Inside a16z’s Boot Camp for Crypto Startups

On a cloud-darkened morning in March, a group of software developers fought their way through the crowds of tourists and puddled streets of Central London. In twos and threes, they filtered into an office on the edge of Soho, hidden in plain sight on a street of showy Tudor and neoclassical facades. They had arrived for their first day of crypto bootcamp.

Five years ago, the Silicon Valley venture capital firm Andreessen Horowitz, also known as a16z, debuted a lecture series for would-be crypto founders. The hope was to encourage a better caliber of startup to play with the limits of crypto technology. Rebranded as the Crypto Startup Accelerator (CSX), the course has since become a fully-fledged, Y Combinator–style affair: a16z provides participants with $500,000 in funding, 10 weeks of tuition, and access to its resources in exchange for an undisclosed amount of equity. The founders of 25 startups selected for the latest edition were meeting for the first time.

The group was male-heavy and ranged in age from around 20 to 50-plus, but shared a costume: Most wore a hoodie or printed T-shirt, paired with jeans. Some had a breezy confidence, chatting freely as they picked at a fruit or croissant from the breakfast spread. Others kept their own counsel at the fringes of the room.

As an outsider in their midst, I was something of a curiosity. When I introduced myself as a reporter, I could detect in some a stiffening. “Should I worry you might print this?” said one of the founders, only half-joking. But most seemed pleased to have a willing ear to tell about their work.

The founders sized each other up, too, comparing their crypto chops. A few were newcomers to the industry, but most were steeped in the language, arcana, and traditions of crypto. One of the founders said he was the first person to use a bitcoin ATM in London. Another had started trading crypto futures at the age of 17. Some had already begun to discuss the technical workings of their projects with a nerdy zeal. “I hear he’s a GigaChad,” said another, of the a16z partner that had been assigned as his mentor.

The group was soon swept to a space at the back of the a16z office that for the next 10 weeks would serve as a classroom and lecture theater. Long banks of desks and high tables with stools faced a stage dressed with the sky-blue and black CSX livery. Jason Rosenthal, operating partner at a16z and head of CSX, was the first to take the stage.

Practically all of the largest generalist VC firms—from Sequoia and Accel to Greylock and Lightspeed—have invested in at least a few crypto startups. But a16z stands alone in the degree of its belief and extent of its investment in the industry’s ability to produce a new generation of era-defining software businesses—something it hoped these founders could bring into being. “Every single one of us has the opportunity to build a once-in-a-generation technology franchise company,” Rosenthal told the room. “We are highly confident that there are companies that in the near future will occupy that mantle in this new space. The seeds are definitely being planted today. The opportunity is palpable.”

a16z was established in 2009 by cofounders Marc Andreessen, who built early web browsers Mosaic and Netscape, and Ben Horowitz, who alongside Andreessen sold a software company to HP. The firm has a track record of investing in companies like Facebook, Instagram, Airbnb, and Slack.

In 2018, in search of the next big investment opportunity, a16z shifted its attention to crypto. Although it continues to invest in a variety of industries, the firm has raised more than $7.5 billion across four separate specialist crypto funds, on which it must now find a return. “We go where great founders are. You don’t want the VCs to tell you what to build,” says Sriram Krishnan, general partner at a16z, who leads crypto investment from the UK office. “This is what we think the best founders are working on.”

However, the crypto industry has not flattered itself of late. In 2022, the collapse of multiple large crypto businesses—among them crypto exchange FTX—led to a crisis of confidence and downturn in crypto prices that, in turn, led to further bankruptcies, the failure of crypto-friendly banks, and a regulatory backlash. In the period since, crypto founders have been sentenced to jail time in the US, celebrities have been charged by regulators with illegally peddling crypto coins without disclosing compensation, and billions of dollars’ worth of crypto has been stolen in scams and security breaches.

a16z has made a few bum crypto bets over the years too, like Diem, the now-defunct cryptocoin developed by Meta; Basis, a similar project, shuttered. In the first half of 2022, the value of a16z’s original crypto fund reportedly fell by 40 percent, though investors are still on track for a tenfold return.

Generalist VCs threw tens of billions of dollars at crypto startups in 2021 and 2022, but their attention has since been drawn elsewhere, implying a limited conviction in the technology’s long-term potential. “When the market crashed, a lot of investors ran away from the crypto space,” says Robert Le, a crypto analyst at market data company PitchBook. While the crypto market has since recovered, “generalist investors didn’t really come back,” he says.

“For generalist VCs, all eyes are on generative AI. Crypto is an excitement from the last wave,” says Edith Yeung, general partner at VC firm Race Capital, which invests in early-stage infrastructure startups. Herself an investor in crypto network Solana, Yeung says she is “cautiously optimistic” about the prospects of crypto startups in 2024 and “applauds” a16z’s continued focus, but her firm will favor AI. “A lot of VCs don’t have the resources to capture both,” she says.

The point of CSX is to inject “rocket fuel,” as Rosenthal puts it, into early-stage crypto startups capable of proving the technology is useful for more than money laundering and financial speculation. “The downturn in the crypto market did a good job of making the people only there to make a quick buck—the tourists—pivot to AI, where they saw the next quick buck,” says Rosenthal. “The people who have stayed are committed, hardcore technologists. That’s represented in our selection.”

Although Rosenthal heads up CSX, the cohort is more a reflection of the thesis of a16z general partner Chris Dixon, who leads the firm’s crypto practice. In a book published in January, Read Write Own, Dixon outlined his vision for crypto as the foundation for a more equitable internet. The web is being strangled by profit-hungry gatekeepers (in some of which a16z invested) and users are suffering as a result, the argument goes. But blockchain, the digital accounting ledger behind crypto networks, which follows precoded rules changeable only by popular vote, can wrest some control away from the world’s largest tech companies and return the internet to its egalitarian roots—or so Dixon contends.

“I believe very strongly that the world is underweighting crypto right now,” says Dixon. “How will content spread across the internet? How will people get paid for it? What will be the shape and economics of internet communities? How will they be governed? To me, those are the questions crypto will answer.”

a16z’s London office, a sixth-floor loft with tall windows and exposed ductwork, had been almost totally empty a few weeks before CSX. Now the shelves were stacked high with energy bars and beef jerky, and the fridge was stocked with low-calorie soda. The bookshelf was lined with recommended reading: Zero to One by Peter Thiel, The Hard Thing About Hard Things by Horowitz, and, naturally, Dixon’s new book.

By the time I returned a few weeks later, the first-day-of-school energy had been replaced with a studious hush. The founders were bent over their laptops in the main body of the office, AirPods in, waiting for class to start. They were wired in.

Throughout the course, lectures from Rosenthal and a rotating cast of other a16z personnel were interspersed with talks from other founders from the a16z stable, like Ben Rubin, creator of chat app Houseparty. The speakers meted out what they consider pearls of wisdom on general topics, including hiring (“Don’t overdilute too early”), firing (“Killers want to be around other killers”), and enduring hardship (“When you chew enough glass, you learn to like the taste of your own blood”). But the curriculum was built around crypto-specific problems, too, such as designing a token, navigating a hostile regulatory environment, and experimenting with novel cryptographic techniques.

Sometimes, crypto class felt like a window into a different world. Instead of scrolling on phones, secretly reviewing code logs was the chosen form of distraction. The language of Silicon Valley startup culture—“zero to one,” “product-market fit,” “run into spikes,” and so on—was overlaid with even more abstruse terminology specific to crypto: danksharding, delay functions, and zk-snarks. “If you really want to nerd-swipe a cryptographer, ask them whether lattice assumptions are going to survive,” one of the speakers joked. The group laughed. I didn’t.

Although some of the founders were from Europe and elsewhere, there was a large American contingent. Introducing himself as part of an icebreaker exercise, one founder from Texas told the room he was concerned about the quality of the taco scene in London. Another, who had already spent some time in the city, confirmed his fears were justified.

Whether through a conscious affectation or a genuine hunger, members of the group lived the stereotype of the overworked and sleep-deprived founder. Over lunch one day, I asked one founder whether he had set aside any time for tourism. I received a quizzical look in return; he had spent the duration of CSX pulling late nights behind his desk, he explained.

The startups in the cohort are making software that falls into three buckets: apps for consumers, services for businesses, and technical plumbing on which other crypto software depends. Relatively few are crypto-forward in their self-presentation—to look at their websites, one wouldn’t necessarily know they have anything to do with crypto—but they each make use of crypto technologies behind the scenes.

One of the startups, AminoChain, gives patients a way to collect royalties on biopsy samples supplied for medical research and hospitals a distribution platform for the samples in storage, where at present they frequently go underutilized. Another, Roux, turns recipes into collectible NFTs to help chefs and food bloggers monetize their creations without having to plaster recipe webpages with ads and SEO sludge. Valyu Network, meanwhile, turns data intended for use in training AI models into tokens, creating a system for licensing and tracing the provenance of information as a means of addressing alleged abuses of copyright.

The founders say they come to a16z partly for its in-house crypto engineering expertise, and partly for its resources and Rolodex. As with any accelerator program, they need help designing elements of their product, and advice on legal or regulatory pitfalls. But they also hope to make use of a16z’s connections in the crypto industry for introductions to potential hires, policymakers, and other investors. At the start of the program, the startups are split into groups and assigned an a16z partner as a mentor, who leads what some founders took to calling “group therapy sessions.” “One self-selecting aspect of being in an accelerator is admitting that you want help—and want people who know what they are doing to give you that help,” says Elizabeth Harkavy, an a16z partner who mentored one of the groups. “It’s really hard to work with a founder who can’t ask for help.”

The continued commitment of a16z to investing in the crypto industry, in the face of a retreat among other generalist firms, is itself a draw to crypto founders. In the past year, outside the CSX program, a16z has added nine new crypto startups to a stable that already includes the likes of crypto exchange Coinbase and NFT marketplace OpenSea. “Roux is as equally consumer as crypto. It’s important for us to find partners that understand the balance between those two items,” says Lisa Grimm, a serial restaurateur and cofounder of the startup Roux. “a16z very clearly walks the walk.”

Though millions of people now own crypto in one form or another, crypto-based apps have failed to gain meaningful traction outside of a trading context. But Dixon claims the technology is approaching an inflection point. Infrastructure advances are making crypto networks faster and bringing down transaction fees, he says, allowing for cheap experimentation that will lead to apps with obvious utility and widespread appeal. “Imagine if, in 2006, every time you clicked on somebody’s Facebook profile, you had to pay a dollar. It just wouldn’t have worked,” says Dixon. “At the magic moment, [crypto transactions fees] get so low that you can subsidize, making it effectively free to the user.”

Although the latest group of CSX founders may be among the first to benefit from the “magic moment,” they are entering the market at a time in which skepticism about the technology prevails and its potential remains unproven. One startup said it had already encountered skepticism among prospective customers, when the technology behind its product came up in conversation. “There’s a chicken and egg problem—and the cohort has to deal with that,” says Dixon. But the hope is for the founders to contribute to banishing the crypto stigma.

Dixon says he doesn’t know how long that process will take. “But at least it feels like we are now in the right idea maze,” he says,” because you can do stuff you couldn’t practically do before.”

In June, on the final day of CSX—demo day—the founders were set to deliver a short pitch to a room full of investors. As the setting, a16z had chosen a flashy basement venue on the edge of Soho, normally for live music and clubbing. A mezzanine balcony overlooks a floor space, flanked by floor-to-ceiling neon lighting. At the front, a cinema-sized screen and sound system frames a stage, on which the founders would present.

I arrived to thumping electronic music. In the back, one of the founders was giving the lo-down on his project to a cloakroom attendant, who returned a polite smile. Those that had left presentation duty to their partners gathered at the bar, some scouting for investors to chat up. A tray of bright green fruit juice had been laid out for anyone abstaining from booze.

An announcement over the speaker signaled time to take a seat. The floor had been arranged like a comedy club, one investor quipped, with chairs grouped around circular tables. After two opening addresses from Dixon and Rosenthal, the procession began.

The founders were each given a handful of minutes. As one presented, the next was mic’d up at the side of the stage, taking a breath to compose themselves. The wait was the worst part, one later said. A few of the youngest stumbled over their too-well-practiced words, but most were assured in their deliveries. They had clearly been instructed to cut through the technobabble with pithy lines more likely to lodge in the memories of prospective investors: “Join us in our mission to bring trust to science and healthcare,” entreated Caspar Barnes, co-founder of AminoChain, at the end of his speech.

As the founders made their pitches, the investors took notes. Some nodded along, or whispered behind the backs of their hands. In the break, they joked about gazumping one another for a stake in the most promising projects. In all, around forty inventors attended in person, from firms like Accel, Foundation Capital, or Amex Ventures.

Many of the founders were aiming to raise funds off the back of demo day. As with previous editions of CSX, a16z expects to further invest in a few of the cohort, says Rosenthal, but the rest will have to look further afield.

The real opportunity for courtship came after the presentations, at a rooftop cocktail lounge fitted in the style of a traditional Chinese courtyard, which by the time I arrived was packed out. The most self-assured of the founders were already shaking hands and making introductions under a set of blossoming cherry trees; others didn’t seem to know quite what to do, either clubbing together or settling for laps of the room with wine glass in hand. I didn’t envy them.

The scene reminded me of something Rosenthal had said at the start of the program: “Most people actually shouldn’t start a company, because it’s hard—it’s painful. Gosh, if there’s a way to get around that, I haven’t found it.”