According to PitchBook data, crypto VCs have raised over $2.2 billion in new capital through closed funds as of August this year. In the past few weeks alone, at least six VCs have raised over $500 million in total. Notable examples include ParaFi Capital’s $120 million fund, Borderless Capital’s $100 million fund, Hack VC’s $77 million fund, and Robot Ventures’ $75 million fund. Several funds are also actively seeking new capital this year, with Dragonfly Capital reportedly targeting $500 million and already raising half of that amount.
Many funds are targeting early-stage startups, which is a sign that VCs are optimistic about the potential of new innovations. This approach suggests that they recognize the opportunity for success even in difficult markets. One fund that caught my attention in particular is Borderless Capital’s $100 million DePIN Fund III.
DePIN, or Decentralized Physical Infrastructure Network, uses blockchain technology and token incentives to allow individuals to create connected networks, such as GPU clusters. Supporters claim that this model offers greater efficiency and lower costs compared to existing Web2 frameworks.
What’s interesting about Borderless Capital is that this is its third DePIN fund, with the first two funds raised in 2021. Alvaro Gracia, a partner at Borderless Capital, said the firm’s first DePIN fund was worth $10 million and focused solely on Helium, a decentralized wireless network, investing in Helium’s HNT token and building the physical infrastructure for the network.
According to Gracia, in contrast, Borderless Capital’s second DePIN fund was $20 million and invested in over 35 DePIN projects, achieving a more than 2x multiple on invested capital. Gracia said the leap to $100 million for the third fund reflects the significant growth of the DePIN sector, not only in the number of projects funded, but also in the size of the funding rounds and the ambition of these initiatives. He noted that the DePIN category is unique and mature, with strong fundamentals and applications across a variety of industries.
DePIN sector ‘very bearish’
“DePIN is probably the only category of web3 where value comes from outside the crypto space,” Gracia said, adding that it “should be very bear-proof.” He noted that during the next crypto bear market, many DePIN projects are likely to maintain their fundamentals and continue to expand even as the broader crypto market declines.
Gracia cited Helium as an example, noting that its revenues are “almost uncorrelated to the crypto market” because subscribers are paying for their mobile plans. He also mentioned GEODNET, a decentralized real-time kinematics (RTK) network for satellite navigation. “We were the first to invest in GEODNET, and they have already achieved over $1.5 million in ARR (annual recurring revenue). The fact that all of this ARR is uncorrelated to the crypto market makes us very bullish on the DePIN category,” Gracia added.
Another important aspect of the DePIN project, according to Gracia, is the token economics design that facilitates the transfer of revenue into token value. “We call this the token appreciation mechanism,” he explained, noting that in some cases, this mechanism involves a buy-and-burn strategy. In the case of GEODNET, Gracia said, 80 cents of every dollar of revenue received from customers is allocated to buy and burn tokens on the open market. This practice reduces the supply of outstanding tokens, driving up the token price and creating a positive feedback loop. The higher the price, the more distribution there is, he added, allowing individuals to earn more in return for contributing to the infrastructure.
According to Gracia, a former head of U.S. investments at Telefónica, DePIN overall has the potential to not only build infrastructure as a category, but to do so in a way that solves real problems and disrupts existing Web2 industries.
Gracia said Borderless expects to fully invest DePIN Fund III within the next four years.
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