While most venture capital firms are hot on their heels, focused on keeping their existing initial bets alive during the pandemic, Andreessen Horowitz is on the attack.
In April, the Silicon Valley firm redoubled its bet on a speculative area of emerging technology. The company raised a second cryptocurrency-focused mutual fund worth $ 515 million, in addition to its original fund of $ 300 million from two years earlier.
I interviewed Chris Dixon, co-leader of the fund, a few weeks ago at a virtual conference called Ready Layer One. (“Layer one”, in cryptographic parlance, stands for “blockchain,” the shared database technology at the core of cryptocurrencies).
Dixon has staked his reputation on the success of cryptocurrencies, and was not ashamed of his unwavering support for the boom-and-bust industry. When I mentioned that many of Dixon’s venture capitalists have pulled out of blockchain investing, he said he doesn’t pay attention to them. The industry is full of trend hunters who play “kids soccer” and all chase the same ball, he said.
During the interview, Dixon addressed everything from the development of artificial intelligence to rethinking the structure of corporations. He said that the Libra Association convened by Facebook, which is building a global payments system, is “being underrated,” as are non-financial applications of blockchains such as crypto-infused social media, an idea reminiscent of the Reddit’s recent cryptocurrency experiment.
The conversation, the video version of which is available online, has been edited for length and clarity.
Dixon: Our view is that cryptocurrencies, like many emerging technologies, such as mobile devices or AI, evolve in waves. One of the really exciting things about where we are now in 2020 is that the seeds that were planted in the last wave are now finally beginning to bloom. This year a lot of projects are being launched. AI. very famous went through all these summers and winters. Since 2013, it has been this real and lasting spring for machine learning. Crypto will be the same.
What do you expect to happen over the next 12 months?
Some of the people sponsoring this conference, for example – like Near [a blockchain designed to process transactions faster than, say, Ethereum or Bitcoin can currently] and Filecoin [the decentralized crypto equivalent of Dropbox] – are launching. Polkadot [a technology that aims to connect different blockchains] will be launched soon. You’ll see sometime this year, probably, too, the launch of Libra and other payment blockchains.
I am optimistic for a relatively short-term release. There are a lot of very high quality people working on that project. I think the general public is underestimating it.
Right now, the payments are very isolated. It reminds me of pre-WhatsApp messaging. For those old enough to remember, messaging, before the iPhone era, was expensive. We had a lot of interoperability issues. And now we take it for granted that you can text and video chat and do all of these things for free. The same will happen with money.
What should prospective crypto entrepreneurs focus on?
Whenever there is a new wave of computing, the really exciting ideas tend to be things that could not have existed in the previous paradigm. One of the really exciting things that is happening now is DAOs, or “autonomous digital organizations.” It is like a digital cooperative. It is a digital service that is owned and operated by a community rather than a company.
Compound, in which we are investors, is a lending protocol [software that allows banking operations without the need for a traditional bank] that is now becoming DAO over time. Basically, they will be owned by the user community in the same way that Maker [another Andreessen investment] is today. A DAO simply could not have existed before crypto. For me, that’s a very, very powerful idea.
