Raising Over $175M for Its Flagship Theta Blockchain Ventures III Fund-of-Funds, Theta Capital Management Is Strategically Supporting the Upcoming Wave of Blockchain Innovation

After a protracted downturn, the capital will be directed towards early-stage crypto venture capital (VC) funds, therefore indicating increased institutional interest in the industry.

output: A Dutch investment firm, Theta Capital Management, has raised over $175 million for its flagship Theta Blockchain Ventures III fund-of-funds. The capital will be used to support the next wave of innovation in early-stage crypto venture capital (VC) funds, showcasing increasing institutional interest in the industry.

This fundraising initiative, which began in late 2022, marks a significant milestone in capitalizing on the emerging opportunities within the crypto sphere. Each of the 15 to 20 top-performing crypto-native VC funds that Theta plans to invest in has experience backing early-stage Web3 companies.

“Our thesis is that the earliest stages of investing still show the most asymmetric upside in this space,” said Derrick Chia, head of venture at Theta Capital. “We think venture capital is structurally the best asset class to grab the long-term upside in this sector.”

This approach ties into Theta’s broader strategy since 2018 to support the crypto sector. So far, the firm has funded over 60 crypto-native VC funds and more than 300 underlying startups across past funds.

Now, as the cryptocurrency markets recover from a two-year downturn and capitalise on a new wave of institutional interest, Theta’s choice to expand and deploy funds is well-timed.

The startup of the fund-of-funds offering also coincides with a recovery in cryptocurrency markets following a two-year decline. Theta began collecting money for the fund in late 2022, right at what many would regard as the lowest point of the bear market. Despite challenging circumstances, the firm drew capital from family offices, institutional investors, and high-net-worth individuals.

However, the timing of Theta’s move seems prescient. A confluence of factors, including rising institutional demand, a maturing regulatory framework, and the approval of a U.S. Bitcoin ETF, point towards a fresh momentum in the crypto sphere.

After significant reductions in 2022 and 2023, VC funding in cryptocurrencies has also started to increase, albeit slowly. A recent report by PitchBook and the American Investment Council highlighted this trend, noting that while total capital invested in crypto startups decreased in the first half of 2023 compared to the same period last year, there was a shift towards later-stage companies.

Unlike generalist VCs who have cycled in and out of crypto based on market trends, Theta specifically focuses on firms deeply embedded in the cryptocurrency domain. Among these, some of the most well-known names include Paradigm, Electric Capital, Polychain Capital, and Framework Ventures.

This concentrated strategy is underpinned by the belief that these companies, with their deep technical knowledge and experience in the space, are best positioned to identify and support the startups developing the infrastructure, tools, and protocols that will define the next phase of the crypto economy.

This move by Theta highlights a broader trend: traditional investors are increasingly seeking exposure to the crypto asset class, but they prefer to do so through trusted intermediaries. The fund-of-funds model provides a means for efficient deployment of capital from institutional investors into early-stage crypto ventures, while also presenting an opportunity for optimal risk diversification.

“Institutions want to be in crypto, but they need a framework that provides both exposure and risk-adjusted returns,” said Chia. “We come in at that point.”

With $175 million in fresh funding and a focus on supporting the next wave of innovation in early-stage crypto VC, Theta Capital Management is strategically positioned to capitalize on the evolving institutional demand for exposure to the crypto asset class.

As capital flows anew and ingenuity blossoms, the narrative of how these companies will aid in the development of decentralised finance, digital ownership, and blockchain-powered solutions throughout the industry will unfold.