Key Takeaways
- • Kraken Ventures is raising $100 million for its second fund, a 54% increase from the $65 million deployed in its first fund, which closed in 2021.
- • The fundraising effort targets early-stage investments typically ranging from $500,000 to $2 million across blockchain, fintech, and deep tech sectors, with support extending through IPO.
- • Brandon Gath, managing partner of Kraken Ventures, emphasizes that smaller funds generate superior risk-adjusted returns and provide more hands-on partnership for entrepreneurs, citing data showing small funds outperform larger vehicles.
- • Kraken Ventures operates as an independent entity with outside capital while maintaining a "strong relationship" with crypto exchange operator Kraken, mitigating concentration risk for limited partners.
- • The fundraising occurs during a contraction in crypto venture capital, with investment volumes declining for five consecutive quarters and expected continued weakness through Q3 2023.
Summary
Kraken Ventures, the venture capital arm of the Kraken cryptocurrency exchange, is actively seeking $100 million in commitments for its second fund amid a challenging macro environment for digital asset investments. This represents a meaningful capital increase compared to the $65 million raised for Fund I, which achieved final close in 2021. The fundraising announcement comes as the crypto venture capital sector faces sustained headwinds following the collapse of major players including Terraform Labs, Three Arrows Capital, and FTX, which have materially diminished institutional confidence in the space.
Brandon Gath, managing partner of Kraken Ventures, confirmed the capital raise and outlined the fund's thesis in communications with The Block. Gath stated that Fund II will "double down" on existing investment parameters while extending support for founders across their full lifecycle from seed capital through initial public offerings. The firm has completed hundreds of early-stage investments historically and plans to maintain deployment sizes between $500,000 and $2 million per investment.
Gath's public positioning emphasizes a contrarian view on fund size dynamics, arguing that smaller vehicles deliver superior performance outcomes for both entrepreneurs and investors. He noted that the Kraken Ventures team benefits from "significant experience in early-stage investing" and that data "overwhelmingly shows that small funds outperform large funds." This thesis aligns with institutional research suggesting that smaller, focused funds often achieve higher net returns to LPs by reducing capital drag and enabling concentrated thesis execution.
Structurally, Kraken Ventures operates as an independent entity with institutional capital, insulating it from volatility in the parent exchange's operations. Gath emphasized that despite independence, the fund maintains a "strong relationship" with Kraken, positioning it to leverage the exchange's market intelligence and deal flow while maintaining fiduciary separation.
The fundraising occurs during sustained crypto VC contraction, with The Block Research Pro tracking five consecutive quarters of declining investment volumes across digital asset startups, with Q3 2023 expected to continue the downward trajectory.
Brandon Gath, managing partner of Kraken Ventures, confirmed the capital raise and outlined the fund's thesis in communications with The Block. Gath stated that Fund II will "double down" on existing investment parameters while extending support for founders across their full lifecycle from seed capital through initial public offerings. The firm has completed hundreds of early-stage investments historically and plans to maintain deployment sizes between $500,000 and $2 million per investment.
Gath's public positioning emphasizes a contrarian view on fund size dynamics, arguing that smaller vehicles deliver superior performance outcomes for both entrepreneurs and investors. He noted that the Kraken Ventures team benefits from "significant experience in early-stage investing" and that data "overwhelmingly shows that small funds outperform large funds." This thesis aligns with institutional research suggesting that smaller, focused funds often achieve higher net returns to LPs by reducing capital drag and enabling concentrated thesis execution.
Structurally, Kraken Ventures operates as an independent entity with institutional capital, insulating it from volatility in the parent exchange's operations. Gath emphasized that despite independence, the fund maintains a "strong relationship" with Kraken, positioning it to leverage the exchange's market intelligence and deal flow while maintaining fiduciary separation.
The fundraising occurs during sustained crypto VC contraction, with The Block Research Pro tracking five consecutive quarters of declining investment volumes across digital asset startups, with Q3 2023 expected to continue the downward trajectory.
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