Pantera Capital's first venture fund did quite well. The second one? Not so much

Pantera Capital's first venture fund did quite well. The second one? Not so much - Pantera CapitalPantera Capital, a cryptocurrency investment firm known for the returns of its blockbuster bitcoin funds, made money from some startup investments, although the returns were lower than other types of equity investors.

The situation of Pantera Capital funds

Pantera Capital venture capital funds raised in August 2013 and August 2014 gained 46,5% and 15,9% respectively since their debut in September 2019, according to data released by the company itself.

Returns underperform index funds that most retail investors can buy and outperform venture funds restricted to smaller pools of accredited investors.

Up to September 2019, the S&P 500 index, for example, increased, adjusted for inflation, by 62,6% compared to the first Pantera venture capital fund and by 40,8% compared to the second Pantera venture capital fund. .

US funds included in the Cambridge Associates Venture Capital Index 2019 averaged 12,08% over a five-year time scale and 14,55% over a 10-year time scale.

Why the fall?

Paul Veradittakit, a venture partner of Pantera Capital, attributed the dramatic performance gap to the different focus and size of the funds. Long-standing fund returns declined as the second fund increased investments in 36 companies and targeted different companies building mostly add-on products for cryptocurrencies - a more than four-fold increase compared to the first fund's eight companies. dedicated to essential services for cryptocurrencies.

While the first venture capital fund Pantera has invested in digital asset developers like Ripple Labs, well-established exchanges and payment processors like Bitstamp, Xapo, Bitcoin system, Circle and Ripio, the second venture fund has invested in exchanges with peripheral financial instruments such as the ErisX cryptocurrency, various cryptocurrency platforms that include Shapeshift, Abra, Brave, Civic, Starkware, BitOasis and BitPesa, and even another fund manager of cryptocurrency, Polychain Capital.

No information was disclosed about Pantera Capital's third venture capital fund, which raised $ 164,7 million in August. But if strategy and volume are any indication, the third fund should have mirrored the second fund's approach, investing more money in ErisX, Starkware and at least 16 in-the-weeds companies.

Among these new startups are The Block, a cryptocurrency research site; and Bakkt, a bitcoin futures exchange linked to the New York Stock Exchange. In all, Pantera Capital's assets have been valued over $ 448 million in financial deposits this year, covering $ 249,3 million in venture funds.

Venture capital funds take amounts ranging from $ 50.000 to $ 100.000 from investors and spend $ 1 million to $ 3 million on 10% to 20% stakes in startup investments. For Series A risk investments, Pantera Capital commits from $ 3 million to $ 8 million, with stakes in companies ranging from 3% to 15%.