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Polychain Capital

Polychain Capital

Polychain Capital manages a cryptocurrency hedge fund of actively managed blockchain digital assets. Polychain invests in protocols and companies in the blockchain space, advancing the global adoption of cryptocurrencies.

Overview

Polychain Capital is a San Francisco-based venture capital firm that manages a cryptocurrency hedge fund of actively managed blockchain digital assets. The firm's founder, Olaf Carlson-Wee, was the first employee at Coinbase and left the company in 2016 to found Polychain Capital. Polychain launched in September 2016 with $5 million from thirty investors. USV led Coinbase's Series A fundraising round, and Andreessen led its Series B. His fund earned investors 2,303% in 2017, after fees, which was one of the highest returns among billion-dollar investment firms in history. Following the success, Carlson-Wee drew comparisons to Wall Street traders, such as John Paulson and George Soros.

Strategy

Investors in Polychain capital include Sequoia Capital, Founders Fund, Andreessen Horowitz, Initialized Capital, Pantera Capital, and Union Square Ventures. In 2017, Polychain adopted a strategy that required its investors to increase their original positions by hundreds of thousands of dollars, and those who did not have such capital were forced out. According to Carlson-Wee, this action was necessary as Polychain introduced changes to accommodate larger investors, and only a small number of backers were impacted.

2018 Bitcoin crash impact

In 2018, Polychain became the first cryptocurrency fund with more than $1 billion in assets under management, according to a regulatory filing. In 2018 amidst the bitcoin crash, Polychain has lost around 40% of the $800 million it made for clients through investment losses and withdrawals by some of its earliest investors. Some backers complained that Carlson-Wee refused to change tactics despite a broad withdrawal from cryptocurrencies. Around that time, Carlson-Wee took out $60 million of his personal stake in the fund, raising concerns among investors in relation to his commitment to the fund. He defended his decision by claiming to have set aside money for family, and went on to invest more in the firm’s funds.

Growth

By 2022, Carlson-Wee’s net worth had grown to an estimated $600 million among cryptocurrency investors. One of the most profitable of his early investments was a major stake in ether, the token underpinning the Ethereum blockchain whose value subsequently rose to $3,000, and which traded for less than $12 back in 2016 when Polychain made its first major investment. As of 2022, the cryptocurrency market was estimated at close to $2 trillion, and Polychain’s assets were valued at $5 billion, making for a growth of 125,000% since the company's inception. That same year, the firm had raised $750 million for its third venture fund, led by Tiger Global Management and Temasek Holdings.

Fee income

Polychain’s main fund takes its fees every year on unrealized capital gains, in comparison to firms holding illiquid assets that are paid upon selling investments. Carlson-Wee started with $14,502 in the fund, and in a few years turned this sum into $150 million of fees. Carlson-Wee and Polychain faced a lawsuit filed in March, 2018 by an early investor, professional poker player Harry Greenhouse. In court filings, Greenhouse claimed he asked for his money to be returned at the end of 2017 and received the price he originally paid as repayment, as opposed to its sale value. He alleged that Polychain would not disclose details regarding the valuing of his investment and suspects he was underpaid.

Timeline

November 2021
Polychain Capital leads Anoma Network's $26M raise.
September 2021
Polychain Capital and Three Arrows lead $230M investment in Avalanche Ecosystem.
July 2021
Polychain leads a $21M funding round for Retail-Oriented DEX.
December 26, 2016
Polychain Capital raises a $10,000,000 seed round from Abstract Ventures, Alexander Pack, Andreessen Horowitz, Cameron McLain, DCM Ventures, DHVC, Pantera Capital and Union Square Ventures.

Funding Rounds

Invested in

Associated Investment Funds

Patents

Funding Rounds Participated In

Further Resources

Title
Author
Link
Type
Date

Blockchain Investing - Olaf Carlson-Wee and Aaron Harris

Jul 19, 2017

Coinbase’s First Employee is Leaving to Start His Own Hedge Fund

Pete Rizzo

Investing In Token Focused...

Fred Wilson

Web

June 20, 2018

Millions in Minutes: How Polychain Makes Sense of the ICO Wild West

Pete Rizzo

Polychain Capital: A hedge fund investing at the Protocol layer of Web 3.0

Efi Pylarinou

News

Title
Author
Date
Publisher
Description
Natasha Lomas
July 16, 2021
TechCrunch
Switzerland-based privacy startup Nym Technologies has raised $6 million, which is being loosely pegged as a Series A round. Earlier raises included a $2.5M seed round in 2019. The founders also took in grant money from the European Union's Horizon 2020 research fund during an earlier R&D phase developing the network tech. The latest funding [...]
Natasha Lomas
July 16, 2021
TechCrunch
Switzerland-based privacy startup Nym Technologies has raised $6 million, which is being loosely pegged as a Series A round. Earlier raises included a $2.5M seed round in 2019. The founders also took in grant money from the European Union's Horizon 2020 research fund during an earlier R&D phase developing the network tech. The latest funding [...]
SynFutures
June 17, 2021
www.prnewswire.com:443
/PRNewswire/ -- Decentralized derivatives exchange SynFutures (www.synfutures.com) today announced the close of a $14 million Series A round of financing led...
Omar Faridi
May 29, 2021
Crowdfund Insider
Internet Computer source code now publicly available, supported by CHF 200 million program announced by DFINITY.
Urkel
February 11, 2021
www.prnewswire.com:443
/PRNewswire/ -- Urkel, the premier institutional mining pool provider, today announced the public access of its flagship product, Urkel Pool, the first...
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References

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