The German funding outfit Lennertz & Co. is about to grow to be one of many largest fund of funds working within the blockchain area because the agency seeks to boost $165 million for its third crypto-focused automobile. In an interview with Fortune, Lennertz’s head of fund investments, Oksana Tiedt, stated the fund has already had its first shut, though she declined to share a determine.
A multi-family workplace established in 2015, Lennertz invests throughout totally different asset lessons, together with personal fairness and conventional enterprise capital. The agency started betting on the blockchain area round 2016, privately investing in a single fund earlier than launching a $35 million fund of funds in 2020 and a second $65 million fund in 2022.
As a fund of funds, moderately than investing straight in portfolio corporations or token offers, Lennertz invests in different corporations, together with well-known crypto VCs akin to Multicoin, Polychain, and Hack VC. Its second fund targeted on generalist funds with crypto methods, together with Bain Capital, Lightspeed, and Andreessen Horowitz.
Tiedt stated that Lennertz determined to boost a brand new fund partially due to the efficiency of its crypto holdings versus different investments. “We’re seeing real distributions from these funds, whereby when you have a tight market like now, everybody from private equity to venture is just struggling with lack of distributions,” she stated. “Blockchain is actually sitting quite comfortably.”
Investing technique
The previous few years have been a rollercoaster for the crypto business, with the bull market of 2021 giving method to the collapse of FTX in late 2022, adopted by a modest restoration spurred by the approval of Bitcoin ETFs in early 2024. At present, costs are largely stagnant for the key property, with a low urge for food for brand spanking new token launches and client initiatives.
Tiedt stated that Lennertz’s technique of investing in different funds, moderately than straight into corporations and tokens, has helped it keep away from the pitfalls of the current volatility. She expressed optimism that funds are starting to look past infrastructure and middleware initiatives, with extra adoption coming, particularly on the B2B stage. “The topics that are interesting, of course, are everything around DeFi and everything around the cross of blockchain and AI,” Tiedt instructed Fortune. “So it’s all about distributing data versus centralizing data.”
In its third fund of funds, Lennertz plans to put money into eight to 10 blockchain-focused enterprise capital funds, with some in Europe however the majority within the U.S. Tiedt stated that Lennertz has raised sufficient capital to put money into two funds, Polychain and Bain Capital’s crypto fund.
Whereas some conventional buyers have stayed away from the customarily radioactive sector, which offers with a continuing onslaught of regulatory points alongside fixed worth swings, Tiedt stated that Lennertz’s base of round 40 households—which she described as largely entrepreneurs—helps its funding thesis. The returns possible don’t harm, with the preliminary two funds each logging an inside price of return over 35% per 12 months.
Tiedt stated that blockchain contains round 10-12% of the agency’s general investments.
Lennertz shouldn’t be the one crypto fund that’s elevating new capital. In September, Fortune reported that Accolade, a U.S.-based fund of funds, had raised $135 million throughout two autos and is probably going nonetheless persevering with to market. Hack VC, one in every of Lennertz’s portfolio funds, has additionally raised $77 million.
The crypto sector should still be removed from its peak in 2021, however dry powder is beginning to accumulate on the sidelines.
