To Ed Roman, cryptocurrencies and related technologies have the potential to revolutionize both the internet and the massive financial services industry.
The initial phases of the internet brought with them e-commerce, streaming video and social media. So-called Web3 technologies represent the next big wave, Roman, co-founder and managing partner of venture firm Hack VC, told the Business Journal.
"We think of this as an opportunity that's unprecedented," he said.
Hack VC has some new money to ride that wave. The San Francisco firm announced last week that it's raised $200 million from investors including Sequoia Capital and Marc Andreessen for a new fund that will invest in cryptocurrency, Web3 and blockchain startups.
The fund will focus on early-stage startups and cryptocurrency efforts. Hack VC plans to invest in companies focused on decentralized finance, and those that are building infrastructure for non-fungible tokens. It also plans to back decentralized autonomous organizations, which are corporation-like entities whose rules of governance and operations are encoded and recorded in blockchains.
Founded in 2017, Hack VC has been investing in the cryptocurrency space for years, Roman said. Among its portfolio of companies are Audius Inc., a San Francisco startup that provides a blockchain-based music streaming service, and Ripple Labs Inc., the San Francisco-based developer of the XRP cryptocurrency.
Blockchain technology presents an enormous opportunity for investors, because it's just beginning to gain traction and it has the potential to transform some gigantic industries, Roman said. For example, blockchain-based startups are starting to revolutionize how financial services are provided to consumers, he said. While financial services is a $25 trillion industry, blockchain-based companies only account for $200 billion — or 0.8% — of that, Roman said.
"We think it's still in the early innings," Roman said. "There's trillions of upcoming value creation as crypto becomes mainstream."
Hack VC is one of several local venture firms that have raised big new cryptocurrency-focused funds recently. Last month, Sequoia Capital announced it planned to invest as much as $600 million through a new fund in digital assets. And in January, Andreessen Horowitz said it planned to raise $4.5 billion to invest in blockchain startups.
"The world is finally realizing what we've known all along, which is that distributed ledgers and token creations are a new way to incentivize value creation in the world," he said. "It's taken the industry a little while to catch up."
