Menlo Park-based venture capital firm, Lightspeed Ventures Partners (LSVP), reportedly raised over one billion dollars for entering multiple sectors, including the nascent cryptocurrency and blockchain market.
Lightspeed’s Cryptocurrency Push
According to Reuters, on July 10, 2018, Lightspeed plans to allocate roughly $1.05 billion to various early-stage companies. The firm aims to expand its operations in South East Asia by actively investing in biotechnology, cryptocurrency, blockchain, and cosmetics.
Although Lightspeed was founded in 2000, it monopolized the limelight in 2018 after a $485,000 seed financing in Snap Inc. turned into billions of dollars after the latter’s IPO. This follows Lightspeed’s investment strategy, which typically funds small to medium scale enterprises where the possibility of an enormous return is high. The enterprise also holds a stake in blockchain-based payments processor Ripple Labs.
While a digital asset venture may never go public, Lightspeed is prepared to invest repeatedly over an extended period to ensure a significant ownership stake, ensuring huge profits when the company is sold or conducts an Initial Coin Offering.
Jeremy Liew, a Lightspeed partner, explains:
“That trend has only been increasing over time, and as a result, our funds have been getting bigger over time as well. Later-stage companies are less likely to go belly up, but are also less likely to provide extraordinary returns.”
While such billion-dollar-investments in startups were previously unheard of, venture capital firms are seemingly shifting to a high-risk, high-reward strategy rather than relying on a company’s IPO. Cryptocurrency projects are a continuation of this ideology.
Venture Funds Withhold Cryptocurrency Investments Despite Interest
According to data collected by Reuters, companies with a vested interest in Lightspeed have conducted about 17 IPOs during the last five years. However, in the field of cryptocurrencies, there still exists a high degree of ambiguity regarding the legal, regulatory and administrative terms. Now, the venture firm is eager to explore a few distinct strategies to capitalize on a potential first mover advantage.
In May 2018, Recode confirmed that Lightspeed was considering three structures for a potential cryptocurrency bifurcation.
The first is a “carve-out,” in which the venture firm branches out investments and profits from their existing money and publicizes the holdings for cryptocurrency businesses. This is a similar method to that of Kleiner Perkins Caufield & Byers’ “iFund” – solely dedicated to Apple and related projects.
The second option involves Lightspeed starting a new fund– separate from their existing business, with the same partners but a different strategy and legal structure. This model is similar to Andreessen Horowitz’s recently launched cryptocurrency fund.
Lastly, a “spinout” model, in which one or more Lightspeed partners set up their personal cryptocurrency funds as wholly-separate entities without carrying the brand name. The effort, however, would be backed by Lightspeed, as per sources.
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