Two Sigma Ventures announced plans on Wednesday to invest $400 million across two new venture capital funds, confirming to CoinDesk that crypto investments will be included.
The early-stage focused Two Sigma Ventures IV fund and growth-stage Opportunity Fund will invest across a number of industries, including enterprise software, financial technology and consumer technology. The company doesn’t have a dedicated crypto fund, but about 15% of its capital will go toward crypto and Web3 projects, Two Sigma partner Dan Abelon told CoinDesk during an interview.
Venture capital investments in the first half of 2022 fell 26% year over year as the Ukraine conflict, the collapse of Terra’s UST stablecoin and the liquidity challenges of crypto lender Celsius Network gave way to a bear market. The number of deals remained stable, suggesting that investors continued to pour into the space but were backing smaller deals.
Two Sigma Ventures is the venture capital arm of New York-based quant hedge fund Two Sigma, which has about $60 billion in assets under management. The combination drives a focus on startups utilizing data science and software, making crypto a natural investment fit.
“Decentralized finance as a whole is a category that we emphasize and focus on for a number of reasons," explained partner Andy Kangpan. "One of them is our affiliation with the broader Two Sigma organization ... There’s very significant, deep financial market expertise that we can tap into to help us think through how crypto can change how financial services operate.”
Other crypto verticals of interest include developer tooling and infrastructure projects, said Kangpan.
Approximately 85% of the capital for the new funds came from external investors, primarily institutional players such as college endowments, non-profit foundations and pension funds. The remainder came from Two Sigma partners and senior employees.
Two Sigma funds typically cut checks of about $8 million to $12 million for a Series A round, but there’s flexibility in the size, said Abelon, particularly for crypto investments.
“We have to be sensitive that this is a challenging time to be a founder. It’s tough to raise money in certain fields,” said Abelon. “From a long-term perspective, it’s a great time to be a founder and a great time to be an investor. It feels like we continue to be on the cusp of the digitization of society and solving lots of big problems with software and data.”
CORRECTION (Sept. 16, 2022 19:48 UTC) – Fixes the dollar amount of the investment in the first paragraph.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.