Early Bitcoin, Ethereum Investor’s Billion-Dollar VC Invests With Multicoin Crypto Fund

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Prominent New York-based venture capital firm, Union Square Ventures (USV), has invested into the cryptocurrency hedge fund managed by Austin-based Multicoin Capital.

The investment news was announced via USV’s blog on Wednesday. In justifying why they opted to invest their (undisclosed amount of) capital in Multicoin, Fred Wilson (Partner, Union Square Ventures) lauded the ability of its co-founders – Kyle Samani and Tushar Jain – to remain shrewd in a space flooded with spontaneity and fallaciousness, despite meaning “their opinions are often controversial and contrarian;” a reference to their highly-respected blog.

USV joins some big-names who’ve already invested in Multicoin Capital, such as Bill Lee (Partner, Craft Ventures), Chris Dixon (General Partner, Andreessen Horowitz), Vinny Lingham (CEO, Civic), Passport Capital, Ari Paul (BlockTower Capital), and Vy Capital.

Another Crypto Play for USV

By no means does Multicoin Capital represent USV’s first point of contact with the bourgeoning cryptosphere.

Indeed, according to their CrunchBase profile, Union Square Ventures have previously invested in Coinbase Inc. thrice (May and December 2013, and January 2015), Mediachain (June 2016), OpenBazaar (December 2016), Numerai (December 2016), Protocol Labs (late 2016), Blockstack (January 2017), Algorand (February 2018), and CryptoKitties (March 2018).

Companies in the blockchain/crypto sector make up about 15% of our active portfolio and closer to 25% of our recent investments.” – Fred Wilson

In Wednesday’s press release, Wilson confirmed that USV has “direct investments in nine companies/projects in the crypto space and one exited investment (i.e., Mediachain acquired by Spotify in April last year).”

Also, in addition to Multicoin Capital, Wilson – himself an early Bitcoin and Ethereum investor – divulged that USV has invested in numerous cryptocurrency funds over the “last 18 months.” These include Polychain Capital, Metastable Capital, Autonomous Partners, BlockTower Capital, and Placeholder.

Network Approach Solving USV’s “Unique Challenges”

Wilson was forthcoming in assuring that “USV has not become, and has no plans to become, a fund of funds.” Justifying why, then, they’d been focussing so heavily on investing into crypto funds recently, he expressed how “the blockchain/crypto/token sector has some unique challenges for [those] in the venture capital business.” And thus, they’ve decided to take “a network approach to solving them, at least for now.”

The major pain point, Wilson explains, is borne from the fact that, because USV operates under the venture capital exemption to Dodd-Frank, they are limited to “20% of [their] holdings at cost in “non-qualifying” investments, which include [crypto] tokens.”

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