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How did the self-made queen of crypto, Katie Haun, survive the darkest moments of cryptocurrency?

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The original title: "Katie Haun launched a $1.5 billion crypto fund—and then the industry blew up. How has she navigated crypto's year from hell?"

The original source: Fortune Magazine website

The original translation: 0x26, BlockBeats

On a sunny morning in April, Katie Haun struggled along a winding path around Stanford Dish on the hills of Palo Alto. This three-and-a-half-mile path is a favorite of this former prosecutor turned VC, but Haun wasn't there for leisure. Instead, her team of 11 needed to rally to persuade wealthy investors at her $1.5 billion firm, that despite the shattered state of the cryptocurrency industry, everything was still on track in high-stakes presentations and pitches.

Haun, who just finished hiking, her team, and several accompanying LPs returned to Haun Ventures' sublet office in Menlo Park. Here, the team settled among more than 70 LPs and founders of companies invested by Haun. The seasoned dealmaker, Wat, presented the Gartner Hype Cycle chart that has been used for evaluating technology trends for a long time, reassuring the attendees. The conveyed message is that the trough of the cycle is the real building period.

Cryptocurrencies may experience cyclical fluctuations, but this time the trough is much steeper than investors expected, and the collapse of many leading projects in the cryptocurrency industry has exacerbated this volatility. For Haun, the Waterloo of cryptocurrencies has dealt a severe blow to her rapidly rising career and carefully cultivated reputation, from Supreme Court clerk to important positions in the Department of Justice, and to the top of the VC world.

Thread the Needle

The timing was terrible. Launching a new cryptocurrency fund in the spring of 2022 was like starting a new chain of movie theaters just before a pandemic hit. In just a few short months, the raging bull market (with Bitcoin reaching $69,000 at one point) turned sour; high-profile projects like Terra collapsed; and the VC industry was hit by rising interest rates. Then in November, industry leader FTX collapsed in a massive fraud case, and US regulators launched their most aggressive crackdown on the industry in history. The result was that Haun raised $1.5 billion - a significant sum even for Silicon Valley VC firms, but many of the best opportunities had already dried up. During the fundraising process, according to a fundraising document, the funds were split into two funds, and Haun had claimed a roughly two-year investment plan. But that timeline no longer applied. By the second quarter of 2023, venture capital for cryptocurrency projects had dropped to $2.3 billion, down more than 70% from the same period in 2022, as many investors turned their attention to the hotter field of artificial intelligence. The script for cryptocurrency venture capital is being rewritten.

Despite this, some cryptocurrency VCs are still consuming their reserve funds. For example, Polychain Capital has already invested most of the funds from its third fund, which was raised in 2022 and 2023. Although it has successfully raised $200 million for its fourth fund, other cryptocurrency VCs have not been so lucky. As of 2023, the funds raised by cryptocurrency VCs are only about $2 billion, compared to over $22 billion for the entire year of 2022.

Haun Ventures is more cautious in its actions and plans to spend all of its cash in about three years. As of mid-June, the company had invested about 30% of its funds in around 20 projects, including publicly traded and highly liquid tokens. These tokens include well-known cryptocurrencies such as Bitcoin and Ethereum, as well as small-cap tokens related to projects, which are often part of venture capital investments alongside traditional equity. Haun Ventures declined to disclose the names of the tokens it holds.

Partner Rosenblum said that during this period, the company's investments were almost evenly split between digital tokens and traditional equity, but until 2023, the company has been emphasizing investments in startups.

Haun Ventures has invested in NFT creation platform Zora and Web3 infrastructure platform thirdweb, among other companies. The company also participated in the $32 million Series B funding round for privacy-focused blockchain network Aleo and provided support for encrypted data analysis platform Artemis. These two transactions were first reported by Fortune magazine. The company plans to announce more deals soon.

Like other VCs, Haun Ventures also leverages its influence to help startups in its portfolio. When Aleo lost almost all of its banking-related services after the collapse of Silicon Valley Bank and First Republic Bank, Haun acted as a behind-the-scenes mediator, introducing them to other banks and dispatching employees to help answer policy questions.

Currently, it is too early to evaluate the returns of Haun Ventures, as acknowledged by the company's LPs themselves, and it is still too early to evaluate the performance of startups. More importantly, many LPs are giant investors, including Saudi Arabia's sovereign wealth fund, who are fond of cryptocurrencies. An investor of Haun Ventures said, "Even if it goes to zero, it won't crush our investment portfolio."

Although some people may appreciate the company's relative caution, there is still pressure for Haun Ventures and other venture capital funds to use their capital for something, as they also charge management fees. The industry average for management fees is about 2%. Haun Ventures declined to comment on its management fees.

Rosenblum acknowledges that the company is navigating through a constantly changing market. He says, "There are two ways that things can go wrong: one is moving too fast," he told Fortune. "The other is moving too slow."

Unconventional VC

Like other VCs, Haun also faces the challenge of honing her investment strategy in black swan events. But as a woman in a male-dominated industry, she faces even more - possibly unfair - scrutiny, as she has raised the largest ever solo fund by a female founding partner.

At a venture capital dinner this spring, Haun's background was discussed. One diner suggested that Haun may be an authority in regulatory matters, but lacks a strong background in technology and trading. However, Haun's supporters believe that this is not important.

"She is not an engineer, not a repairman, nor a construction worker," said Fred Wilson, co-founder of Union Square Ventures, who has invested in projects with Haun before, to Fortune. Wilson said that instead, Haun brings her extensive government work experience and her network to the table.

"She is one of the best socializers I have ever worked with," Wilson said. "She can meet anyone."

Haun gained a seat on the Coinbase board with these experiences, and later served as a General Partner (GP) at venture capital giant Andreessen Horowitz. She worked in this position for four years and invested in top companies such as the NFT market OpenSea.

"Many investors with a legal background have transitioned to VC," said Rachael Horwitz, spokesperson for Haun Ventures. "We believe that Katie (Haun) is undoubtedly one of the most experienced leaders and traders in the cryptocurrency field."

Some law enforcement officials are unhappy with her brief experience in the field of digital asset prosecution, which helped Haun gain wealth and fame, while others who have established themselves in this field have not received the same benefits. What is particularly frustrating for some is that an article referred to Haun as the "top cryptocurrency cop in Washington, D.C." - a title she has never held or claimed to hold.

"She didn't work hard in the government for ten years, twenty years, thirty years - she only worked on a few encryption cases," said an insider. "I do have to commend her for playing the game smarter, rather than harder."

A former law enforcement officer recalled such an episode: a former prosecutor from the Department of Justice criticized media reports on LinkedIn, believing that these reports distorted Haun's role in the government. The law enforcement officer, who did not want to be named, told Fortune that some dramatic things happened afterwards, and Haun's friends apparently advocated for the removal of the post. Shortly thereafter, the post disappeared.

This former law enforcement officer said that regardless of whether the reports exaggerated Haun's achievements, Haun clearly benefited greatly from her growing fame. They said, "As far as her career in government is concerned, she positioned herself in the greatest and best position, which is the starting point of everything."

The law enforcement industry is a world full of ego and cover-ups. Law enforcement personnel can only discuss cases under specific circumstances, so professional disputes should be handled with caution. Other law enforcement personnel defend Haun, pointing out that she has never falsified her records.

Former Department of Justice prosecutor and current Coinbase Director of Financial Crimes, Grant Rabenn, said: "There are definitely people who dislike her." He asserts that 99% of her detractors "lack her vision and insight, or do not have her level of success."

The relationship between the venture capital industry and the media is notoriously tense. Although many venture capitalists consider themselves independent thinkers, there are also some who are thin-skinned and fiercely criticize negative coverage.

But unlike her former colleagues Marc Andreessen and her crypto fund partner at the company Chris Dixon, who prefer to argue with journalists on social media and stay behind the scenes, respectively, Haun tends to participate in mainstream media events. She debated with Paul Krugman, sat down with Ezra Klein, and even graced the cover of Fortune magazine, believing that cryptocurrency and compliance can be compatible. In May 2022, two months after Haun's fund was launched, she took the stage with Sam Bankman-Fried and Michael Lewis at the infamous conference held by FTX founder in the Bahamas.

However, after the FTX crash in November, Haun mostly avoided the media she once pursued - except for a column she wrote for The Wall Street Journal in March 2023 and a brief interview with Bloomberg in December. Her team attributed this decision to a focus on trading and working with regulatory agencies. Although she was interviewed for a cover story in Fortune magazine last year, Haun declined multiple interview requests for this story.

Horwitz told Fortune that the best use of company time is to prioritize investing in the company.

They will want a very compact story

When VC invites investors to participate in "LP Day" events, it is usually a luxurious event. Considering the low sentiment of cryptocurrency, Haun Ventures' April gathering exudes a slightly frugal atmosphere: a large water dispenser from Peet's Coffee and a picnic lunch from La Fromagerie. LPs, founders, and the Haun team chatted on the outdoor terrace.

LP's speech seems to have temporarily appeased investors, as no one has openly complained or demanded a withdrawal of investment. Part of the reason may be that Haun did not choose to invest in FTX, a notorious exchange run by Sam Bankman-Fried, whose parents taught Haun at Stanford Law School. Other top funds, including celebrities and cryptocurrency experts, chose to support this fraudster, resulting in staggering losses: Sequoia Capital evaporated $200 million of its investors' funds, while Paradigm reportedly marked its $290 million stake in FTX as zero last year.

After avoiding the media she once embraced, Haun's cryptocurrency promotion is now almost entirely behind closed doors. She hosts legislators, holds fundraising events and educational conferences for major politicians including New York State Democratic Senator Kirsten Gillibrand, and invites founders like thirdweb's Furqan Rydhan to praise the benefits of blockchain.

Due to very few transactions (as one LP put it, Haun Ventures has yet to enter the race), most of the company's efforts seem to be focused on political propaganda. Chris Lehane, who led Airbnb's policy struggles and participated in Democratic Party political activities, said he spends about a third of his time on cryptocurrency policy propaganda, including Coinbase's newly established global advisory committee, which has a vague mission to "strengthen our efforts with stakeholders" and "responsibly deploy cryptocurrency".

Katie Haun's entrepreneurial journey is still in its early stages, and the lifecycle of her first fund is also very short. Nevertheless, in the battle for survival in the cryptocurrency industry, the former prosecutor chose to work mainly behind the scenes and gave up the title of public supporter. Moreover, even if her company survives the crisis, it is still unknown whether investors are willing to continue betting in this turbulent industry.

Wilson from USV told Fortune: "When they go to raise their second fund, they will want to tell a very concise story around what they've done and how they've adapted to market changes," and "hopefully they can also talk about some successful experiences."