London-based venture capital firm Northzone has launched a billion euro fund with the aim of investing in crypto and fintech startups, according to an announcement made today.
Founded in 1996 as a generalist investor, Northzone has backed a wide range of technology companies, from fintech companies such as open banking specialist TrueLayer and giant Klarna, to music streaming platform Spotify, which would explore the web3. But the company also counts crypto infrastructure startup Magic Labs, Web3 privacy firm Sunscreen and DeFi protocol Gro as portfolio companies.
Wendy Xiao Schadeck, partner at Northzone, described web3 as a “core business” for the company. She wrote her dissertation on crypto investing in July 2018 – at the start of a long crypto winter.
“Web3 and web2 will likely start to converge over the lifetime of this fund cycle,” she said in an interview with The Block. “For example, some of the web2 fintech companies in our last fund launched tokens and some of our gaming companies decided to base their tracking rounds on web3 VCs – so it’s very hard to say exactly where the delineation will be. “
The venture capital firm has the infrastructure to support startups through equity investments and token sales, and has previously participated in token staking, Xiao Schadeck said. She also suggested that the company would be willing to invest in a Decentralized Autonomous Organization (DAO), given the right circumstances.
Northzone currently has no exposure to NFTs, unlike fellow London-based venture capital firm Blossom Capital, which has purchased NFTs – including a Bored Ape, a CryptoPunk and an Azuki, by founding partner Ophelia Brown – via its latest fund of $432 million. But that could change.
“We are looking at new ways of investing that fit with what we do,” said Xiao Schadeck when asked about buying NFT. “But it’s not to a point where we’re saying we’ll dedicate some of the funding to buying NFTs or something like that. So far, we haven’t found that specifically, NFTs themselves- memes are an investment case that fits our corporate criteria.”
Xiao Shadeck also said she wasn’t put off by some of the bumps in the road that DeFi has encountered. Holding company Gro was hit by the de-anchoring of Terra’s UST in May, leading it to reassess its strategy of generating yield for clients. Still, Xiao Shadeck said Northzone will continue to look into the Web3 infrastructure space and DeFi protocols like Gro.
The jury is still out on whether Northzone will follow the lead of other European venture capital firms, such as Aglaé Ventures and Cherry Ventures, in launching a dedicated crypto fund, according to Xiao Shadeck.
“We would discuss and evaluate with our LPs to see if the time is right for this,” she said, noting that such a move would allow the company to participate in trading liquid tokens. “I think what’s most likely to happen is that we’ll continue to invest in web3 companies from our core funds and if they decide to launch tokens we’ll hold onto them – we’re not not at all limited in this way.”
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