Silicon Valley venture capital group Andreessen Horowitz is betting on crypto to break the excessive focus of the Big Tech power that the company played a major role in creating.
According to Chris Dixon, founder of Andreessen’s crypto arm, the Internet has led to dominance by a handful of companies, including Facebook and Twitter, which the venture capital group backs early on.
“I don’t think any of us expected this level of attention,” he told the Financial Times’ Tech Tonic podcast. “I don’t think this is a good outcome for society or business, because our business is for entrepreneurs . . . The idea of five companies controlling the Internet is bad for entrepreneurs and bad for VCs.
His comments suggest the company is looking to develop a new investment strategy built around cryptocurrencies and digital tokens to replace traditional equity investments made by VC firms and create a community-driven model for investing in high-growth startups.
Proponents of the Web3 movement shift the balance of power away from centralized platforms and toward users.
However, critics warn that companies like Andreessen will use the new technology to create new Internet gatekeepers.
Molly White, a software engineer and prominent critic of Web3, said: “The web is being re-centered in the hands of a small minority of investors or, in some cases, the same exact people who hold most of the power on the current web.”
Venture capital firm co-founder Marc Andreessen is one of the longest-serving board members of Facebook owner Meta. The company raised $78 million from a seed investment in Instagram when it was bought by Facebook in 2012, a 300 percent return.
Andreessen invested $80 million in Twitter before it went public, and earlier this year Elon Musk was among the crowdfunding backers for the platform.
Dixon believes blockchain technology can prevent anti-competitive behavior by building rules into smart contracts written in computer code.
“of course, [business people] It tries to create monopolies and big businesses and maximize shareholder value,” he added. “What we can do to create a better Internet is to create a new way of making the network impact not on companies, but on society.”
Since the crypto fund launched in 2018, Andreessen has raised more than $7.6 billion to invest in cryptocurrencies and related technology companies.
Instead of accepting traditional equity, he was investing in tokens, a type of digital asset built on the blockchain that can be traded.
“In Web3, our investments are mostly in tokens instead of companies, which is a completely different economic model,” Dixon said. “And that was a big change. It’s a big part of what we’ve created a separate crypto fund for. . . It requires a different legal structure.
Andreessen’s portfolio includes crypto exchange Coinbase, NFT marketplace OpenSea and FlowCarbon, which was founded by former WeWork CEO Adam Neumann.
As companies like Amazon and Google focus on other new technologies like artificial intelligence and virtual reality, Dixon said, crypto is an opportunity for new entrepreneurs and startups.
“I see no evidence of this. [dominant] Companies will jump in,” he added. “Compared to areas like AI and virtual reality, if the incumbents are investing heavily, we have a lot of room for our startups to operate.”
While cryptocurrency prices have been on a slow decline since late last year, the market crashed in May after the TerraUSD stablecoin collapsed. Market volatility has pushed Bitcoin prices back to pre-pandemic levels and contributed to the collapse of several crypto lenders and hedge funds.
Dixon said the downturn made Web3’s investments more attractive.
“There are a lot of great entrepreneurs coming into the space, great ideas and low prices,” Dixon said. “With venture capital, you hopefully buy low and sell high. . . So my experience has been rejected. There were opportunities.
Additional reporting by Jemima Kelly
You can listen to the full interview with Chris Dixon on the FT. Tech Tonic Podcast