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Venture capital firm Coinfund is digging in with new crypto start-ups with a fresh fundraising round at a time when many investors are pulling back from the industry.
Coinfund, a New York-based VC firm that boasts 105 companies in its portfolio, announced today that it pulled in $158 million in its latest round.
In an interview with Decrypt, Alex Felix, Coinfund's co-founder and chief investment officer, said that his firm’s priority lies with projects that further develop the infrastructure around crypto, particularly as they relates to enabling more decentralization.
This, Felix adds, follows a trend that emerged after the implosion of cryptocurrency exchange FTX last year.
"In the post-FTX era, we've seen a lot of developers resolve to finish the roadmap to a decentralized application developer stack," Felix told Decrypt. "Now you're seeing a big, renewed focus on scalability, interoperability, and user experience to really bring that roadmap to decentralization to completion."
With previous rounds of fundraising, Felix said Coinfund invested in what he termed the “established category” of applications around NFT gaming and DeFi, among others. This round will be more focused on what he described as emerging sectors like early-stage crypto start-ups—particularly those that intersect with artificial intelligence.
To date, Coinfund has put down millions in seed funding for companies like AI company Giza, for which it raised about $3 million, and in infrastructure projects like Cosmos where it helped raise $10 million along with Binance Labs and others to further develop its Neutron smart contract platform.
Coinfund’s latest move comes against a backdrop of a broad retreat from crypto-related investments following a maelstrom of failures throughout 2022, including the demise of the TerraLuna stablecoin and FTX’s collapse. Fundraising has also been complicated by a year of higher interest rates that made borrowing more expensive.
In the first quarter of 2023, funding for crypto projects shriveled from $9.1 billion a year earlier to only $1.7 billion, according to a report by Crunchbase. A more recent report by Galaxy Research found that crypto and blockchain investment sank to $2.3 billion in the second quarter, down from more than $8 billion last year.
Despite these drawbacks, Felix said that the current market environment does provide some advantages. One of them is that it allows funders to be more discerning with applicants compared to previous cycles where funders had more capital to spare. This slower pace, Felix says, raises the quality of entrepreneurs competing for more limited funds.
"It slows down dealmaking, but it allows you more time to make the most thoughtful, and best decisions possible," Felix told Decrypt. "You have to really be solving harder problems, and put your company under a lot more scrutiny earlier than you would have in the broader tech boom.”