Cryptocurrency specialists at traditional venture-capital firms are jumping at the chance to create their own separate funds as capital continues to flood into the booming sector.
The latest of these is Dragonfly Capital Partners, a new firm which has raised $100 million to invest both in crypto funds and directly into seed-stage startups. More than half of the fund will be invested in crypto vehicles.
Based in both San Francisco and Beijing, Dragonfly Capital, which invests both in Asia and the U.S., is headed by Alexander Pack, a former investor at Bain Capital Ventures, and Bo Feng, a veteran venture capitalist and founding partner of Ceyuan Ventures in China.
“It’s a new asset class, so many fundamentals of investing are different now,” Mr. Pack said. “So it’s silly to limit yourself to one asset type or geography. We’re trying to back the most important entities in the crypto economy, no mater what organization they are.”
Dragonfly is the latest crypto fund to include a former investor from a traditional venture firm. Other investors from top firms such as Union Square Ventures, Sequoia Capital and Andreessen Horowitz also have formed their own crypto funds. Their moves are an indication of the rapid growth of the crypto industry and the specific expertise and focus required to succeed in the sector that traditional venture firms often lack.
By investing both in Asia and the U.S., Dragonfly can find top startup teams in both regions while benefiting from the large distribution and audience for crypto in Asia, Mr. Pack said.
“That’s the goal—be a single diversified access point for LPs,” Mr. Pack said.
The fund’s investors include large cryptocurrency exchange OKEx and mining company Bitmain Technologies Ltd., which recently filed for an initial public offering, in addition to individual investors including Salil Deshpande of Bain Capital Ventures; Marc Andreessen and Chris Dixon of Andreessen Horowitz; Cyan Banister of Founders Fund; Olaf Carlson-Wee of Polychain Capital; Neil Shen of Sequoia Capital China; Eric Xu, founder of Baidu Inc.; and Bob Xiaoping Xu, founding partner of Zhenfund.
Dragonfly invests in a range of crypto funds, including “quant” style funds such as Hong Kong-based Amber.ai, as well as in the funds of more venture-style crypto firms such as Polychain and Metastable.
In terms of startups, Dragonfly invests both in crypto protocols and applications as well as infrastructure startups that act to bridge crypto and noncrypto businesses and entities, said Mr. Pack. Dragonfly has made more than 20 portfolio company or fund investments so far, including stablecoin startup Basis and startups Spacemesh and Oasis Labs.
The funds Dragonfly backs don’t see the firm as a competitor for startup deals—the funds often bring deals to Dragonfly because of its expertise and because its large limited partners such as OKEx and Bitmain have deep insight into the crypto market and the growth of tokens, Mr. Pack added.