FTX opens $2bn venture capital arm to invest in crypto projects

FTX, the cryptocurrency exchange led by 29-year-old billionaire Sam Bankman-Fried, has announced it will invest $2bn in crypto projects, following the example of rival exchange Coinbase and others.

FTX Ventures will invest in start-ups working in the social, gaming, fintech, software and healthcare sectors, it said. FTX, which investors valued at $25bn in October, said the fund could also invest in tokens, tradable assets that many cryptocurrency projects distribute to users.

“Our first $2bn fund will be flexible capital where we can invest in equity and/or tokens, at any check size and stage,” FTX said in a blog post. “We measure time horizons in decades. We don’t mind if you’re anon. We won’t ask you to present in front of an investment committee.”

FTX joined a spate of investors raising billions of dollars to invest in cryptocurrency start-ups. Katie Haun, a partner at Andreessen Horowitz, has recently held talks about raising at least $900m for two digital asset funds this month, the Financial Times has reported.

Some cryptocurrency industry watchers have raised concerns about the overlapping roles played by cryptocurrency exchanges, which have come under scrutiny from global regulators in the past year.

Bankman-Fried also owns Alameda Research, a cryptocurrency trading firm that has made 95 investments since 2020, according to PitchBook data. FTX has made 19 investments, according to PitchBook, including a stake in Sky Mavis, the development team behind the popular cryptocurrency game Axie Infinity.

Coinbase, FTX’s main competitor in the US, has made more than 200 investments through its venture arm, the company’s executives have said, making it one of the most active corporate investors in any sector.

Based in the Bahamas, FTX has become one of the fastest-growing cryptocurrency companies since it began operations three years ago, developing a popular offshore exchange for cryptocurrency derivatives and a newer market for US-based traders.

FTX has raised at least $1.4bn of funding in the past year, including a $1bn financing it called the largest ever for a cryptocurrency exchange. Bankman-Fried said in August the company expected to make profits of roughly $400m in 2021 after bringing in about $77m in the previous year.

Amy Wu, a former partner at Lightspeed Venture Partners, has joined FTX to lead the new fund. In a statement, Wu said the company was “particularly excited about web3 gaming and its ability to bring mainstream audiences into the ecosystem”.

Venture capitalists and start-up founders have recently described web3 as a new version of the internet built on cryptocurrency technology, though the term has drawn backlash from some software developers.