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Andreessen Horowitz launches $600 million gambling fund to add to Web3 betting


Silicon Valley venture capital firm Andreessen Horowitz has launched a $600 million fund dedicated to gaming startups, stepping up its bets on so-called Web3 technology, just as a broader market decline highlights the volatility of the cryptocurrency-based industry.

The venture capital firm, known as a16z, said Wednesday that the fund was its first dedicated to the games industry, highlighting the billions of dollars in annual revenue generated by games such as “Fortnite” and ” Minecraft”. The fund continues a16z’s long-standing practice of backing gaming startups and builds on its strategy to deploy billions of dollars in Web3 technologies. Web3 refers to a new iteration of the internet, with products and applications that are built on the blockchain, include the exchange of cryptocurrencies or tokens, and are sometimes hosted in a virtual world, dubbed the metaverse.

Start-up investors said the technologies being built in VR gaming companies will help lay the foundation for the Web3 industry, which is even more a set of ideologies embraced by tech industry leaders. than practical technologies. An early wave of these companies are creating games that take place in the metaverse, in which users can play to earn tokens or cryptocurrencies.

Some see Web 3.0 as the next generation of the Internet, a decentralized blockchain-based version of the Web. Here are the key principles behind it and why skeptics aren’t convinced it could scale globally. Illustration: Amber Bragdon

“Games infrastructure and technologies will be key elements of the metaverse, an opportunity that dwarfs the current $300 billion gaming industry,” said a16z. The company said it would invest in an array of gaming services and apps, as well as companies developing technology for the metaverse.

Andreessen Horowitz has been a strong supporter of Web3, with his latest and third fund dedicated to cryptocurrency-based startups totaling $2.2 billion. One of the company’s investors, Katie Haun, left in December to create her own $1.5 billion fund also dedicated to crypto investments, a sign of the growing appetite for Web3 startups not only among venture capitalists but also the limited partners who finance venture capital companies.

A16z’s new fund coincides with a sharp decline in cryptocurrency values ​​as investors offloaded risky assets amid broader market volatility and inflation, with more than $1 trillion in digital money wiped out since November. A breed of cryptocurrencies touted for their supposed stability have crashed while other popular coins are down around 60% from the November high. The steep and sudden drop creates a risk for games whose objective is to spend and earn cryptocurrencies.

The slide in crypto is part of a broader downturn in the venture capital industry, as investors exercise newfound caution or flee the sector, startups lay off thousands of employees and entrepreneurs make facing pressure to cut costs and improve margins. The colder market has created cheaper prices for investors still looking to spend, but also significantly increases the uncertainty surrounding investments.

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

Andreessen Horowitz invested in games long before the Web3 craze, including a 2009 bet on Zynga Inc.,

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

Write to Heather Somerville at Heather.Somerville@wsj.com

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