Crypto corporate venture capital faces the crash

Can crypto’s corporate funds make it through winter?

It was a no good, very bad week for crypto. Unless you happened to want to work in crypto, because in that case it was a very good week for crypto.

For those in the crypto downturn camp: There were more troubling signs that this could be more than a winter but a true crisis.

• Layoffs have racked the industry, as Coinbase, BlockFi and Crypto.com all let go of large chunks of their workforces.
• First it was the UST/luna crash. Now causing chills through the ecosystem is the news that crypto lending company Celsius stopped all withdrawals and hedge fund Three Arrows Capital experienced massive losses as it eyes selling its assets.

For those who prefer a glass half full: There were plenty of encouraging signs, as CEOs signaled that they were still looking to hire hundreds, if not thousands, of employees.

• Binance’s CEO Changpeng Zhao snarkily tweeted, “It was not easy saying no to Super Bowl ads, stadium naming rights, large sponsor deals a few months ago” (directly shading firms like Coinbase), but it now has 2,000 jobs open. Ripple and Kraken are also looking to hire hundreds of folks.
• Industry conference Consensus had thousands of people in attendance — and no one was even saying the words “crypto winter.”

The question now is, if crypto companies like to invest in each other, what happens in a crisis if they’re forced to cut costs? One major difference between the last crypto winter and this one is that a lot of the companies are investing in each other.

• Many crypto companies have launched their own VC arms, including major funds like FTX Ventures ($2 billion) and Binance Labs ($500 million). Coinbase Ventures is one of the most active corporate VCs. Unlike most corporate funds, the crypto industry seems to be totally fine in investing in competitors.
• Despite the layoffs this week, “Coinbase Ventures does exist and is still very much alive,” Shan Aggarwal, its head of Corp Dev and Ventures, told me. “Despite the market conditions and market turmoil, we’re still very much continuing to invest.”
• The deal pace has slowed, and now investors are still doing price discovery to figure out what the new normal looks like in a market without a ton of comps. But the uncertainty in pricing is always an opportunity for investors, especially strategic CVCs, to get in on an investment.
• “Frankly speaking, Binance Labs is in a really great spot right now because the valuations for a lot of these firms will be depressed given the crypto winter, and the ones that survive this winter will thrive in a bull market period,” Binance.US CEO Brian Shroder told my colleague Ben Pimentel. “So to the extent that investors are actually investing now, that actually has kind of the greatest amount of return from my perspective.”

“I think CVCs are gonna pull back as much as the VC world,” predicted PitchBook’s Robert Le. Depending on who you ask, that’s either going to be a lot or a little. The only thing everyone agrees on is that there’s always an opportunity in a crisis.

For more on what’s happening in crypto corporate venture capital, read my full story on Protocol.com.

Overheard

“Most American ladies have been brainwashed in modern times.” That comment is not something you’d ever expect to see from a CEO in a Slack channel, but it’s one example of a culture war inside crypto exchange Kraken largely sparked by its CEO, Jesse Powell, who seems gleefully provocative on Twitter at times. Anticipating a New York Times story published this week, the company published a culture memo, co-opting Coinbase’s “mission-driven” corporate stance, with Powell adding his own tweetstorm. The whole thing is a DEI nightmare, but Kraken is offering a new “jet ski program” to give employees four months’ pay to leave and pledge to never work at the company again. No, the jet ski is not included, but they hope employees will happily ride off into sunset metaphorically on one instead.