Faction launches $285M early-stage crypto fund

Amid a tough fundraising climate in the crypto market, Faction Ventures, a blockchain-focused venture capital firm, has announced the launch of its first $285 million fund, as revealed exclusively to TechCrunch by the firm’s co-founders.

Faction’s primary focus will be on early-stage blockchain projects raising seed or Series A rounds. Samuel Harrison, managing partner at Faction, stated that before the public launch, approximately 20% of the fund’s capital had been invested in a handful of projects. The deployment period is expected to span around three years, but may be subject to variations based on the investment landscape, said Banafsheh Fathieh, a general partner at the firm.

“Most growth stage activities in the crypto space revolve around crypto as an asset class, with a significant emphasis on trading use cases or the concept of this being an emerging asset class. However, as a technology trend, crypto is still relatively nascent,” Fathieh explained. “The early stage presents the most substantial opportunities in this regard.”

Originally targeting $250 million, the fund ultimately exceeded its goal by 14%. “We believed that a range between $250 million and $350 million would be appropriate,” stated Harrison.

Harrison also noted that the fund’s limited partners are predominantly institutional investors, alongside some strategic investors, with a small portion of capital raised from family offices and acquaintances.

“We aimed to prioritize flexibility with capital,” Fathieh emphasized. “In times of declining fund sizes, it becomes challenging to participate as a syndicate or lead.”

The firm’s objective is to have the necessary scale to lead seed rounds and early Series A rounds while retaining full control over collaborating with companies to aid their growth, Harrison affirmed. “Operating at a smaller scale would present challenges in this respect, as it would limit the available resources to support these companies, particularly those with substantial capital requirements,” he added.

“Our size is designed to have a significant impact,” Harrison continued. “Yet, it is also structured to facilitate effective deployment of our resources.”

Fathieh stated that the firm does not abide by rigid criteria for check size or ownership and indicated that it invests in both tokens and equity. Harrison added that the average check size falls within the “sweet spot” of $5 to $10 million, typically positioning the firm as a lead investor.

The firm is led by individuals with previous experience at prominent crypto companies such as Coinbase, Blockchain.com, and Amber Group, among others. Harrison also disclosed that it operates as a joint “hybrid structure” venture with Lightspeed Venture Partners to leverage the platform provided by the venture firm.

Both Fathieh and Harrison view the current state of the crypto market as an opportune environment for investment.

“Clearly, we are observing a phase where a significant amount of generalist capital has exited the space,” Harrison observed. “Having invested through several market cycles, we believe that this presents an ideal window for investment. It is preferable to a highly overheated market… This is the most opportune time for us to be active, especially when others are hesitant.”

Despite the decline of the crypto market from its peak, Fathieh expressed a commitment to long-term focus. “Markets experience fluctuations; we allocate a minimal portion of our day to monitoring it. Nevertheless, our fundamental conviction remains steadfast, and there is a clear opportunity here,” she emphasized.

Harrison stressed that market timing is not the primary concern, as the firm’s investments are viewed as a long-term commitment rather than a short to medium-term endeavor.

“Even in a downturn next year, we will continue to invest, deploy capital, and pursue our long-term strategy over a 10-year horizon,” he affirmed.

Source link

Leave a Comment