Venture capitalists at Andreessen Horowitz are betting on crypto technologies to save the internet industry from the concentration that has made a handful of big companies so powerful. The Financial Times reports:
Andreessen Horowitz, the Silicon Valley venture capital group, is betting on crypto to break up the excessive concentration of Big Tech power that the firm played a prominent role in creating, according to one of its leading partners.
Chris Dixon, founder of Andreessen’s crypto arm, said the internet had led to power being held by a handful of companies including Facebook and Twitter, which the venture capital group backed at an early stage.
“I don’t think that any of us expected this level of concentration,” he told the Financial Times’s Tech Tonic podcast. “I don’t think this is a good outcome, both societally and from a business point of view, because our business is investing in entrepreneurs . . . the idea of having the internet controlled by five companies is very bad for entrepreneurs and bad for VCs.”
His comments come as the firm is seeking to hone a new investment strategy built around cryptocurrencies and digital tokens to replace the traditional equity investments made by VC firms and create a new, community-led model for investing in high-growth start-ups.
Proponents of the Web3 movement claim decentralisation will shift the balance of power away from centralised platforms and towards users.
However, critics warn firms such as Andreessen will use the new technology to create a new generation of internet gatekeepers.
“The web is just becoming re-centralised in the hands of a small few investors, or in some cases the same exact people who hold so much power in the current web,” said Molly White, a software engineer and prominent critic of Web3.
The venture capital firm’s co-founder Marc Andreessen is one of Facebook owner Meta’s longest-serving board members. The firm made $78mn from its seed investment in Instagram when it was acquired by Facebook in 2012, a 300 per cent return.
The firm also invested $80mn in Twitter before it went public, and was among the financial backers of Elon Musk’s initial bid for the platform earlier this year.
Dixon believes blockchain technology offers safeguards against anti-competitive activity by building rules into smart contracts written into the computer code.
“Of course, [business people] will try to create monopolies and big businesses and maximise shareholder value,” he added. “What we can do to create a better internet is create new systems where the network effects accrue to the community instead of to companies.”
Since its crypto fund was launched in 2018, Andreessen has raised more than $7.6bn to invest in cryptocurrencies and related technology companies.
Instead of receiving traditional equity, it has been investing in tokens, a form of digital asset built on the blockchain, which can be traded.
“It is a completely different kind of economic model in Web3 in which our investments are mostly in tokens instead of companies,” Dixon said. “And that was a big change. That is a big part of why we created a separate crypto fund . . . it requires a whole different legal structure.”
Andreessen’s portfolio includes the crypto exchange Coinbase, NFT marketplace OpenSea, and Flowcarbon, a crypto carbon credit venture set up by former WeWork chief executive Adam Neumann.
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