Crypto markets are slowing the industry, but that’s not stopping venture capital firm Variant, which announcement on Thursday that it raised $450 million in two funds targeting Web3 and decentralized finance startups.
Variant is an early-stage crypto-focused investment fund founded by veterans of Andreessen Horowitz that has backed well-known Web3 and crypto projects including decentralized crypto exchange Uniswap, decentralized non-fungible token marketplace Magic Eden and the Ethereum Polygon scaling project, among others.
The money is part of Variant Fund III, which is intended to “invest in user-owned builders of the web,” Variant partners Li Jin, Spencer Noon and Jesse Walden wrote in the announcement.
The fund is split into two parts: a $150 million seed fund designed to help startups and the remaining $300 million for an opportunity fund for projects in Variant’s own portfolio that have demonstrated value.
“What we’ve learned over the past few years has reinforced our thesis that user-owned networks grow larger and faster than their traditional centralized counterparts, with more favorable economics for users,” the partners wrote. “Beyond that, it also showed that ownership is a vast design space, with different experiences ranging from participation in a community to financial exposure to governance.”
The fund will specifically target DeFi projects, blockchain computing, consumer-focused Web3 projects, and new forms of ownership such as non-fungible tokens.
Web3 is the nickname IT experts have given to the next evolution of the World Wide Web, also known as the Decentralized Web, which enables peer-to-peer financial transactions via blockchain technology. These transactions are governed by smart contracts that execute transactions without the need for intermediaries or centralized institutions, allowing developers to create software that empowers communities to control their own resources.
This is the fundamental philosophy behind DeFi, or decentralized finance, which uses blockchain technology to create crypto-token economies. These savings have been used to replicate decentralized versions of traditional finance, including securities trading exchanges, interest generation, lending, and more, all using crypto assets.
Web3 also led to allowing virtual ownership of digital assets via non-fungible tokens, which Jin said Fortune The variant is also targeted. Although most NFTs have been collectibles and digital artworks, they can also represent items from video games, music, video, documents, concert tickets and other consumer items virtual.
“Web2 was digital feudalism, and Web3 is digital capitalism,” she said. “Web3 is a paradigm shift, in that it brings capitalism to the Internet. This introduces the possibility of people actually owning capital and becoming owners of the capital of their own production.
Using NFTs, it is possible to incentivize users by providing them with ownership of assets within an ecosystem, such as game items, collectibles, or their very avatars in virtual worlds. Token models can also be used as part of loyalty schemes which can allow users to not only exchange them for goods on a platform, but also exchange them on external markets for cash, which which makes the tokens valuable to earn. According to Jin, these and many other emerging use cases combine social and economic systems in ways not possible in legacy systems.
Variant raised $22.5 million and $110 million in its two previous funds.
The partners said the small size of the funds is deliberate: it’s meant to allow the company to stay close to and guide its portfolio companies. They added that the next three to five years will be critical for the crypto and Web3 industry and what happens now will determine that future.