Business Blog: Kickstopper

How Andreessen Horowitz's secret crypto gamble on Kickstarter has played out

March 12, 2024

In tech, language can be powerful.

A linguistic advantage can be a competitive advantage. In rideshare, we're all likely to have at some point said "let's call an Uber." In search, how often have you said "I'm just going to Google it"? And if you're talking about an AI chatbot, you've probably heard someone say "it's like ChatGPT." A company or its product becoming a verb or a noun (or, in many cases, both) often signifies dominance.

But Kickstarter's story reminds us that linguistic dominance isn't always enough. My colleagues Jessica Mathews and Leo Schwartz just published a piece taking us inside Kickstarter's last decade, and Andreessen Horowitz's crypto-driven gamble on the company in 2021, to the tune of a $100 million tender offer. Fortune was the first to report the story.

The recent past is often the hardest to fully remember. But at its peak, Kickstarter was culturally massive. It was truly a darling, a star of New York's tech scene and the purveyor of a crowdfunding model that produced hits of all kinds, from Phoebe Waller-Bridge's Fleabag to the VR headset pioneer Oculus. As Schwartz and Mathews write:

Back then, the company's anti-corporate slant and grassroots spirit had lured celebrity investors and helped shape the early New York tech scene. Its events, from film premieres to rooftop festivals, and its viral money-raising campaigns had helped prove that creative business ideas could find success—and funding—outside of Silicon Valley, and that artists could find support from their fans.

But a dozen years after its launch, Kickstarter had lost its cachet of cool and churned through CEOs. The Kickstarter of 2021 had little to offer would-be investors but headaches. Growth had flatlined at the startup, which made its money by taking a small cut when a project on its platform met a funding threshold, and its onetime feel-good culture had become toxic in the wake of a bitter unionization drive. New shareholders would be inheriting ownership of a brand that many felt had turned stale.

Here's where the story gets weird. As the company's fortunes spiraled, a savior emerged: a16z, whose crypto boss Chris Dixon had been an early investor in the company. This kicked off a new, "Hail Mary" chapter for Kickstarter. As the story details:

After all, this was no small top-up to keep the lights on, but a staggering $100 million investment that valued the startup at around $400 million. But there was a catch. The investment came with the expectation that Kickstarter would attempt a pivot to blockchain as its new benefactor—the crypto fund of venture behemoth Andreessen Horowitz—sought to capitalize on the latest hype cycle.

I won't spoil the ending, but if you want to go on a ride, you can read the full story here.

See you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Nanonets, a San Francisco-based AI-powered workflow automation program, raised $29 million in Series B funding. Accel India led the round and was joined by existing investors Elevation Capital, Y Combinator, and others.

- Adaptive ML, a Paris, France-based developer of technology designed for enterprises to improve their generative AI models based on users' interactions, raised $20 million in seed funding from Index Ventures, ICONIQ Capital, Motier Ventures, Databricks Ventures, and others.

- Kaedim, a San Francisco-based AI-powered platform designed to produce digital 3D assets for game developers and interactive content creators, raised $15 million in Series A funding. A16Z GAMES led the round and was joined by Pioneer Fund and angel investors.

- Simera Sense, a Leuven, Belgium-based provider of earth observation cameras for small satellites, raised €13.5 million ($14.7 million) in funding from NewSpace Capital and Knife Capital.

- Worth AI, an Orlando, Fla.-based AI-powered financial underwriting platform, raised $12 million in pre-seed funding from the Florida Opportunity Fund, Jim Douglas, and Asif Ramji.

- Pienso, an Arlington, Va.-based AI platform designed to turn text data into insights, raised $10 million in funding. Latimer Ventures led the round and was joined by Gideon Capital, SRI, Uncork, and Good Growth Capital.

- Prescient AI, a Miami, Fla.-based AI-powered media measurement and optimization platform, raised $10 million in Series A funding. Headline and CEAS Investments led the round and were joined by existing investors Blumberg Capital and Focal VC.

- Sanzo, a Brooklyn, N.Y.-based producer of Asian-inspired sparkling water, raised $5 million in funding from Simu Liu and Steve Aoki.

- Grupago, a Mexico City, Mexico-based digital microcredit provider for small businesses, raised $4.3 million in seed funding. Deciens Capital led the round and was joined by Precursor Ventures, Clocktower Ventures, Twine Ventures, and others.

- Key, a Palo Alto, Calif.-based professional networking platform, raised $4.3 million in funding. Felicis led the round and was joined by Liquid 2 Ventures, Alumni Ventures, Archangels Ventures, Cerigo Investments, Everywhere Ventures, and others.

- Codezero, a Vancouver, Canada-based cloud development platform, raised $3.5 million in seed funding from Ballistic Ventures.

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PRIVATE EQUITY

- KKR agreed to acquire mdf commerce, a Quebec, Canada-based provider of digital commerce technologies, for approximately $255 CAD ($189 million).

- Access Information Management, backed by GI Partners and Berkshire Partners, acquired Triyam, a Lexington, Ky.-based provider of data management solutions for health care organizations. Financial Terms were not disclosed.

EXITS

- SPIE Group agreed to acquire ICG Group, a Leonberg, Germany-based provider of digital communication infrastructures and master network expansion, from H.I.G. Capital. Financial terms were not disclosed.

- UWorld acquired Aspen Publishing, a Boston, Mass.-based provider of educational content to law schools, from Transom Capital. Financial terms were not disclosed.

OTHER

- Crane NXT (NYSE: CXT) agreed to acquire OpSec Security, a Lancaster, Pa.-based provider of brand protection and authentication services, for $270 million in cash.

IPOS

- Reddit, a San Francisco-based social media platform, plans to raise up to $748 million in an offering of 22 million shares priced between $31 and $34. The company posted $804 million in revenue for the year ending December 31, 2024. Advance Magazine Publishers, Fidelity Investments, Quiet Capital and Tacit Capital, Sam Altman, Tencent, and Vy Capital back the company.

PEOPLE

- Brand Velocity Group, a New York City and San Francisco-based private equity firm, hired Daniel Hodges as a principal. Formerly, he was with Alliance Consumer Growth.

- TheVentureCity, a Miami, Fla.-based venture capital firm, promoted Álvaro Sanz Sieteiglesias to partner.