UK venture firm Northzone launches a €1 billion web3 fund

Northzone has become the latest venture capital firm to enter the web3 ecosystem, setting up a fund to finance projects in the space. 

London-based venture capital firm Northzone announced on Tuesday, September 13th, that it has launched a €1 billion fund. The fund will focus on investing in cryptocurrency and fintech startups. 

Northzone has been around since 1996 and is a generalist investor. The VC firm has invested in numerous tech projects over the years, including fintech firms like open banking specialist TrueLayer,  buy now pay later giant Klarna, and music streaming platform Spotify. 

The firm has already invested in some crypto companies like Magic Labs, web3 privacy firm Sunscreen, and DeFi protocol Gro. Northzone is now looking to enter deeper into the crypto ecosystem with the launch of its new fund. 

Wendy Xiao Schadeck, a partner at Northzone, described web3 as a critical sector for the firm. She said Northzone began its crypto investment journey in July 2018, during the crypto winter. She added that;

“Web3 and web2 two will likely start to converge in this fund cycle’s lifetime. For instance, some of the web2 fintech companies in our last fund have launched tokens, and some of our gaming companies have decided to base their follow-on rounds from web3 VCs — so it’s really hard to say exactly where the delineation will be.”

The VC firm said it has the necessary infrastructure to support via both equity investments and token sales. Northzone added that it has participated in staking tokens previously.

Xiao further suggested that the VC firm would be open to investing in a decentralised autonomous organisation (DAO) under the right circumstances. The VC firm is yet to invest in nonfungible tokens (NFTs), but the firm said this latest fund could change all that. Xiao said;

“We consider new modes of investing that are aligned to what we do. But it’s not at a point where we say we’ll dedicate a portion of the funding to buy NFTs or anything like that. So far, we haven’t found that specifically, NFTs themselves are an investment case that fits our venture criteria.” 

Xiao added that the challenges within the DeFi ecosystem wouldn’t deter Northzone from further investing in the space. She concluded that;

“We would discuss and evaluate with our LPs to see if the time is right for that. I think what’s most likely to happen is that we’ll continue to invest into web3 companies out of our core funds and if they decide to launch tokens, we’ll hold them — we’re not at all limited in that way.”