Polychain Capital To Create Venture Capital Fund
A US-based company Polychain Capital raised $175 million to establish a venture fund to work with cryptocurrency startups, Bloomberg reports.
According to the firm’s head, Olaf Carlson-Wee, the proceeds will be spent on acquiring stakes in projects that have faced financial problems. It is necessary to mention that the future fund will have a lockup period for funds withdrawal during the first seven years.
Californian Polychain Capital is considered a hedge giant in the cryptocurrency industry — in 2018, it was managing assets worth $1 billion. However, in the same year, the number of new venture funds (124) exceeded that of hedge funds (114) in the crypto industry for the first time.
Moreover, last year, 42 hedge cryptocurrency funds closed, and the rest reported their revenues decreasing by 70%.
This trend is associated with a significant decline in digital currency price and the collapse of the ICO market. According to Arca, a partner of Polychain Capital, there are now a lot of distressed projects in the industry, which can be bought even below their market price.
While ICOs bring quick profits to startups, an instant result should not be expected from venture funds. Many funds, which are now working with cryptocurrency projects, have lockup periods for two, three years or more.
Also, the representatives of Pantera Capital hinted that the company is likely to switch to a venture capital investment too. Its existing funds have a different structure: one is a hedge fund for ICOs, the second is for investments in bitcoin.
As previously reported, ICO projects attracted $160 million since the beginning of the year.