After leaving a16z, she encountered a bear market. How did the crypto queen Katie Haun emerge from the darkest hours of cryptocurrency?
Original Title: "Katie Haun launched a $1.5 billion crypto fund—and then the industry blew up. How has she navigated crypto's year from hell?"
Original Source: Fortune Magazine Official Website
Translated by: 0x 26, BlockBeats
On a sunny morning in April, Katie Haun struggled along a winding path around Stanford Dish on Palo Alto's hills. This three-and-a-half-mile path was a favorite of the former prosecutor turned VC, but Haun was not there for leisure. Instead, her team of 11 people needed to rally to convince the wealthy investors of her $1.5 billion company that despite the shattered state of the cryptocurrency industry, everything was still going according to plan.
Fresh from a hike, Haun, her team, and a few accompanying LPs returned to the Haun Ventures office in Menlo Park, where the team settled amongst over 70 LPs and the founders of the companies Haun invested in. Seasoned trader Wat presented the Gartner Hype Cycle chart, which had long been used to assess technology trends, to reassure the attendees. The message conveyed was that the trough of the cycle was the real building period.
Cryptocurrencies may experience cyclical fluctuations, but this trough was much steeper than what investors expected, and the collapse of many leading projects in the cryptocurrency industry only exacerbated these fluctuations. For Haun, who went from being a Supreme Court clerk to a key position at the Department of Justice and then to the top of the VC world, cryptocurrency's Waterloo dealt a significant blow to her rapidly rising career and carefully cultivated reputation.
Connecting the Dots
The timing was terrible. Launching a new cryptocurrency fund in the spring of 2022 was akin to starting a new chain of movie theaters before a pandemic hit. In just a few months, the frenzy of the bull market (with Bitcoin reaching $69,000 at one point) soured; highly anticipated projects like Terra collapsed; and the VC industry was hit by rising interest rates. Then, in November, industry leader FTX collapsed in a massive fraud case, and U.S. regulatory agencies initiated the most severe crackdown in the industry's history.
As a result, Haun raised $1.5 billion—even though it was a significant amount even for Silicon Valley VC firms, many of the best opportunities had already vanished. During the fundraising process, according to a fundraising document, the funds were allocated to two separate funds, with Haun previously stating a roughly two-year investment plan. But now, this timeline no longer applies.
In the second quarter of 2023, venture capital funding for cryptocurrency projects dropped to $2.3 billion, a decrease of over 70% compared to the same period in 2022, as many investors shifted their focus to the more popular field of artificial intelligence. The script for cryptocurrency venture capital is being rewritten.
Nevertheless, some cryptocurrency VCs are still spending their reserves. For example, Polychain Capital has deployed most of its third fund, which was raised in 2022 and 2023. While it has successfully raised $200 million for its fourth fund, other cryptocurrency VCs have not been as fortunate. By 2023, cryptocurrency VCs have raised funds of only about $2 billion, compared to over $22 billion for the entire year of 2022.
Haun Ventures is acting more cautiously, planning to spend its cash reserves over the course of about three years. As of mid-June, the company has invested approximately 30% of its funds in around twenty projects, including publicly traded and highly liquid tokens. These tokens include well-known cryptocurrencies like Bitcoin and Ether, as well as low-market-cap tokens associated with projects, which typically serve as part of the venture investment along with traditional equity. Haun Ventures declined to disclose the names of the tokens it holds.
Partner Rosenblum stated that during this period, the company has almost evenly split its investments between digital tokens and traditional equity, although up until 2023, the company has been emphasizing investments in startups.
Haun Ventures has invested in companies such as NFT creation platform Zora and Web3 infrastructure platform thirdweb. The company has also participated in the $32 million Series B funding of privacy-focused blockchain network Aleo and provided support for encrypted data analytics platform Artemis. The company plans to announce more transactions soon.
Like other VCs, Haun Ventures also leverages its influence to help startups in its portfolio. When Aleo lost almost all its banking-related services after the collapse of Silicon Valley Bank and First Republic Bank, Haun acted as a behind-the-scenes facilitator, introducing them to other banks and dispatching employees to help with policy questions.
In the regulatory turmoil in the United States, Haun has also been exploring opportunities overseas. She recently returned from a trip to Japan, where she met with a congressman who is pushing for the adoption of Web3.
It is currently too early to assess the returns of Haun Ventures, as acknowledged by the company's own LPs. Evaluating the performance of early-stage companies is still premature. What's more important is that many LPs are heavyweight investors, including the sovereign wealth fund of Saudi Arabia, and they are willing to take this risk. An investor in Haun's company said, "Even if it goes to zero, it won't break our investment portfolio."
While some may appreciate the relative caution of the company, there is still pressure for Haun Ventures to do something with its capital, as it, like other venture capital funds, charges management fees. The industry average for management fees is around 2%. Haun Ventures declined to comment on its management fees.
Rosenblum acknowledges that the company is threading the needle in a rapidly changing market. "There are two ways you can go wrong," he told Fortune. "One is going too fast. The other is going too slow."
An Unconventional VC
Like other VCs, Haun also faces the challenge of refining her investment strategy in black swan events. But as a woman in a male-dominated industry, she faces even more, possibly unfair, scrutiny because she raised the largest-ever fund by a female solo founding partner.
At a venture capital dinner this spring, Haun's background was discussed. One diner raised the idea that Haun may be an authority in regulation but lacks a strong technical and transactional background. However, Haun's supporters believe that this is not important.
"She's not an engineer, she's not a plumber, she's not a builder," Fred Wilson, co-founder of Union Square Ventures, who has co-invested with Haun in the past, told Fortune. Wilson said instead, what Haun brings is her extensive government work experience and her network.
"She's one of the best connectors I've ever worked with," Wilson said. "She can meet with anyone."
Haun's social skills have helped her rise to the top of the VC world, and her ability to tell her own story contributes to that. While she is now known as one of the federal prosecutors who handled the early cryptocurrency cases, she was not involved in the earliest cases, including the landmark takedown of the dark web marketplace Silk Road. Instead, she led a follow-up case that took down former government law enforcement officers stealing cryptocurrency from Silk Road and later participated in the investigation of the massive hack of cryptocurrency giant Ripple and early cryptocurrency trading platform Mt. Gox.
Haun gained a seat on the Coinbase board with these experiences and later served as a General Partner (GP) at venture capital giant Andreessen Horowitz, where she worked for four years and invested in top companies such as NFT platform OpenSea.
"Many investors with interesting stories have transitioned from a legal background to VC," said Rachael Horwitz, spokesperson for Haun Ventures. "We believe that Katie (Haun) is undoubtedly one of the most experienced leaders and traders in the cryptocurrency field."
Some law enforcement officials are unhappy with her brief experience in the field of digital asset law, which helped Haun gain wealth and fame that others in this field did not receive. Particularly frustrating for some is that an article referred to Haun as the "top cryptocurrency cop in Washington, D.C."—a title she never held nor claimed to have.
"She didn't work tirelessly for ten years, twenty years, thirty years in government—she only handled a few cryptocurrency cases," said one source. "I do have to give her credit for playing the game smarter, not harder."
A former law enforcement official recalled a small incident: a former Justice Department prosecutor criticized media coverage on LinkedIn, believing that these reports distorted Haun's role in the government. This anonymous law enforcement official told Fortune that some dramatic things happened afterwards, and Haun's friends apparently insisted on taking down the post. Shortly after, the post disappeared.
This former law enforcement official said that regardless of whether the reports exaggerated Haun's accomplishments, Haun clearly benefited greatly from her growing fame. They said, "In terms of her career in government, she positioned herself at the greatest, the best, and that was the starting point for everything."
The law enforcement community is a world full of ego and secrecy, where officers can only discuss cases on certain occasions, so professional disputes should be handled cautiously. Other law enforcement officials defended Haun, pointing out that she never falsely reported her record.
Former Justice Department prosecutor and current Coinbase Director of Financial Crime Grant Rabenn said, "There are definitely people who dislike her." He asserted that 99% of her detractors "don't have the foresight or the success she has."
The relationship between the venture capital industry and the media is famously tense. While many VCs consider themselves independent thinkers, there are also some who are thin-skinned and heavily criticize negative coverage.
But unlike her former colleagues Marc Andreessen and Chris Dixon at Andreessen Horowitz, who like to argue with journalists on social media, Haun prefers to participate in mainstream media events. She has debated with Paul Krugman, sat down with Ezra Klein, and even appeared on the cover of Fortune magazine, arguing that cryptocurrency and compliance can coexist. In May 2022, two months after Haun's fund was launched, she joined Sam Bankman-Fried and Michael Lewis on stage at a conference held by the infamous founder of FTX in the Bahamas.
However, after FTX crashed in November, Haun mostly avoided the media attention she once sought – except for a column she wrote for The Wall Street Journal in March 2023 and a brief interview with Bloomberg in December. Her team attributed this decision to focusing on trading and working with regulatory agencies. Despite having been interviewed for Fortune magazine's cover last year, Haun declined multiple interview requests for this story.
Horwitz told Fortune that the best use of company time is to prioritize investing in companies.
They want a very concise story
When VCs invite investors to "LP Day" events, they are usually extravagant affairs. Considering the bearish sentiment in the cryptocurrency space, Haun Ventures' April gathering had a slightly more modest feel: a large water dispenser from Peet's Coffee and picnic lunches from La Fromagerie. LPs, founders, and the Haun team chatted on the outdoor terrace.
Brian Armstrong, co-founder of Coinbase and Haun's entry into the crypto industry when she joined Coinbase's board in 2017, also made an appearance and gave his standard speech about how he hopes his company continues to be an American company despite its struggles with US regulators.
The speeches at LP Day seemed to temporarily appease investors, as no one openly complained or asked for withdrawals. Part of the reason might be that Haun did not choose to invest in FTX, the infamous exchange operated by Sam Bankman-Fried, whose parents taught Haun at Stanford Law School. Other top funds, including celebrities and crypto experts, chose to support the scammer, resulting in staggering losses: Sequoia Capital reportedly lost $200 million of its investors' funds, and Paradigm allegedly marked its $290 million stake in FTX as zero last year.
After avoiding the media that she once embraced, Haun's cryptocurrency promotion now is almost completely secretive. She hosts legislators, organizes fundraising events and educational conferences for major politicians including New York State Democratic Senator Kirsten Gillibrand, and invites founders like Furqan Rydhan of thirdweb to praise the benefits of blockchain.
Due to very few transactions (as one LP said, Haun Ventures hasn't even entered the race yet), most of the company's energy seems to be focused on political propaganda. Chris Lehane, who formerly led Airbnb's policy struggles and was involved in Democratic party politics, says he spends about a third of his time on cryptocurrency policy campaigns, including Coinbase's newly established Global Advisory Council, which has a vague mission to "strengthen our efforts with stakeholders" and "responsibly deploy cryptocurrency."
Katie Haun's entrepreneurial journey is still in its early stages, and the lifespan of her first fund is also quite short. Nevertheless, in the midst of the cryptocurrency fight for survival, the former prosecutor chooses to work mainly behind the scenes, giving up the title of a public supporter. And even if her company survives the crisis, whether investors will continue to bet on this turbulent industry remains unknown.
Wilson from USV told Fortune, "When they go out to raise their second fund, they'll want to tell a very compact story about what they've done and how they've responded to market changes," and "hopefully they'll also talk about some successful experiences."
