Venture capital (VC) firms have stepped up their efforts to raise funds in the cryptocurrency sector in 2024, with over $2.2 billion already raised through August. Despite the challenges of the market, funds continue to support promising projects, and in the last period at least half a dozen VCs have collectively raised over USD 500 million. Notable examples include ParaFi Capital’s $120m fund, Borderless Capital’s $100m fund, and the $77m raised by Hack VC.
Looking beyond Bitcoin and the most capitalised cryptos, an interesting aspect is the focus on DePIN (Decentralised Physical Infrastructure Networks) projects. These projects exploit blockchain technology and token incentives to create decentralised physical infrastructure networks, such as clusters of GPUs, providing a more efficient and low-cost alternative to traditional web2 models.
One fund that is attracting particular attention is Borderless Capital’s $100m DePIN Fund III. This fund represents an important development for Borderless, which had already launched two previous DePIN funds in 2021. The first fund, of $10m, was focused exclusively on Helium, a decentralised wireless network. With the second fund, of 20 million, Borderless invested in more than 35 DePIN projects, achieving more than double the return on investment.
The increase of the third fund to $100m reflects the rapid growth of the DePIN sector, both in terms of projects financed and the size of capital raised. According to Alvaro Gracia, partner at Borderless Capital, the DePIN sector stands out for its resistance to bear markets. Indeed, many of these ventures have solid fundamentals that make them less susceptible to crypto market fluctuations.
Gracia points out that DePIN projects, such as Helium and GEODNET, do not depend on the cryptocurrency market to generate revenue. For example, Helium derives profits from its mobile plan subscribers, while GEODNET, a decentralised real-time satellite navigation network, has already achieved over $1.5 million in annual revenues. This means that such projects are largely disconnected from crypto market fluctuations, making them a safe investment area even during periods of market decline.
Another distinguishing feature of the DePIN projects is their innovative tokenomics design. These projects use token value mechanisms that allow revenues to be transferred directly to the value of the token itself. For example, in the case of GEODNET, 80% of the revenues are used to buy back and burn tokens on the open market, thus reducing the supply and potentially increasing the price of the token.
This mechanism creates a virtuous circle: higher token prices incentivise further investments in infrastructure, increasing revenues and generating further price increases. With this system, the DePIN sector is not only able to build infrastructure, but can do so in a way that solves real problems and effectively replaces traditional web2 economic models.
But what will happen in the near future? Borderless Capital plans to fully invest the funds of DePIN Fund III within the next four years. Gracia is optimistic about the growth of the sector, which continues to show signs of maturation and innovation, making DePIN one of the most promising categories within the web3 sector. Will this really be the case? For now, all the ingredients seem to be there.
