While the crypto market has lost $2 trillion in value since November 2021, the venture arm of the $22 billion hedge fund run by Steve Cohen, the man who inspired the “Billions” TV show, last week announced it had invested in its fifth crypto company, a decentralized finance firm that provides data and trade execution services for institutions.
Though the $20 million round was led by billionaire investor Mike Novogratz’s Galaxy Digital, the investment marks Cohen’s latest in a string of bear market crypto deals and builds on his hedge fund’s past work in institutional private investing and private equity.
As institutions re-evaluate how they use—or don’t use—decentralized finance, Cohen’s continued involvement in the struggling $41 billion industry is notable, as is his firm’s decision to help build yet another bridge between crypto and large trusted companies.
“We talked to our existing portfolio of fintech companies and we heard, especially from financial institutions, one thing very clearly, crypto was a big priority,” says Adam Carson, the operating partner leading crypto efforts at Point72 Ventures. “Either their customers were demanding crypto products or they saw it as a new business opportunity.”
Founded in 2016, New York-based Point72 Ventures, is best known for investing in early-stage technology companies. The firm has more than 100 venture portfolio companies like Peloton and Mirror, and has committed more than $1 billion of capital, according to a Point72 Ventures spokesperson.
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Though the venture firm didn’t start its crypto work until about 15 months ago, Cohen’s conversion goes back much further. In 2018 his family firm, Cohen Private Ventures, invested in San Francisco-based Autonomous Partners, a venture firm whose founding partner has since joined Andreessen Horowitz.
Cohen’s New York-based venture firm now employs 30 people, about a third of which work on crypto and broader fintech investments. The firm’s crypto thesis aims to assist financial institutions and businesses transitioning to Web3 by investing in companies that help merge the crypto and non-crypto worlds. Notably, its crypto investments are driven by demand it sees from its non-crypto portfolio and potential users.
While Point72 Ventures has not disclosed terms of its investments thus far, it was the lead investor in the Series A round of its first crypto company investment, New York-based Messari, a research and data platform. It also led the seed round of Chicago-based Zero Hash, a crypto infrastructure company that provides solutions for platforms to trade digital assets.
Other investments include New York-based Massive, which provides a new way for users to pay for digital apps and services; Bermuda-based 24 Exchange, a multi-asset class trading platform; and its latest investment, Skolem Technologies, a DeFi trade company that helps institutions get into the decentralized finance space without having to hire new employees.
“Talking to hedge funds was what led to Messari and Skolem. Talking to fintechs led to our investment in Zero Hash. Then talking to banks led directly to our investment in 24 Exchange,” says Carson.
Coming at a time when the total value locked in defi markets has plunged by 50% since March to $41 billion today, and when institutions are re-evaluating stablecoins, the investment is part of a larger trend that shows many investors in the space remain optimistic.
In early June, troubled cryptocurrency exchange Binance raised $500 million to invest in Web3 companies and venture capital firm Felix Capital raised $600 million for the same purpose. Cryptocurrency and blockchain fundraising has more than doubled since 2020 with $5.2 billion being raised in 2020, while $11.7 billion has been raised so far in 2022. Though experiencing a bear market, 2022’s crypto fundraising value is only $1.7 billion shy of 2021’s all-time high of $13.4 billion, according to PitchBook, a capital market data company.
So successful has been Point72 Asset Management that Cohen, now worth $16 billion according to Forbes data, inspired the ongoing hit Showtime television series, “Billions,” starring Damien Lewis as hedge fund manager Bobby Axelrod.
Though the notoriously quiet Cohen didn’t comment for this article, last year he told investment newsletter Stray Reflections that he is “fully converted” to crypto. Speaking at the Skybridge Alternatives Summit last year, Cohen said his conversion was largely thanks to what he described as his “cryptomaniac” son who helped change his mind. “He really convinced me this was something I needed to do,” said Cohen.
In addition to institutional markets research, Point72 Ventures’ crypto team focuses on companies that let others offer crypto products. “They’d say ‘we want to offer a buy, sell, trade experience, and we want to offer crypto rewards.’ They looked at what PayPal and Robinhood had done, which is just introduced crypto products into their ecosystem,” says Carson.
Many of these companies faced similar problems — they lacked the technologies needed to help them get up and running. This led Point72 Ventures to its first run in the crypto space, institutional markets infrastructure, which is essentially offering services to support financial institutions. “We landscaped out the entire universe of that institutional markets infrastructure (in the crypto space) and that led to our first few investments,” Carson says.