The German funding outfit Lennertz & Co. is ready to turn into 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, mentioned 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 completely 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, somewhat than investing immediately in portfolio corporations or token offers, Lennertz invests in different corporations, together with well-known crypto VCs comparable to Multicoin, Polychain, and Hack VC. Its second fund centered on generalist funds with crypto methods, together with Bain Capital, Lightspeed, and Andreessen Horowitz.
Tiedt mentioned 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 mentioned. “Blockchain is actually sitting quite comfortably.”
Investing technique
The previous few years have been a rollercoaster for the crypto trade, with the bull market of 2021 giving option to the collapse of FTX in late 2022, adopted by a modest restoration spurred by the approval of Bitcoin ETFs in early 2024. At the moment, costs are largely stagnant for the foremost belongings, with a low urge for food for brand spanking new token launches and shopper initiatives.
Tiedt mentioned that Lennertz’s technique of investing in different funds, somewhat than immediately 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 degree. “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 spend money on eight to 10 blockchain-focused enterprise capital funds, with some in Europe however the majority within the U.S. Tiedt mentioned that Lennertz has raised sufficient capital to spend money on 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 relentless onslaught of regulatory points alongside fixed worth swings, Tiedt mentioned that Lennertz’s base of round 40 households—which she described as largely entrepreneurs—helps its funding thesis. The returns seemingly don’t damage, with the preliminary two funds each logging an inside charge of return over 35% per yr.
Tiedt mentioned that blockchain includes round 10-12% of the agency’s general investments.
Lennertz is just not 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 automobiles and is probably going nonetheless persevering with to market. Hack VC, considered one 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.
