Lightspeed Faction, a blockchain-focused venture capital firm, is placing a large wager on the cryptocurrency market as it struggles to get financing during the winter. The company has officially opened its $285 million first fund, as its co-founders exclusively disclosed to TechCrunch.
The primary aim of Faction is to support seed or Series A investments for early-stage blockchain startups. According to Lightspeed Faction managing partner Samuel Harrison, the fund has committed around 20% of its resources to a few initiatives before going public, according to Banafsheh Fathieh, a general partner at the company. The deployment time would essentially take three years; however, it might change based on the state of the economy.
Most of what you see at the growth stage of the maturity arc refers to cryptocurrencies as an asset class. Several trading use cases and examples convey the idea that “this could be an emerging asset class.” However, crypto is still a relatively new technological development, according to Fathieh. “The most opportunities are seen in the early stages.”
The fund aimed to raise $250 million but ultimately raised 14% more. Harrison stated, “We felt that anywhere between $250 million and $350 million made sense.”
He also mentioned that confident strategic investors and most institutional investors make up the fund’s LPs. A tiny amount of money was also gathered from friends and family offices.
Fathieh stated, “We wanted to make sure we were always flexible with capital.” When fund sizes drop, it’s hard to fill in as a syndicate or lead.
According to Harrison, the company aspires to be big enough to lead seed rounds and early Series A while still being able to “essentially have full control when it comes to working with companies” to support their growth and be a beneficial partner. “Going smaller than that makes it difficult to support these companies, especially the well-known ones with larger capital needs, because you don’t have the dry powder.”
Harrison went on, “It’s being big enough to matter.” “But not so large that it’s challenging to use,”
According to Fathieh, the company doesn’t follow “a hard and fast rule for check size or ownership,” and it makes investments in shares and tokens. Its typical check size is between $5 and $10 million, which Harrison described as the “sweet spot” and typically earns the company the top slot as a lead investor.
People with leadership positions in cryptocurrency companies like Coinbase, Blockchain.com, and Amber Group now run the business. To take advantage of Lightspeed Venture Partners’ platform, it is also a part of a combined “hybrid structure” venture, according to Harrison.
Harrison and Fathieh agree that the state of the cryptocurrency market is ideal for deployment.
Harrison stated, “It’s obvious that a lot of generalist capital has left the space at this time.” It’s a fantastic moment to invest since we’ve been through a couple of cycles of investments. It’s preferable when the market is blazing hot. While others are doubting it, now is the moment to be the most engaged.
Fathieh stated they wish to concentrate on the long term, even though the cryptocurrency market is down from all-time highs. “We spend twenty seconds of our day watching the ups and downs of the markets, but the fundamental belief remains the same, and the door is open.”
Harrison believes that since their investments are for ten years rather than a one- to two-year, it is not about timing the market.
“Even if next year is a bust, we’ll still be making investments, deploying resources, and carrying out our 10-year plan,” he said.
