A16z: Investing $2 billion in the next dawn of Web3

Title: “The Elephant Hunter’s Nose: a16z Bets $2 Billion on the Next Dawn of Web3”

Author: Eric

Source:

Repost: Mars Finance

While the entire crypto industry is still trembling in winter, and countless VC firms are choosing to wait and see, the so-called “most aggressive venture capital” in Silicon Valley, a16z, has once again raised its shotgun.

According to Forbes, a16z crypto is raising about $2 billion for its fifth fund, aiming to complete fundraising by the first half of 2026. Although this figure is half of the $4.5 billion “behemoth” in 2022, in the current market environment, it is still enough to turn heads across the industry. Similarly, the influential VC Dragonfly announced its fourth fund on February 17, with a size of only $650 million.

a16z’s investment style in Web3 is unique, almost always pre-emptively betting on all the hot tracks. According to Forbes, this fundraising plan is very rushed, with only three months left in the window, and they are only investing in blockchain-related projects.

We can’t help but ask: what exactly are they seeing?

A Venture Capital Revolution by Two Programmers

To understand a16z’s current choices, we must go back to the winter of 2009.

The shadow of the financial crisis had not yet lifted, and the air in Silicon Valley was filled with pessimism. Two tech entrepreneurs, Marc Andreessen and Ben Horowitz, both financially free, decided to start a venture capital firm at the worst possible time. Their first fund targeted $300 million, with both personally committing $15 million.

What did the VC circle think at the time? “This is a stupid idea, absolutely not to be done.” This was Ben Horowitz’s later recollection of peer evaluations.

Besides the scale of $300 million being considered too aggressive, a16z’s fundraising memo also included a line that made peers laugh: “We believe that technical talent is the top resource, so we will build a platform team to serve founders.” At that time, peers thought this would increase costs and drag down returns, contradicting the traditional VC “small but elite” rule.

Today, almost all mainstream VCs are copying this “stupid idea,” and that is part of a16z’s DNA: daring to say “yes” when others say “no.”

In 2009, a16z invested $65 million in acquiring Skype. At that time, eBay was involved in patent lawsuits with Skype’s founders, and everyone thought the risk was too high. Less than two years later, Microsoft bought Skype for $8.5 billion.

In 2010, Benchmark partner Matt Cohler mocked a16z for buying Facebook and Twitter shares in the secondary market as “reselling pig futures.” But what happened? Groupon IPO’d at $17.8 billion, Facebook at $104 billion, and Twitter at $31 billion.

In 2015, a New Yorker journalist relayed peer skepticism: a16z aimed for a 5-10x return on its first four funds, with a portfolio valuation reaching hundreds of billions of dollars. Marc Andreessen dismissively gestured: “Nonsense. We’re hunting elephants, chasing the big guys!”

Today, the total value of a16z’s first four funds’ portfolios has reached $853 billion, far exceeding the initial threshold. The phrase “hunting elephants” has become a classic in VC industry slang, and the two founders of a16z continue to inspire entrepreneurs with their stories: truly innovative things often look stupid at first.

This is the nose for elephants.

Early Layout in the Crypto Track

In 2013, when most still regarded Bitcoin as a “geek’s toy,” a16z led Coinbase’s Series B funding. At that time, Ethereum hadn’t even been born.

Eight years later, Coinbase went public on NASDAQ, with a valuation once reaching $85.8 billion. After cashing out $4.4 billion, a16z still holds 7% of the shares.

This is not luck but foresight.

In 2018, the crypto market experienced its first major bear market, with Bitcoin falling from nearly $20,000 to around $3,000. During this period, a16z officially launched its first crypto fund, Crypto Fund I, with a size of $300 million.

Once again, with $300 million, no one questioned their boldness or model. This fund’s selections were enough to silence skeptics of Web3. Between 2018 and 2021, a16z’s crypto investments included MakerDAO (now Sky), Compound, Uniswap, Solana, Avalanche, NEAR, dYdX, Dapper Labs, OpenSea, and Axie Infinity.

According to DefiLlama data, Sky, Compound, and Uniswap’s TVL combined exceeded $11.4 billion, accounting for nearly 12% of all DeFi TVL. Although many names familiar four or five years ago have faded into history, their former glory still influences today’s Web3 world.

By the end of 2021, the holdings of the first fund had grown 11-fold from the initial capital, making it one of a16z’s best-performing funds. Even after a 40% decline in 2022, investors still made substantial profits.

The success of Crypto Fund I made a16z the most prominent crypto VC. In 2020, the second fund raised $515 million. In 2021, the third fund reached $2.2 billion. In 2022, the fourth fund hit $4.5 billion. With over $7.6 billion in total capital, a16z became the largest global crypto venture firm. Projects like Optimism, LayerZero, Lido, EigenLayer, among others, have almost become industry leaders across various tracks.

Of course, a16z also chases hot trends and has made mistakes. In market predictions, they heavily backed Kalshi; their investments in Celo, Chia, Dfinity, and Farcaster also faced misjudgments.

In this cycle, a16z held a somewhat negative view of inscriptions and Meme tokens, pouring hundreds of millions and even over a billion dollars into “VC coins,” which faced unprecedented setbacks. However, narratives like Layer 2 solutions, LSD, re-staking, and interoperability are among the few “Web3 native” stories that a16z has fully embraced.

You might say they have an elitist arrogance, but it’s hard to say they are inexperienced.

The Double Life of a “Media Company”

In the Web3 space, a16z, almost wearing a crown, has never stopped attracting controversy.

In 2015, former a16z partner Benedict Evans joked: “a16z is a media company that makes money through venture capital.” This remark later became a classic critique of a16z both inside and outside the industry.

In 2021, a16z launched Future.com, a centralized media platform aiming to build a “content empire” in tech. However, after 18 months, the project was shut down. The failure of Future.com did not make a16z abandon its media strategy. Instead, they shifted focus—from building a centralized media platform to creating a decentralized “media ecosystem.”

In April 2025, a16z acquired Erik Torenberg’s podcast network Turpentine. This was a typical acquisition + talent recruitment deal, with a16z expanding its media and network business, and Erik Torenberg joining to lead investments and media teams. Seven months later, a16z launched a16z New Media.

In their official article “What is New Media?”, a16z states that the goal of the “new media” team is to create the best turnkey media operation in venture capital, helping portfolio founders win narrative battles and, more importantly, bypass traditional media.

In the AI era, the barrier to product development has nearly dropped to zero, but storytelling has unexpectedly become a top priority. Giants like Anthropic, OpenAI, Netflix, and Microsoft are massively expanding their comms/storytelling teams. If you’ve recently seen frequent claims on social media that without AI, you’ll be eliminated, those ideas likely come from these AI companies.

After all, in an era where a product can be built in hours, whoever can tell compelling stories to sell products and services will survive.

Many have criticized a16z, claiming they lack real substance, often just telling stories for their invested companies, waiting for a “white knight” to come in. But now, this storytelling ability has become a scarce resource in the AI age. Perhaps a16z’s ability to see trends early is itself part of their story. But I recently heard an interesting story:

a16z is a nerd-friendly VC, very eager to find talented people who lack social skills and are often overlooked. These individuals are usually not good at speaking but have wild, innovative ideas that seem impossible or counter to mainstream thinking. Their flaws make it hard to stand out in the human trial, but a16z finds and gathers them.

When like-minded people gather, they create intense chemical reactions, making a16z’s unconventional approach highly fruitful.

The simple truth: these people don’t need to face complex business wars directly but serve as strategists behind the generals on the front lines. Their insight and calm minds always find new paths. More importantly, no one initially dismisses a strange idea because outsiders might think they’re crazy, but inside the team, everyone knows it might be the best answer.

Where will the $2 billion go?

Since October 2024, the crypto market has experienced a sharp correction, with total market cap evaporating over $2 trillion. In such an environment, many crypto VCs have chosen to shrink their operations.

But a16z’s choice is to go against the trend and increase their bets.

Chris Dixon has repeatedly stated that 95% of a16z crypto’s current assets are from their previous investments. They believe that in venture capital, selling high-quality assets too early is the worst decision. Dixon views blockchain as the next infrastructure of the internet, believing the crypto industry is in a long “building phase,” similar to how neural network papers from 1943 laid the groundwork for today’s AI, requiring decades to mainstream.

“We are thinking in centuries,” said a16z partner Katherine Boyle.

From this perspective, the current market downturn is actually the best time to deploy. Valuations are more reasonable, high-quality projects are easier to access, and competition is relatively low. More importantly, a16z might see the next explosive track.

Forbes mentioned some key points, such as a16z not wanting to raise funds for too long and only investing in blockchain-related projects.

We can roughly infer what this message conveys: a16z sees new trends and wants to deploy quickly, but hundreds of millions of dollars are not enough—they need at least $2 billion.

Many speculate they will invest in stablecoins, RWA tokenization, payments, Crypto+AI, and other popular tracks. But I believe they’ve seen something different, though we don’t know what yet.

Although not explicitly stated, Chris Dixon’s tweet on February 7 hints at some clues:

“We expect financial applications to be the first to succeed, so we invested in Coinbase, MakerDAO, Compound, Uniswap, and Morpho, but non-financial applications will eventually catch up;”

Financial applications are the first not by chance but due to a basic sequence—once enough people come in, new applications will emerge;

The lack of regulation and legislation in crypto has led the industry astray, but once regulation is in place, good actors will drive out bad ones;

It’s the chaos of those years that ultimately led to brilliance—just like the internet and AI.

Perhaps a16z has seen one or a series of new, promising tracks, or maybe the $2 billion won’t go into new tracks at all, but continue investing in seemingly dead projects, or aggressively accumulating chips in the secondary market like in their early days.

a16z is still there, doing many things others don’t understand. But will you believe again this time?

The Power of Belief

Is a16z a Web3 evangelist or a savvy harvestor?

There may be no definitive answer.

From one perspective, a16z has indeed gained huge returns from the rise of crypto. Their investment in Coinbase alone brought over $7 billion in profit. But from another angle, without early bets from institutions like a16z, and without their substantial support for seemingly crazy entrepreneurs, could Web3 have grown to its current scale?

Their post-investment services have helped countless startups through tough times. Their lobbying has fought for a more friendly regulatory environment. Their content has educated generations of entrepreneurs and developers.

In this atypical cycle, we see market resistance to VCs. a16z once used massive reserves of UNI to try to make LayerZero the cross-chain interoperability choice for Uniswap, but the market seemed to rally around Wormhole just to oppose VCs.

At the end of 2021, Elon Musk joked on X: “Has anyone seen Web3? I can’t find it.” Jack Dorsey sarcastically replied: “Maybe it’s somewhere between A and Z.”

Looking today, these jabs hit the mark. The concept of Web4.0 has been proposed, but Web3 hasn’t clearly defined itself. Many big crypto VC partners are leaving, many founders are retreating, and investors are shifting focus to stocks and traditional markets.

a16z has chosen to believe in Web3.

I’ve had moments of wavering in the past year or two, but whenever times are tough, I remember the success stories of business leaders who endured: follow what the smartest people in the world are doing, and do the same.

Right now, the smartest people in the world are probably working on AI, but some still insist on crypto. Like you, I don’t see obvious potential or hope, and we seem unable to see the future. All we can do is watch closely when that new $2 billion fund starts deploying.

After all, in the past 15 years, this “elephant hunter” has proven one thing: while others are still debating whether elephants exist, they’ve already pulled the trigger.