Will the FTX failure hinder crypto venture deals?

The dramatic fall of FTX takes with it more than the paper wealth of one of crypto’s most colorful players. Given the amount of invested capital that can be incinerated in the crypto exchange expected sale to rival Binance, it’s hard not to wonder where web3 ventures are headed.

FTX is no longer set to generate massive returns for investors when it goes public; instead, supporters of the exchange are concerned that their investment can go to zero in the Binance transaction. A potential sale of FTX to the larger exchange could save the brand — there’s still a lot we don’t know about its non-healthcare rescue — but it’s unclear whether any of the capital pools that have helped its rise will get their money vice versa.

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The scale of the potential losses is staggering. FTX funding round in mid-2021 was something that it describes at the time as “the largest increase in crypto exchange history,” for example. The $900 million round valued the company at about $18 billion. The bragging about the round now sounds more like a threat, at least from a venture return perspective.

“Over 60 investors participated in the $900 million Series B,” FTX wrote at the time, noting that “Paradigm, Sequoia Capital, Thoma Bravo, SoftBank, Ribbit Capital, Insight Partners, Third Point, Lightspeed Venture Partners, Altimeter, BOND, NEA, Coinbase Ventures, Willoughby Capital, 40North, Senator Investment Group, Sino Global Capital, Multicoin, the Paul Tudor Jones family, Izzy Englander, Alan Howard, VanEck, Hudson River Trading and Circle invested in the round.

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