(Bloomberg) – The family offices of billionaire Cameron and Tyler Winkleves will serve as a test case for the sustainability of crypto startups following the fall of TerraUSD and rising interest rates and recession risks.
Most read from Bloomberg
Through Winklevoss Capital Management, the 40-year-old twins have invested in crypto startups ranging from trading platform Slinshot to Tax Facilitator Taxbeat to Praxis, promising to build a “city-cryptostate to realize a more important future.” Between the initiatives of their family office and their digital asset exchange Gemini, they have partnered with about 50 crypto or blockchain startups, according to a portfolio posted online.
The latest wave of digital assets could test the stability of that bet. Global fundraising for tech startups has shrunk in the first quarter of nearly two years, with entrepreneurial capitalists warning companies they support to start cutting costs. This is a message that many young entrepreneurs have never heard before.
Crypto startups in particular may experience a cooling effect from the recent collapse of the TerraUSD algorithmic stablecoin and its associated digital token, Lunar. They are still receiving funding from venture capitalists as recently as April and pulled $ 5 billion in the first quarter.
Digital currencies Bitcoin and Ether remain depressed, down 50% from last year’s high. According to Pitchbook data, venture capital fund-raising activities among U.S. crypto or blockchain firms are at a slower pace than the number of contracts last year, for the first time since 2017.
Cameron Winkleves said in a statement to Bloomberg earlier this year, “We believe in investing in the next generation of creators and dreamers who are pushing potential boundaries.” “They are risk takers who want to create a better human experience and are not afraid to think big and fail miserably.”
The brothers declined to comment further on their family office.
According to the Bloomberg Billionaires Index, the combined wealth of the Winklevs twins is $ 6.4 billion. They co-founded Gemini and, considered to be the largest holder of Bitcoin, bought about 1% of all existence in 2012.
The brothers first became famous for claiming that Mark Zuckerberg stole their ideas for a Facebook-type social media platform while at Harvard University. They settled a lawsuit and used the money – $ 20 million and Facebook stock – to build Winklevs Capital in 2012.
For wealthy families, many investment firms are shrouded in secrecy, take pains to avoid the limelight, and risk theft and kidnapping if their fortunes are made public.
The Winklevs twins, by contrast, use Instagram and Twitter to promote investments in more than 75 of their family offices. The companies that have been acquired are engraved with bright magenta badges on their websites, which do not include the size, duration and type of their stack.
Their investments include Tezos, a platform for smart contracts and decentralized applications, and Xapo Bank, which protects users’ crypto holdings, including the security of “deep cold storage vaults”. The twins joined Tiger Global Management and other investors last month in a fundraising round for GamerGains Labs, which allows players to earn crypto prizes.
In January, the twins joined Soros Fund Management and other investors in a fundraising round for Animoca Brands Corporation, a non-fungible token, and a Metavers company.
John Workman, managing director of family office advisory firm Pathstone, said: “This is an interesting combination between what we think of as a traditional office and a venture capital firm. “You can’t find too many family offices with a web page that reveals what they’re investing in.”
The firm’s top exits come mostly from non-crypto companies: Block Inc. Food-delivery firm Caviar bought it in 2014, Ford Motor Co. bought commuter ride-sharing firm Chariot in 2016, and ASSA Aboly Smart-Lock Maker bought August Home in 2017.
For Winklevoss Capital’s new crypto investment, some questioned how long such startups could raise funds – even before this month’s turmoil.
“We’re shocked at the amount of funding they’ve been able to raise, compared to just over a year ago,” Spencer Bogart, a general partner at Blockchain Capital LLC, told Bloomberg News last month.
The New York-based firm, which has completed about 130 contracts, passed one of its choices after the startup’s asking price reached a very high level near the stomach.
“Many blockchain-based projects require additional funding to achieve their growth goals,” said Matthew Siegel, head of digital-asset research at VanK. “This downdraft could tighten investors’ focus on who should get funding and who shouldn’t.”
If the Winklevoss twins approach their startup investments like they do in Bitcoin, they will probably stay on it for a long time. When their favorite digital currency fell below 25 25,425 on May 12, Tyler tweeted that he was “completely unprepared”, while Cameron said he was “hoodling”. (HODL is an acronym for “Hold On to Favorite Life”.)
“Bitcoin is not just an asset. And it’s not just a technology,” Cameron Winklevs tweeted May 14. “It’s a movement that provides a blueprint for breaking down traditional power structures. It promises greater freedom, choice and opportunity. There were weeks, but the underlying fundamentals did not change. “
He signed off with another short name. Wagmi: We’re all going to do that.
Most read from Bloomberg Business Week
© 2022 Bloomberg LP