Brandy covers crypto-related venture capital deals for CoinDesk.
Shima Capital has raised $200 million for its first venture capital fund to support early-stage Web3 startups. The fund debuted on the same day as a $300 million purse from CoinFund, dual signs that investors remain confident during the crypto bear market.
“There’s been crypto funds that have grown and ballooned in size to billions of dollars of assets under management,” founder and managing partner Yida Gao told CoinDesk in an interview. “It’s hard for them to invest in the earliest stages of Web3 founders … We think that’s an area that we can add the most value.”
Shima Capital Fund I will focus on pre-seed and seed stage investments. More than half of the Shima team is devoted to post-investment operational support services such as engineer recruiting, community marketing and token design, said Gao.
The fund has a generalist approach that covers a wide range of potential verticals from consumer companies addressing decentralized identity or Web3 social media to gaming to next-generation blockchain technology like zero knowledge rollups, which address Ethereum’s high transaction fees and slow throughput. Check sizes will range from $500,000 to $2 million for each company.
“We want to have that margin of safety in our investments,” explained Gao. “Investing early and helping the companies with their entire lifecycle of growth allows us to have that margin of safety and have higher, risk-adjusted returns for our limited partners.”
Investors in the new fund included newly rebranded VC firm Dragonfly, hedge fund billionaire Bill Ackman, blockchain game maker and investment firm Animoca, crypto wallet OKX, Mirana Ventures, Republic Capital, CoinDesk parent Digital Currency Group and entrepreneur and former U.S. presidential candidate Andrew Yang, among others.
Shima Capital was founded in 2021 by Gao, who previously co-founded crypto hedge fund Divergence Digital Currency. His work history also includes stints as a technology investor at New Enterprise Associates, a venture capital firm with more than $25 billion in assets under management, and as M&A-focused investment banker at Morgan Stanley.
How did Shima Capital feel about launching its first fund during a market downturn?
“Launching the fund in the bear market is great,” said Gao. “We can support founders at the earliest stages and have the capital they need across all the stages and help them raise additional capital … It’s good for our limited partners because the valuations have come down and the dollar goes farther and farther.”