Andreessen Horowitz bets on crypto to break the power of Big Tech

Silicon Valley venture capital firm Andreessen Horowitz is betting on crypto to break the excessive concentration of Big Tech power the company played a leading role in creating, according to one of its top partners .

Chris Dixon, founder of the crypto arm of Andreessen, said the internet has led to power being held by a handful of companies, including Facebook and Twitter, which the venture capital group backed early on.

“I don’t think any of us expected this level of focus,” he told the Financial Times’ Tech Tonic podcast. “I don’t think it’s a good result, both from a societal point of view and from a business point of view, because our company invests in entrepreneurs. . . the idea of ​​having the internet controlled by five companies is very bad for entrepreneurs and bad for VCs.

His comments come as the company seeks to refine a new investment strategy based on cryptocurrencies and digital tokens to replace traditional equity investments made by venture capitalists and create a new community model for investing in high-growth start-ups.

Proponents of the Web3 movement claim that decentralization will shift the balance of power from centralized platforms to users.

However, critics warn that companies such as Andreessen will use the new technology to create a new generation of internet guardians.

“The web is refocusing in the hands of a small number of investors, or in some cases the exact same people who hold so much power on the web today,” said software engineer and reviewer Molly White. eminent of the Web3.

Venture capital firm co-founder Marc Andreessen is one of the longest-serving board members of Facebook-owner Meta. The firm did $78 million of its initial investment in Instagram when it was acquired by Facebook in 2012, a return of 300%.

Andreessen also invested $80 million in Twitter before it went public and was among the backers of Elon Musk’s initial bid for the platform earlier this year.

Dixon believes that blockchain technology provides safeguards against anti-competitive activities by establishing rules in smart contracts written in computer code.

“Sure, [business people] will try to create monopolies and big business and maximize shareholder value,” he added. “What we can do to create a better Internet is create new systems where network effects benefit the community rather than the business.”

Since launching his crypto fund in 2018, Andreessen has raised over $7.6 billion to invest in cryptocurrencies and related tech companies.

Instead of receiving traditional shares, he invested in tokens, a form of digital asset built on the blockchain, which can be traded.

“It’s a completely different kind of business model in Web3 where our investments are mostly in tokens instead of companies,” Dixon said. “And that was a big change. That’s a big part of why we created a separate crypto fund…it requires a whole different legal structure.

Andreessen’s portfolio includes crypto exchange Coinbase, NFT marketplace OpenSea, and FlowCarbon, a crypto-carbon lending firm founded by former WeWork chief executive Adam Neumann.

Dixon said crypto is an opportunity for new entrepreneurs and start-ups as companies such as Amazon and Google focus on other emerging technologies such as artificial intelligence and virtual reality.

“I haven’t seen any evidence that [dominant] companies will mobilize,” he added. “We have a much larger place for our start-ups, compared to areas like AI and virtual reality, where incumbents are making significant investments.”

While cryptocurrency values ​​had seen a gradual decline since late last year, the market fell in May after stablecoin TerraUSD collapsed. Market instability pushed the price of Bitcoin to pre-pandemic levels and contributed to the collapse of a number of crypto lenders and hedge funds.

Dixon said the slowdown has made Web3 investments more attractive.

“There are a lot of great entrepreneurs entering the space, there are a lot of great ideas, and the prices are lower,” Dixon said. “In venture capital, you hope to buy low and sell high. . . so my experience has been that downturns have been opportunities.

Additional reporting by Jemima Kelly

You can listen to the full interview with Chris Dixon on the FT Podcast Tech Tonic