News Tech: According to one of its key partners, Silicon Valley venture capital firm Andreessen Horowitz is counting on cryptocurrencies to break up the intense concentration of Big Tech energy that the company played a significant role in generating.
I don’t believe any of us expected this degree of focus,” he told the Tech Tonic podcast of the Financial Times. “Our business is investing in entrepreneurs. The concept of having the internet controlled by five businesses is incredibly awful for entrepreneurs and bad for VCs. I don’t think this is a healthy conclusion, both societally and from an economic point of view.”
Chris Dixon, the founder of Andreessen’s cryptocurrency division, claimed that the web had resulted in a small number of companies, like Facebook and Twitter, which the venture capital company sponsored at an early stage, holding the majority of the power.
His comments come as the organisation works to refine a new financing strategy based on cryptocurrencies and digital tokens to replace the traditional equity investments made by VC firms and develop a new, community-led model for investing in high-growth start-ups.
Marc Andreessen, the co-founder of the venture capital firm, is one of Facebook owner Meta’s longest-serving board members. When Facebook purchased Instagram in 2012, the advertising company gained $78 million from its initial investment, a 300 percent return.
The company was one of several financial sponsors of Elon Musk’s initial offer for the platform earlier this year and spent $80 million in Twitter before it went public. Dixon thinks that by incorporating rules into smart contracts that are coded into the computer, blockchain technology offers protections against anti-competitive activity.
He said, “Of course, [businesspeople] would strive to establish monopolies and large corporations and maximise shareholder wealth. What we can do to build a better internet is design new systems such that the community benefits from network effects rather than just the businesses. In order to invest in cryptocurrencies and related technology companies, Andreessen has raised more than $7.6 billion since the debut of its cryptocurrency fund in 2018.
It has been investing in tokens, a form of digital asset built on the blockchain and capable of trading, rather than obtaining traditional compensation. In Web3, the economic model is very different because most of our investments are made in tokens rather than actual businesses, according to Dixon. And it was a significant shift. This is a major factor in why we established a separate cryptocurrency fund since it necessitates a whole distinct legal framework.
He said, “I’ve seen no evidence that [powerful] corporations will stomp in. In contrast to fields like artificial intelligence and virtual reality, where the incumbents are making large expenditures, “we have a lot wider berth for our start-ups to operate.” Although the value of cryptocurrencies has been steadily declining since late last year, the market collapsed in May with the demise of the terraUSD stablecoin. Market unpredictability caused bitcoin’s value to reach pre-pandemic levels and contributed to the failure of several cryptocurrency lenders and hedge funds.
As companies like Amazon and Google focus on other emerging technologies like artificial intelligence and virtual reality, Dixon claimed that cryptocurrency offered an opportunity for young entrepreneurs and start-ups. The cryptocurrency exchange Coinbase, NFT market OpenSea, and Flowcarbon, a cryptocurrency carbon credit score business founded by former WeWork CEO Adam Neumann, are all included in Andreessen’s portfolio.