Mike Novogratz's Galaxy Digital has become a minority shareholder in venture firm ParaFi Capital to jointly co-invest in the decentralized finance (DeFi) space.
ParaFi said Galaxy's strategic investment (undisclosed) would help drive further adoption of DeFi, especially among institutions. ParaFi's other investors include Bain Capital Ventures and Henry Kravis, co-founder of private equity giant KKR & Co.
ParaFi began investing in DeFi in 2018, and its portfolio includes leading protocols such as Uniswap, Compound, Aave, and Synthetix. As of August 31, ParaFi had more than $100 million in assets under management.
In addition to investing in DeFi protocols, ParaFi is also a liquidity provider and a governance participant. Andreessen Horowitz (a16z), for instance, delegated its crypto fund's Compound governance rights to ParaFi.
"DeFi represents the nascent architecture for a new, open financial network...As DeFi approaches an inflection point, we look forward to partnering closely with the Galaxy team," said ParaFi founder and managing partner Ben Forman.
Novogratz told Bloomberg that DeFi protocols would eat into many intermediaries' businesses in a few years. "We want to stay close to the cutting edge. My instinct is, this is a really important part of the ecosystem," said Novogratz.
Galaxy's current exposure to DeFi is about 5% of its capital, said Novogratz.