On January 14, FTX, a popular Bahamian-based cryptocurrency exchange led by Sam Bankman-Fried, announced a launch of a new venture capital business unit called FTX Ventures. According to the Wall Street Journal media outlets, the exchange has pumped $2 billion in funds into the new capital unit to focus on investing in crypto-industry startups. The allocation makes the FTX Ventures’ fund as one of the largest venture capitals in the crypto industry. FTX exchange disclosed that the $2 billion venture fund will be led by Amy Wu, a former General Partner at the $10 billion venture capital firm, Lightspeed.
As per FTX exchange, the FTX Ventures will majorly focus on blockchain and cryptocurrency investments. Wu talked about the development and stated that the fund will make strategic concentrated bets into companies in the crypto market, from Latin America, Africa and beyond. She said that FTX Ventures is especially excited about consumer and social web3 as well as Web3 gaming applications. Additionally, she mentioned that the venture firm targets layer-1 and layer-2 blockchain platforms, blockchain infrastructure, cross-chain protocols, crypto-fueled and NFT-powered video games and wallet payment applications.
"It's not necessarily tied to the strategy of FTX. The objective is more to accelerate the adoption of blockchain technology. We want to be known for the value add that we bring, leveraging the resources, the expertise and the global network of FTX," Wu elaborated.
Why Crypto Startups Are Attracting Venture Capital Money
The development by FTX cryptocurrency exchange to have launched its FTX Ventures’ fund comes at a time when the crypto and blockchain space sees a lot of interest from venture capital companies. Such interests translated into a significant amount of investments made in the space during 2021. Startups in the crypto and blockchain sector have become winners in the category of record-breaking fundraising. Venture capitalists bet big in cryptocurrency in the previous year, investing more cash than ever into emerging companies in the sector. Startups in the blockchain and crypto space were powered by a record $33 billion in ventral capital funding last year. That can be compared with 2020, which saw venture funding of about $3.1 billion.
In 2021, about 43% of crypto funding went into firms involved in lending, investing, exchange services and trading of cryptocurrencies. Meanwhile, 17% was channeled towards startups in the Metaverse (a network of 3D virtual worlds), Web3 (a decentralized online ecosystem based on the blockchain), DAOs (decentralized autonomous organizations), and NFTs (non-fungible tokens). Other categories that attracted significant venture capital interest, include decentralized finance, infrastructure and custody.
Crypto startups have become so profitable that they have begun attracting growth-stage capital. In the previous year, major crypto funds such as Hivemind, a16z and Paradigm managed to raise billions of dollars to bet on crypto and blockchain startups.
