Andreessen Horowitz, the Silicon Valley enterprise capital group, is betting on crypto to break up the extreme focus of Big Tech power that the agency performed a distinguished position in creating, in accordance to one in every of its main companions.
Chris Dixon, founding father of Andreessen’s crypto arm, mentioned the web had led to power being held by a handful of firms together with Facebook and Twitter, which the enterprise capital group backed at an early stage.
“I don’t think that any of us expected this level of concentration,” he informed the Financial Times’s Tech Tonic podcast. “I don’t think this is a good outcome, both societally and from a business point of view, because our business is investing in entrepreneurs . . . the idea of having the internet controlled by five companies is very bad for entrepreneurs and bad for VCs.”
His feedback come because the agency is searching for to hone a brand new funding technique constructed round cryptocurrencies and digital tokens to exchange the normal equity investments made by VC companies and create a brand new, community-led mannequin for investing in high-growth start-ups.
Proponents of the Web3 motion declare decentralisation will shift the steadiness of power away from centralised platforms and in the direction of customers.
However, critics warn companies similar to Andreessen will use the brand new know-how to create a brand new era of web gatekeepers.
“The web is just becoming re-centralised in the hands of a small few investors, or in some cases the same exact people who hold so much power in the current web,” mentioned Molly White, a software program engineer and distinguished critic of Web3.
The enterprise capital agency’s co-founder Marc Andreessen is one in every of Facebook proprietor Meta’s longest-serving board members. The agency made $78mn from its seed investment in Instagram when it was acquired by Facebook in 2012, a 300 per cent return.
The agency additionally invested $80mn in Twitter earlier than it went public, and was among the many monetary backers of Elon Musk’s preliminary bid for the platform earlier this 12 months.
Dixon believes blockchain know-how provides safeguards in opposition to anti-competitive exercise by constructing guidelines into sensible contracts written into the pc code.
“Of course, [business people] will try to create monopolies and big businesses and maximise shareholder value,” he added. “What we can do to create a better internet is create new systems where the network effects accrue to the community instead of to companies.”
Since its crypto fund was launched in 2018, Andreessen has raised greater than $7.6bn to spend money on cryptocurrencies and associated know-how firms.
Instead of receiving conventional equity, it has been investing in tokens, a type of digital asset constructed on the blockchain, which could be traded.
“It is a completely different kind of economic model in Web3 in which our investments are mostly in tokens instead of companies,” Dixon mentioned. “And that was a big change. That is a big part of why we created a separate crypto fund . . . it requires a whole different legal structure.”
Andreessen’s portfolio contains the crypto change Coinbase, NFT market OpenSea, and Flowcarbon, a crypto carbon credit score enterprise set up by former WeWork chief govt Adam Neumann.
Dixon mentioned crypto was a possibility for brand spanking new entrepreneurs and start-ups, as firms similar to Amazon and Google focus on different rising applied sciences similar to synthetic intelligence and digital actuality.
“I’ve seen no evidence that [dominant] companies will muscle in,” he added. “We have a much wider berth for our start-ups to operate, as compared to areas like AI and virtual reality, where the incumbents are making significant investments.”
While cryptocurrency values had been in a gradual downturn since late final 12 months, the market plummeted in May after the collapse of the terraUSD stablecoin. Market instability drove the worth of bitcoin to pre-pandemic ranges and contributed to the collapse of numerous crypto lenders and hedge funds.
Dixon mentioned the downturn had made Web3 investments extra interesting.
“There are a lot of great entrepreneurs entering the space, there are a lot of great ideas and prices are lower,” Dixon mentioned. “In venture capital, you’re hopefully buying low and selling high . . . so my experience has been downturns have been opportunities.”
Additional reporting by Jemima Kelly
You can hear to the total interview with Chris Dixon on the FT’s Tech Tonic podcast