The constellation of crypto-focused venture capital funds grew this week with the launch of a dedicated team within Bain Capital Ventures.
Bain Capital Crypto, which counts the $155 billion Bain Capital as its largest limited partner, is in the process of deploying $560 million across the crypto ecosystem with an emphasis on early-stage companies, according to a conversation with the team conducted Tuesday evening.
According to partner Stefan Cohen, Bain Capital Crypto has been in the works for about a year. Bain Capital Ventures is no stranger to crypto; among the industry's firms in its portfolio are BlockFi, Zero Hash, Risk Harbor and CoinDCX.
But according to Cohen, who has been a partner at the firm since 2016, Bain Capital Ventures felt like it needed "a dedicated team" in order to compete in an increasingly active field.
In a sense, the firm is following in the footsteps of a16z, which spun out its own dedicated unit. Elsewhere, BCV has to compete for space on cap tables with large crypto-native venture firms like Paradigm and Multicoin as well as VCs like Sequoia and Tiger.
"A little more than a year ago we set out to design a founder-oriented fund to help them through inception to growth," Cohen added. "Advising on key economics, interacting with on-chain governance, providing liquidity and staking."
Alex Evans, the fund's co-lead, said the team "gives us the structure to do this."
To that end, the fund hopes to embody more of a "mad scientist" culture versus traditional Silicon Valley given the added complexities of investing in the crypto market.
"This isn't traditional venture," said Cohen.
"Crypto VC is different than traditional software investing: founders and communities have a different set of needs [and] we intend to be involved with protocol communities, code level governance decisions and incubating projects on top of infrastructure we are excited about.”
Thus far, large traditional venture shops have shied away from tokens that have already begun trading on exchanges. Bain also plans to back anonymous founders, according to a spokeswoman. The firm's check sizes will range from $1 million to $30 million.
The new fund joins the ranks of other major funds raised in recent months, including those from Sequoia, Pantera, and exchanges like FTX. With each successive announcement, the amount of venture capital on the crypto sidelines continues to surge.
Yet Bain Capital Crypto's announcement on Tuesday wasn't without a dose of controversy. A team photo drew scorn and criticism for its all-male composition. Tuesday night, managing partner Stefan Cohen apologized and committed to "hiring women, investing in women-led projects" among other diversity-focused steps.
Focus on the DAO and now
One area in which Cohen and Evans expect to sign a lot of checks is in the ecosystem for decentralized autonomous organizations of DAOs.
While DAOs have been around for years, they surged in mindshare during 2021 on the back of viral, community-led causes related to buying a rare copy of the US Constitution or paying for Wikileaks founder Julian Assange's legal fees via the purchase of an NFT. On the development side, DAOs help manage a wide range of DeFi protocols from Compound to Uniswap.
"As the Web3 narrative grew, a lot more inclusive DAOs came up. DAOs with culture, DAOs where people can hang out and it feels intuitive," noted Darren Lau of the Daily Ape during a recent episode of The Scoop."People just want a place to hang out with their friends and having a DAO seems like the cool way to do it right now.”
All the while, the proliferation of DAOs has created an investment opportunity, drawing the interest of firms like Bain Capital Crypto.
The firm plans to invest in the companies that provide tools and services to DAOs related to governance, payments and launch-time marketing, among others.
During the interview, Cohen pointed to Tarun Chitra's Gauntlet as one example of a company in this space, highlighting the firm's automated governance platform.
"The ways we live and work are going to continue to evolve and create a flywheel of economic growth that is purely crypto native," Cohen said, adding:
"DAOs are starting to look like what B2B software looked like in the early 2000s."
This story was updated to add context in paragraph ten.
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