Andreessen Horowitz Debuts $600 Million Gaming Fund to Add to Web3 Bets

Silicon Valley venture capital firm Andreessen Horowitz has launched a $600 million fund specifically for game startups, ramping up bets on so-called Web3 tech just as the market decline widens. more emphasized the volatility of the crypto-based sector.

The venture firm, known as a16z, said Wednesday the fund is the first dedicated to the games industry, pointing to the billions of dollars in annual revenue that games like “Fortnite” and “Minecraft” created. The fund expands a16z’s longtime work in supporting game startups and builds on its multi-billion dollar deployment strategy into Web3 technology. Web3 refers to a new iteration of the internet, with products and applications built on the blockchain, including the exchange of cryptocurrencies or tokens, and sometimes housed in a virtual world, called is the metaverse.

Startup investors say the technologies being built at virtual reality game companies will help form the basis of the Web3 industry, which is still a collection of ideologies held by leaders tech industry leaders advocate rather than actual technologies. The initial wave of such companies creating games takes place in the metaverse, in which users can play for tokens or cryptocurrencies.

Some see Web 3.0 as the next generation of the internet, a decentralized version of the web based on blockchain. Here are the key principles behind it, and why skeptics don’t believe it can scale globally. Illustration: Amber Bragdon

“Game infrastructure and technology will be key building blocks of the metaverse, an opportunity that will cripple the current $300 billion gaming industry,” a16z said. The company said it will invest in a range of game services and applications, as well as companies building technology for the metaverse.

Andreessen Horowitz is a strong proponent of Web3, with its most recent and third fund dedicated to crypto-based startups totaling $2.2 billion. One of the company’s investors, Katie Haun, left in December to set up her own $1.5 billion fund, also dedicated to crypto investments, an indication that growing appetite for Web3 startups not only among venture capitalists but also limited partners funding venture firms.

A16z’s new fund coincides with a sharp drop in crypto values ​​as investors shed risk assets amid broader market volatility and inflation, with more than $1 trillion in funds. digitally wiped out since November. A bunch of cryptocurrencies touted for their purported stability crashed while other popular coins fell about 60% from their peak of November. The sharp and sudden drop creates risks for games whose goal is to spend and earn cryptocurrency.

The crypto drop is part of a larger downturn in the venture capital industry, as investors showing caution just discovered or fled the sector, laying off startups Thousands of employees and entrepreneurs face pressure to cut costs and improve profit margins. The cooler market has created cheaper prices for investors who still want to spend, but also significantly increased uncertainty around investments.

Many new VCs have been announced since the beginning of the year but most likely were raised before the current market correction.

Andreessen Horowitz has been an investor in games since before the Web3 craze, including betting on Zynga in 2009. Inc.,

one of the game pioneers in Silicon Valley. Gaming apps have grown in popularity during the pandemic, an outlet for virtual socialization amid Covid-19 restrictions.

Write letter for Heather Somerville at Heather.Somerville@wsj.com

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Edmund DeMarche

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