Paradigm’s New $850 Million Bet on Blockchain Technology

Paradimity, a venture capital firm, has successfully raised $850 million for its third fund, which focuses on early-stage crypto and blockchain ventures. Established in 2018, Paradigm quickly became a notable player in the cryptocurrency investment field, starting with a $400 million fund in its founding year and expanding to a record $2.5 billion fund in 2022.

The firm was co-founded by Fred Ehrsam, a co-founder of Coinbase, and Matt Huang, a former partner at Sequoia Capital. Today, the team has grown to over 60 employees. Matt Huang reflects on the firm’s journey:

“When we founded Paradigm in 2018, we believed that crypto would be a crucial technical and economic innovation for the future. Six years on, our belief is even stronger.”

Paradigm has been a critical backer of many transformative crypto projects. It supported Uniswap, which pioneered the use of automated market makers (AMMs) for decentralized trading platforms. The firm also invested in Optimism and Flashbots, startups that have significantly advanced blockchain scalability and redesigned how blocks are constructed on Ethereum.

According to data from Crunchbase, Paradigm has made 111 investments, leading in 76 of these deals by being the first to commit substantial capital. The firm’s investment sizes range widely, from as little as $1 million to more than $100 million, tailored to the project’s scale and potential.

Despite a significant portfolio of successful investments, Paradigm experienced a major setback with its investment in the now-defunct FTX exchange, where the firm lost $278 million. Following FTX’s collapse, Paradigm had to write off its investment entirely and is currently involved in a lawsuit filed by FTX investors. They allege that Paradigm and several other large investors misled the public about the legitimacy of the exchange.

Despite this challenge, Paradigm continues to invest actively, with a particular focus on infrastructure projects within the crypto space. Its recent investments include innovative projects like Farcaster, Monad, Blast, and Friend tech.

Although Paradigm has seen only six exits, as per Crunchbase, including high-profile names like Coinbase and Compound, it maintains significant stakes in many ongoing ventures.

According to Deal Room, Paradigm's portfolio is valued at around $92 billion today. With a total investment of $3.7 billion over six years, these figures represent a substantial return, underscoring Paradigm’s impact and success in navigating the volatile world of crypto investments.

Besides investing, Paradigm is contributing to blockchain research. Its latest research paper focuses on Maximal Extractable Value (MEV), and how dApp developers can tap into the lucrative MEV stream, traditionally only captured by blockchain validators.