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Accolade Partners launch Blockchain fund of funds

Venture Capital investment firm Accolade Partners has launched a fund of funds to provide exposure to blockchain opportunities.

Founded in 2000 by Joelle Kayden, Accolade Partners is a Washington, D.C. based investment firm. The company provides venture capital and invests in growth equity funds on behalf of endowments, foundations, institutions, and individuals. A registered investment advisor, the firm has raised US$1.6 billion of capital.

In its first twenty years, Accolade has focused on identifying early technology trends and investing in those sectors, including SaaS, social media, mobile, fintech, cloud computing, artificial intelligence, and healthcare IT.

“We are particularly excited about the opportunity in blockchain technology,” the company states in a medium post announcing the new fund of funds. "In our opinion, blockchain adoption mirrors that of the Internet in the early ’90s or mobile in ’08. Blockchain-enabled use cases are showing traction and there continues to be an influx of developer talent."

The Accolade Partners investment team began to meet industry fund managers three years ago. After completing its due diligence, the firm eventually made its first blockchain investment in the Andreessen Horowitz Crypto Fund I, in 2018.

In December 2019, Preqin ranked Accolade its #1 performing fund of funds in its Special Report: Private Equity Fund of Funds. Accolade Partners had recently closed two oversubscribed investment vehicles.

The Firm’s flagship venture capital and growth equity fund of funds, “Accolade VII,” closed with $300 million in limited partner commitments. The Firm’s first fund of funds focused solely on growth equity, “Accolade Growth,” closed with $280 million in limited partner commitments. Both vehicles will be managed by Joelle Kayden, Atul Rustgi, Aram Verdiyan, and Andy Salembier.

Accolade states that it has continued to refine its process for underwriting venture managers and intends to "apply the same level of rigor to our Blockchain Fund of Funds and will lean on many of the same frameworks that have led us to be successful."

The company advocates a diversified approach of investing across three core dimensions, protocols, applications, and supporting infrastructure. Each of the core dimensions has investment opportunities.

  • Protocols are best understood as the base layer of a blockchain, similar to internet protocols such as HTTP. They are the building blocks for all developer and transactional activity.
  • Applications are subsequently are built on top of blockchain protocols, such as Maker, which is a decentralized lending platform built on top of Ethereum. According to DeFi Pulse, Maker has originated over $449 million in loans, as part of the fast-growing DeFi ecosystem.
  • Infrastructure companies are the on-off ramps into the crypto ecosystem, and include exchanges, brokerages, custodial services, and wallets.

The firm notes that it’s difficult to gain holistic exposure through a single blockchain fund commitment, and pick one manager over another, given the lack of track record. Accolade Partners says its blockchain fund is focused on managers who take a long-term venture approach to the asset class.

The firm said, "While there is a place for active trading strategies our expertise lies in identifying and underwriting venture capital funds. We are looking for teams that have (i) the ability to conduct in-depth technical due diligence and actively participate in crypto networks (ii) deep institutional investment track records and (iii) blockchain specific operating experience. “

The teams under consideration are described as having deep technical experience in cryptography and distributed systems, successful track records from established firms, and have worked or co-founded leading blockchain companies. “These teams have a proven ability to access the best deals at early stages, are well respected by entrepreneurs, exhibit strong portfolio construction, and have best-in-class back-office and supporting teams to add value and participate in network governance," Accolade adds.

Accolade Partners says it is now tracking over 70 managers that fit its potential investment criteria, with many of those firms founded in the past two to three years. Consequently, the new Accolade Blockchain fund has already made its first investments. These went to Polychain Ventures II, Polychain Crypto, and Andreessen Horowitz Crypto II.

At the end of April, Andreessen Horowitz announced that they had raised US$515M for their Crypto Fund II. Like their Crypto Fund I, which was a US$300M fund, the new fund will primarily back crypto-related startups, but also will buy and hold some crypto assets.

Brave New Coin’s Deal Flow analysis showed a slowing trend in the crypto venture capital space. In April 2020, Deal Flow identified 14 companies that raised traditional equity investment. Twelve of those companies disclosed financial details and raised a combined total of US$61M. In comparison, the total capital raised in March was US$368M, from a total of 18 companies.


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