Crypto VCs have raised over $2.2 billion in new capital through closed funds this year as of August, according to PitchBook data. In the last few weeks alone, at least half a dozen VCs have collectively raised over $500 million. Notable examples include ParaFi Capital's $120 million fund, Borderless Capital's $100 million fund, Hack VC's $77 million fund and Robot Ventures' $75 million fund. Additionally, several funds are actively seeking new capital this year, with Dragonfly Capital reportedly aiming for $500 million and already raising half of that amount.
Many funds are targeting early-stage startups, signaling that VCs remain optimistic about the potential for new innovations. This approach suggests they recognize opportunities for success, even in a challenging market. One fund that particularly caught my attention is Borderless Capital's $100 million DePIN Fund III.
DePINs, or Decentralized Physical Infrastructure Networks, leverage blockchain technology and token incentives to enable individuals to create connectivity networks, such as GPU clusters. Proponents argue this model offers greater efficiency and lower costs compared to traditional web2 frameworks.
What's fascinating about Borderless Capital is that this is its third DePIN fund — its first two funds were raised in 2021. Alvaro Gracia, partner at Borderless Capital, told me that the firm's first DePIN fund was valued at $10 million and focused exclusively on Helium, a decentralized wireless network, where they invested in Helium's HNT token and deployed physical infrastructure on the network.
In contrast, Borderless Capital's second DePIN fund was sized at $20 million and has invested in over 35 DePIN projects, achieving more than a 2x multiple on invested capital, according to Gracia. The jump to $100 million for the third fund reflects significant growth in the DePIN sector — not only in the number of projects raising funds but also in the size of funding rounds and the ambition behind these initiatives — Gracia said. He noted that the DePIN category is unique and maturing, with strong fundamentals and applications across diverse industries.
"DePIN is probably the only category in web3 where the value comes from outside the crypto sector," Gracia said, suggesting it will be "very resistant to bear markets." He noted that during the next crypto bear market, many DePIN projects are likely to maintain their fundamentals and continue expanding, even as the broader crypto market declines.
Gracia cited Helium as an example, highlighting that its revenue has "close to zero correlation to crypto markets" since subscribers are paying for a mobile plan. He also mentioned GEODNET, a decentralized real-time kinematic (RTK) network for satellite navigation. "We were the first investors in GEODNET, and they've already achieved over $1.5 million in ARR [annual recurring revenue]. The fact that all this ARR has zero correlation with the crypto market makes us very bullish on the DePIN category," Gracia added.
Another critical aspect unique to DePIN projects is their tokenomics design, which facilitates revenue transfer to token value, according to Gracia. "We call it a token value accrual mechanism," he explained, noting that in some cases, this mechanism involves buy-back and burn strategies. In the case of GEODNET, for every dollar of revenue received from customers, they allocate 80 cents to buy back and burn their token in the open market, Gracia said. This practice reduces the supply of outstanding tokens, potentially driving up the token price and creating a positive feedback loop — higher prices lead to greater deployments, allowing individuals to earn more for contributing infrastructure, he added.
Overall, DePIN as a category not only has the potential to create infrastructure but also does so in a way that addresses real-world problems and can disrupt existing web2 industries, according to Gracia, former head of U.S. investments at Telefonica.
Borderless anticipates fully deploying its DePIN Fund III within the next four years, Gracia said.
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