Institutional Capital Flooding in as Bain and Sequoia Launch New Funds

  • Significant amounts of institutional capital are entering the crypto industry with a long-term view
  • Bain Capital and Sequoia Capital are both launching $500m funds dedicated to the crypto industry
  • These funds could foreshadow even more institutional capital entering the sector

Bain Capital is one of the world’s largest investment firms with $155 billion under management. Its venture capital division, Bain Capital Ventures, is launching its “first” $560m fund focusing on the crypto industry. This fund, called Bain Capital Crypto, will invest in “the renegades and pioneers building the next generation of internet infrastructure.” This is not Bain’s first foray into the sector. They have invested in cryptocurrency protocols and companies in the space for the last seven years.

The team behind this new fund have released enthusiastic statements regarding their conviction in the sector. An introductory statement reveals their belief that “we are at the precipice of a monumental technology shift towards open, community-driven, and decentralized services” and that “this seismic shift may prove the most important technological development of our lifetimes.” Senior team members also told Bloomberg that they were taking “a very long view” on the sector as they were “long-term believers”. Their new fund reportedly closed late last year, after being oversubscribed, and has already invested $100m.
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One of Bain’s portfolio companies is Digital Currency Group (DCG). DCG is a strategic investor that builds and supports businesses in the Bitcoin and blockchain space. They have invested in over 160 companies in 30 countries and been a part of raising over $1bn for their portfolio companies. One of their holdings is Grayscale, the world’s largest digital currency asset manager behind the Grayscale Bitcoin Trust. Other companies include Coindesk, Luno, Blockstream, Chainalysis, Coinbase, Kraken and Ledger.

The news of Bain’s new fund comes on the heels of Sequoia Capital’s own announcement regarding a new crypto fund it is launching. Sequoia Capital is one of the pioneering legends of venture capital and has been behind tech giants such as Apple, Cisco, Google, LinkedIn, WhatsApp, Zoom, PayPal, Reddit, Instagram and Tumblr. It manages approximately $80bn in assets. On 22 February it announced it was launching a new $500-600m sub fund that would focus exclusively on digital assets. In this endeavour, it will partner with influential tech players such as Sam Bankman-Fried and Jack Dorsey. Like Bain, Sequoia has already been in the sector for years and, last year, up to one-fifth of its investments in the US and Europe went into cryptocurrency. It is also employing a long-term view and a partner told the FT they would be using a “20-year lens” for their cryptocurrency holdings.

These announcements come after a record year for venture-capital investments in the cryptocurrency industry. 2021 saw venture-capital investments top $25bn and grow by over 700% year-over-year. They also follow similar announcements by Paradigm, which launched a $2.5bn fund and a third crypto fund by Andreessen Horowitz that raised an additional $2bn in June 2021. There is thus an immense influx of long-term institutional capital entering the cryptocurrency industry and this is only likely to increase with time. Bitcoin is likely to benefit froml this influx of capital as it retains its leading position in the industry.

Nothing in this article constitutes professional and/or financial advice. The content is provided exclusively for informational and/or educational purposes. Nothing is to be construed as an offer or a recommendation to buy or sell any type of asset. Seek independent professional advice in regards to financial, tax, legal and other matters.

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