“If I had a million dollars, I’d be rich”
– Barenaked Ladies
Oh, how cute the 90s were. Andreesen Horowitz just announced it raised a $9B for Web3 companies (https://a16z.com/2022/01/07/9b-to-build-the-future/).
And, A16Z is not the only game in town. Simple web searches can turn up other funds being raised for Web3 specifically, and undoubtedly $10s of billions of dollars, if not $100s of billions of dollars available for investment. Where does all this money go and what is it for?
At a high level, this is because of the profound shift from Web2 to Web3 and the new types of backends that are available and the disruption to financial industry and so much more. But, this is at a high level. Where will this be deployed? Such a breathtaking sum has to be doled in in fairly large amounts — one would imagine in average sizes well in excess of $100m, given it seems unlikely that A16Z would have 90 investments from just this fund. Companies that receive the financing would be the break-aways — the companies that have shown that they have a business and are looking to grown. A long time ago, like three years ago, these companies might have raised $10-20m, but now, with the landgrab on and valuations increased, these companies will raise 5 to 10 times as much.
Many VCs’ blogs lament the money into the system and increases in value and ‘too much money’ and how it causes problems. Undoubtedly, there is some truth here. But, the other side of this is that the breakout companies can grow tremendously, and the valuations are ultimately the result of a competitive market among professional investors — about as fair as you could imagine.
There will be some big failures assuredly. And, this goes with the process. But, when the industry grows so much, even one winner can make up for all the losses. And, I have no doubt that we’ll see even more breakout winners, beyond OpenSea, FTX, Coinbase, Binance and the other Crypto companies with valuations in excess of $14B. It’s an exciting time, and there a lot of money to go around!
As there should be. If the Barenaked Ladies wanted to update their song, it feels like the number would be 10-100x times as much. Ahh.. the 90s.