Coinbase Founder Fred Ehrsam and ex-Sequoia Capital Partner Matt Huang have raised $2.5 billion for a venture capital fund called Paradigm One, the biggest-ever cryptocurrency-related VC fund, the Financial Times (FT) reported.
Ehrsam said the amount is likely small compared to how much it would be in 10 years, according to the report.
The fundraise for Paradigm could fuel fears about a bubble in cryptocurrencies, particularly in the decentralized finance space, the report stated.
The first Paradigm fund raised $400 million in 2018 and made an annual internal rate of return of over 200% in the first half of 2021 with assets going as high as $10 billion, although they can swing abruptly with the price of cryptocurrencies. A separate fund from Andreessen Horowitz also claimed to have the largest crypto-related VC ever when it raised $2.2 billion earlier in the year, according to the report.
Both Andreessen and Paradigm brought in more than they intended, the report stated, and both are attempting to profit from ethereum, a blockchain-based software platform for creating and using smart contracts and distributed apps.
Paradigm’s structure is akin to that of a hedge fund, which frees it from the expectation of returning capital to investors by a specific date, which is usually required of VC funds, according to the report.
Paradigm is a desirable investor, according to startup founders, because of its research team that works with portfolio companies, per the report. Paradigm has also worked with crypto groups on sweetheart deals when the latter groups needed its endorsement.
In other news, Circle Internet Financial, a stablecoin issuer, rolled out Circle Ventures earlier this month. The project intends to invest in “compelling” blockchain projects at early stages.
Circle Ventures wants to work with projects that share the mission of boosting economic prosperity around the world, using “the frictionless exchange of financial value.”