(Bloomberg) — The family office of billionaires Cameron and Tyler Winklevoss will serve as a test case for the staying power of crypto startups after TerraUSD’s collapse and as interest rates and recession fears rise.
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Through Winklevoss Capital Management, the 40-year-old twins have investments in crypto startups from trading platform Slingshot to tax facilitator Taxbit to Praxis, which vows to build “the city-cryptostate to realize a more vital future.” Between their family office and the venture arm of their digital asset exchange Gemini, they have stakes in about 50 crypto or blockchain startups, according to portfolios they’ve posted online.
The latest tumble in digital assets could test the durability of those bets. Global fundraising for tech startups declined in the first quarter for the first time in nearly two years, with venture capitalists warning the firms they’ve backed to begin slashing costs. It’s a message that many young entrepreneurs have never heard before.
Crypto startups in particular could face a cooling effect from the recent collapse in the TerraUSD algorithmic stablecoin and its affiliated digital token, Luna. They were still getting funding from venture capitalists as recently as April and pulled in $5 billion during the first quarter.
Digital currencies Bitcoin and Ether remain depressed, down 50% from last year’s peak. Venture capital fundraising activity among US crypto or blockchain firms is on pace to fall short of last year’s deal count for the first time since at least 2017, according to PitchBook data.
“We believe in investing in the next generation of builders and visionaries who are pushing the boundaries of what’s possible,” Cameron Winklevoss said in a statement provided to Bloomberg earlier this year. “They are risk takers who want to build a better human experience and aren’t afraid to think big and fail greatly.”
The brothers declined to comment further on their family office.
Bitcoin HODLers
The Winklevoss twins have a combined fortune of $6.4 billion, according to the Bloomberg Billionaires Index. They co-founded Gemini and are thought to be among the largest holders of Bitcoin, reportedly buying about 1% of all in existence around 2012.
The brothers first became famous for claiming Mark Zuckerberg stole their idea for a Facebook-type social media platform while at Harvard University. They settled a lawsuit and used the money — $20 million plus Facebook stock — to create Winklevoss Capital in 2012.
Many investment firms for ultra-wealthy families are shrouded in secrecy, taking pains to avoid the limelight and raising the specter of theft and kidnapping if their fortunes were made public.
The Winklevoss twins, by contrast, use Instagram and Twitter to promote their family office’s 75-plus investments. The companies that have been acquired are emblazoned with bright magenta badges on their website, which doesn’t include the size, duration and type of their stakes.
Their investments include Tezos, a platform for smart contracts and decentralized applications, and Xapo Bank, which protects users’ crypto holdings with the “security of a deep cold storage vault,” according to the family office. The twins joined Tiger Global Management and other investors last month in a funding round for GamerGains Lab, which lets players earn crypto rewards.
The twins in January joined Soros Fund Management and other investors in a funding round for Animoca Brands Corp., a non-fungible token and metaverse company.
‘Interesting Blend’
“It’s an interesting blend between what we think of as a traditional office and a venture capital firm,” said John Workman, managing director at family office advisory firm Pathstone. “You don’t find too many family offices with a web page that publishes what they’re investing in.”
The firm’s top exits have mostly come from non-crypto companies: Block Inc. bought food-delivery firm Caviar in 2014, Ford Motor Co. snapped up commuter ride-sharing firm Chariot in 2016, and ASSA Abloy purchased smart-lock maker August Home in 2017.
As for Winklevoss Capital’s newer crypto investments, some questioned how long such startups could continue to attract funding — even before this month’s turmoil.
“Compared to just a year ago, there’s been financing events that we’re just shocked at by the amount they were able to raise,” Spencer Bogart, a general partner at Blockchain Capital LLC, told Bloomberg News last month.
The New York-based firm, which has completed about 130 deals, passed on one it originally liked after the startup’s asking price reached levels too lofty to stomach.
“Many blockchain-based projects require additional funding to achieve their growth goals,” said Matthew Sigel, head of digital-assets research at VanEck. “This downdraft could tighten investors’ focus on who should get funding and who shouldn’t.”
If the Winklevoss twins approach their startup investments like they do Bitcoin, they’re likely in it for the long haul. When their digital coin of choice tumbled as low as $25,425 on May 12, Tyler tweeted that he was “completely unfazed,” while Cameron said he’s “HODLing.” (HODL is an acronym for “hold on for dear life.”)
“Bitcoin isn’t just an asset. And it’s not just a technology,” Cameron Winklevoss tweeted on May 14. “It’s a movement that offers the blueprint to dismantle traditional power structures. It promises greater independence, choice and opportunity. It was a tough week, but the underlying fundamentals haven’t changed.”
He signed off with another acronym. WAGMI: We’re all going to make it.
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