New crypto-focused VC firm TenSquared Capital, or 10SQ, is looking to raise a $200M fund. 10SQ intends to back crypto startups across various stages. Unlike other crypto-focused investment firms, 10SQ will make more equity than token investments. However, the firm plans to become a registered investment advisor, following in the footsteps of Andreessen Horowitz and Sequoia Capital, which will allow it to invest more capital into public equities and crypto tokens than traditionally allowed for VC firms. With the funds raised so far, 10SQ has already lined up two investments, including a crypto wallet infrastructure startup. 10SQ was established by former employees of crypto-focused investment firm 10T Holdings, known for backing crypto exchange Kraken, digital wallet Ledger, and NFT creator Yuga Labs. 10T had nearly $1.2B in assets under management and was backed by Alan Howard and the Municipal Employees' Retirement System of Michigan. Several of 10T's limited partners have already committed capital to 10SQ's new fund. 10T co-founder and partner Stan Miroshnik is joining 10SQ as CEO and managing partner, per internal documents reviewed by Bloomberg. Several former 10T executives, including Polina Bermisheva, Christopher Cheung, George Dawson, and Ruby Hsu, joined 10SQ. The Los Angeles-based firm roped in StillBrook Capital's founding strategic advisor Elaine Co as general partner. In February, 10T's CEO Dan Tapiero informed The Block that he was establishing his own private equity firm called 1RoundTable Partners.
10SQ's fundraising comes as VCs reduced their investments in the sector by 80% YoY in Q1 2023. Global VC funding in the first quarter of this year dropped to its lowest levels since 2020. VCs invested $2.4B into global startups in the recent quarter, 80% lower than the $12.3B invested in the same period last year, per Pitchbook. All sectors witnessed a VC funding pullback since last year. However, the reduction was more pronounced for the crypto industry due to a recent string of bankruptcies, market downturn, and regulatory headwinds. After the collapse of the crypto exchange FTX, VCs slowed down their investment pace sharply, citing the need to conduct extended due diligence before backing crypto startups. Going forward, crypto investments are "not going to be based on FOMO or what other investors are doing," said Pitchbook crypto analyst Robert Le. Crypto investments showed a slight uptick in February and March this year, possibly indicating that the worst of the funding drought may be over, Le added. Investors are still investing in crypto infrastructure, data analytics, and developer-focused startups, albeit at a slower pace than before.
VCs have sufficient dry powder available for deployment when they eventually resume their normal pace of funding. Per The Block, investors raised $99.3B worth of crypto funds last year, of which several VCs have nearly 50% or more available for deployment. The largest crypto-focused funds launched last year include A16z's $4.5B and Haun Ventures' $1.5B crypto funds. At the end of December 2022, A16z partner Chris Dixon informed The Block that the firm had deployed less than 50% of its crypto fund. Sequoia launched a $600M crypto fund early in 2022 and deployed only 10% of the dry powder by the end of the year. Despite the large reserves of dry powder available, VCs will be thinking of deploying the capital "in terms of years, not months," said Haun Ventures' Sam Rosenblum. |
