a16z leaving London: shifting tides of web3 VC from a European perspective

About the positive implications of a16z closing its European (London) office.

Hi everyone,

You’ve probably read a lot yesterday about Andreessen Horowitz' recent decision to close its London office and refocus on the US market, which is kind of sending ripples through the European web3 ecosystem. I want to share my hot take, possibly counter-intuitive perspective.

While this move might initially seem like a setback, I believe it actually presents a unique opportunity for the European crypto / web3 landscape to flourish. Let me try to explain that.

Quick recap about the a16z effect

First off, there's no denying the impact that Andreessen Horowitz has had on the global web3 scene. As one of the most prominent VC firms in Silicon Valley, their entry into the European market was met with hot enthusiasm. Their presence brought attention, capital, and expertise to the European crypto ecosystem. a16z setting up their London office was slightly over a year ago - only.

a16z has established itself as a powerful media brand in both traditional VC and web3 VC, bringing significant benefits to the ecosystem and web3 founders. Their strong media presence translates into high-quality content (audio, video, written forms, events..) that educates the market about web3 emerging technos (they’ve been vocal about ZK for years even though ZK was invented by the MIT in the mid 80s), shape industry narratives, and drive convos around nascent trends. This thought-leadership helps legitimize and mainstream web3 concepts, attracting more talent + capital to the ecosystem.

For web3 entrepreneurs, partnering with a16z can provide a powerful platform for visibility, credibility, and strategic support beyond just capital investment. Their Crypto Startup School in London was a great illustration of that.

The US policy shift

However, recent developments in US crypto policies under the Trump administration have prompted a16z to shift its focus back to the American market. These policy changes include:

• executive orders on crypto, with Trump signing an order promoting the development of the cryptocurrency industry in the US, establishing working groups and exploring national digital asset reserves

• regulatory changes with the SEC revoking controversial policies like SAB 121, making it easier for banks to custody cryptocurrencies. The appointment of Paul Atkins as SEC Chair signals a potential end to the "regulation by enforcement" era

• appointment of pro-crypto figures in the administration, including the Secretary of the Treasury, who have expressed openness to Bitcoin and actively hold crypto assets

• potential legislative developments, with the example of reworked stablecoin regulations, possible tax incentives for blockchain-based businesses

These policy shifts have sparked a market optimism in the US, and this web3-friendly stance is creating a more favorable environment for crypto (innovation & investments) in the US, prompting a16z' strategic pivot.

The rise of European early stage web3 Funds

With a16z's retreat, a vacuum has been made greater in the European web3 funding landscape. This gap is already immense, you must have a look at the Q3-Q4 2024 Pitchbook “Crypto VC Funds Report”: not a single European-based crypto VC fund in the Top closed crypto VC funds over $100 million by size, only two European-based crypto VC funds (in Germany) in the Top closed crypto VC funds under $100 million by size.

My hypothesis is that this pre-existing void, magnified by a16z’ departure, is likely to be filled by the formation of (many) more lean, thesis-driven pre-seed and seed funds that are deeply rooted in the European ecosystem. These funds have the potential to move quickly and decisively at the earliest stages of startup development.

For those of you who favor larger, household names in VC, I want to share there some key advantages of local funds, taking the example of our core conviction on Europe:

• European-based funds have a more intimate understanding of the regional market, fragmented regulations, and culture

• smaller, localized funds can often move more quickly than large, multinational VC firms

• local funds can provide more hands-on support and mentorship to early-stage startups (caveat: this VC “value-add” is always optional, and an opt-in from a portfolio company perspective)

• these funds can help create a tighter-knit European web3 community, fostering collaboration + innovation

Distortion effect

While having big-name VCs like a16z in the European market elevated & educated the European (web3) ecosystem and brought capital, it also had the potential to distort the local fundraising landscape. Their presence might have led some founders to default to chasing these big names, potentially at the expense of building relationships with local investors who could provide more tailored support.

I believe in a new dawn for European web3.

This shift in the VC landscape could lead to a more diverse and robust European web3 ecosystem. By removing the "easy" option of defaulting to large overseas franchises, founders may be encouraged to engage more deeply with local investors who are intimately familiar with the European market.

As the European web3 scene evolves, we can expect to see:

• more European-focused funds and a proliferation of VC firms specifically targeting European web3 startups

• increased collaboration and tighter networks forming between European founders, and such investors

• unique European solutions with a focus on solving problems specific to the European market and regulatory landscape FIRST

• and SECOND, given the “day 0” global competitiveness nature of web3, we can expect a stronger, more self-reliant European web3 ecosystem that can compete on the global stage.

While the departure of a16z from London may seem like a step back, it's important to view it as an opportunity for growth and maturation of the European web3 ecosystem. By fostering a more localized and focused approach to early-stage funding, Europe has the chance to cultivate a unique and thriving web3 landscape that can stand toe-to-toe with Silicon Valley.

This is exactly the focus of Olive Capital olivecapital.vc. While bridging the “Atlantic gap” as pre-seed specialists between European early stage founders and US VCs, we believe the next wave of large, European-based web3 companies (which will target global markets from inception) will be building consumer experiences on invisible crypto infrastructure. We think this is made possible now thanks to three core fundamentals: zero-knowledge (ZK), the Agent Economy, and increasing programmability of Bitcoin. This approach positions Olive Capital to take advantage of the "barbell effect" in crypto VC fundraising, where first-time managers and established crypto-native fund managers are expected to have the most credibility in the ecosystem and value-add to founders.

The future of European web3 is bright, and it's being written by the innovators, founders, and investors who call this continent home, YES! So as we move forward, we must embrace this chance to build a truly European vision for the decentralized future, one that can thrive independently of the policy shifts and market dynamics across the Atlantic, while recognizing that we need European actors bridging the Atlantic gap.

See you on the bright side European side of the web3 Atlantic gap ;)

Raph.