Why is a16z Crypto raising an additional $2.2 billion to heavily invest in Web3?

Author: Zhou, ChainCatcher

On May 5th, the crypto arm of venture capital firm Andreessen Horowitz, a16z Crypto, officially announced the closing of its fifth fund, Fund 5, with a total size of $2.2 billion.

This fund’s size is significantly smaller than the record-breaking $4.5 billion Fund 4 in 2022. Paul Cafiero, partner at a16z Crypto, stated that the firm intends to return to a smaller fund size because “shorter fundraising cycles allow us to keep up with the rapidly changing crypto trends.”

This choice has its practical background. Previously, Forbes cited SEC filing data showing that leading crypto venture firms like Paradigm, Pantera, and a16z Crypto have all scaled back their management sizes in 2025. a16z Crypto’s four funds’ total management scale decreased by nearly 40% from 2024 to 2025, down to about $9.5 billion, partly because the firm has begun returning capital to LPs in early-stage funds.

The entire crypto VC ecosystem has seen a clear increase in fundraising difficulty over the past two years, with capital concentrating among top players. Shrinking fund sizes are the most direct response to market realities.

Looking back, a16z Crypto’s previous fund sizes were: the first in 2018 at $350 million, the second in 2020 at $515 million, the third in 2021 at $2.2 billion, and the fourth in 2022 at $4.5 billion. The current fifth fund returning to $2.2 billion matches the third fund in 2021.

According to RootData, from an investment landscape perspective, a16z Crypto has participated in 253 funding rounds, with a total of 183 portfolio companies and leading investments in 150 of them. In terms of sector distribution, infrastructure accounts for the largest share at 37.7%, followed by gaming (13.1%) and DeFi (12.5%). Notable projects include Coinbase, Solana, Uniswap, Ripple, Phantom, Kalshi, LayerZero, among others.

Image source: RootData

Four GP partners at a16z Crypto stated that the crypto market is currently in a quiet phase, but signal adoption is improving. In each cycle, infrastructure that remains after speculation recedes often becomes more valuable than at its peak and more resilient than at its trough.

They listed three key signals. First, stablecoins, whose trading volume fluctuates with the market, but their usage continues to grow even during bear markets. Stablecoins are widely used for cross-border remittances, savings, and daily payments. This growth is driven more by network effects than price expectations.

Second, the maturity of on-chain financial infrastructure, with perpetual contracts used for price discovery, prediction markets for information aggregation, on-chain lending services stabilizing stablecoin credit markets, and traditional assets beginning to be tokenized. The scope of applications has extended beyond native crypto assets.

Third, on the regulatory front, a16z Crypto holds a positive attitude toward the GENIUS Act, believing it provides a clear compliance framework for developers, and remains optimistic about the Clarity Act passing this year.

Based on this, a16z Crypto states that the new fund will focus on investing in projects that transform new infrastructure into products used in daily life—areas that are less in the spotlight during cycles but can generate more long-term value.

In terms of investment focus, the fund will be 100% dedicated to crypto investments and will not expand into adjacent fields like AI or robotics. The reason given by a16z Crypto is not to avoid AI but because they believe AI makes crypto even more indispensable in the current era.

They point out that software is becoming increasingly complex and less trustworthy, AI systems are powerful but operate with opaque logic, and the high concentration of internet infrastructure poses ongoing risks of single points of failure.

In this context, the core attributes of crypto networks become even more valuable: systems that are transparent and verifiable, inherently global networks, economic models aligned with user and developer interests, and infrastructure that does not rely on a few middlemen.

These features are already evident in real products across payments, financial services, creator platforms, and decentralized infrastructure, and are gradually being adopted by financial institutions and tech companies.

Meanwhile, a wave of new models previously thought impossible is emerging: users can directly hold assets and identities, own inviolable digital property rights; numerous software agents can autonomously decide, trade, and access computing power, data, and services; autonomous networks can self-finance, govern, and evolve through code.

In other words, they are not directly entering the AI track but are betting that AI development will drive demand for crypto infrastructure. Specifically, they are betting on the underlying tracks of stablecoins, on-chain finance, and AI agent economies.

This contrasts with some peers’ judgments. Reports indicate that Paradigm is seeking to raise a new fund of up to $1.5 billion, planning to expand its investment scope directly into AI and robotics. Haun Ventures, having completed a $1 billion fundraise, also lists AI agents as one of its core investment directions.

These two strategies represent different bets by top-tier institutions on the next cycle: one believes the intersection of crypto and AI offers greater opportunities, while the other thinks focusing on crypto alone is sufficient because the AI wave will eventually flow back into blockchain.

Additionally, Dragonfly recently completed its fourth fundraise, totaling $650 million, and Blockchain Capital is raising about $700 million. The dense fundraising activity among top institutions indicates that a new wave of project investments will be launched in the coming months.

Clearly, this round of capital is betting on crypto’s transition from infrastructure building to real user adoption. Whether focusing solely on crypto or crossing into AI, these investments will flow into areas capable of turning technology into tangible products.