In the noisy venture capital landscape, crypto investors have emerged as some of the most aggressive to make their business into a brand. They’ve written white papers and launched podcasts; on social media, partners at multi-billion-dollar firms have become minor celebrities themselves within the crypto bubble, sharing predictions and memes for their legions of followers.
BlockTower Capital, a new venture practice led by investor Thomas Klocanas, is opting for a different approach. A previously unannounced $150 million fund that’s part of a larger hedge fund and credit business, BlockTower barely has a website. Its corporate Twitter account, despite its ten-thousand followers, has yet to tweet.
Instead, the Miami-based BlockTower and Klocanas, its venture arm’s Brooklyn-based leader, are looking to make moderation — and old-school financial ties — their calling cards. By keeping its fund relatively tidy at $150 million, BlockTower is looking to invest at a pace (10 investments so far this year) and check size ($500,000 to $5 million bets, with $20 million deployed so far) that will help it hold its own alongside its better known, faster-paced mega fund peers. And as one of four vehicles within BlockTower, a crypto-focused financial firm with a flagship hedge fund, market-neutral fund and lending business, Klocanas, 31, says he can offer startups something that a bigger firm can’t: real power users in crypto-focused institutional finance who can help make markets and provide assets for lending businesses to get off the ground.
“We’re living and breathing the stuff we’re investing in, because otherwise, who are we to give them advice,” Klocanas says. “We want to lead by actions, and hope our actions speak for themselves.”
The French-American Klocanas cut his teeth in investment banking as a sell-side analyst in London before attending Columbus Business School, where he was co-president of its fintech and blockchain student organization. While getting his MBA, he started working at local crypto software maker and incubator ConsenSys in 2017, helping launch new projects and performing several business development roles. After short stints at several other crypto projects, he joined VC firm White Star Capital in January 2020 as a principal, helping raise its first digital asset fund, a $50 million vehicle that backed startups including Ledn, Paraswap and Rally.
At the end of 2021, with crypto projects flying high and cryptocurrency prices soaring, Klocanas was considering raising his own fund when he met Matthew Goetz and Ari Paul, both 38. Goetz, a former Goldman Sachs investment banker, and Paul, a former University of Chicago endowment manager, had launched their own hedge fund, BlockTower, in 2017, to focus on crypto investments in a way they felt traditional institutions could not. Along with a flagship fund that could make long-term investments in public and private markets and in cryptocurrencies themselves, they added a market-neutral fund, as well as a developing credit business. A filing from the end of 2021 listed the firm with nearly $1 billion in assets; at today’s prices, it has more than $500 million.
By teaming up with Klocanas, Goetz and Paul saw an opportunity to dive deeper into the private, startup-side of investing, where the firm had already made more than 40 investments on its own. The pitch: BlockTower could combine the expertise and financial clout of its traders with the deep domain expertise of Klocanas on the startup side. “You can’t fake being a crypto native,” Goetz told Forbes in July. “The DNA of winning venture franchises is different today than the Sand Hill Road game of the last 40 years.”
The trio set out to raise $100 million, and ultimately capped their fund at $150 million early this year. Backers include MassMutual, French investment bank Bpifrance, former Midas List investor Roger Ehrenberg and the Teacher Retirement System of Texas. While other firms have invested hundreds of millions in as short as six months, Klocanas claimed, BlockTower has made just 10 investments so far this year, deploying $20 million. The firm looks to write $500,000 to $5 million checks it can lead or co-lead into companies and crypto projects at their early stages, aiming for equity stakes of up to 10% in a startup, or up to 5% of a token protocol.
BlockTower often targets finance-minded crypto projects that focus on interoperability between blockchains, credit or payments. But the firm has also written checks to “digital asset adjacent” businesses in mobile, social media, decentralized governance and future of work that, while they lack a crypto-focused product today, may use crypto as a key part of their business in the future, Klocanas said.
source BlockTower’s ability to bring resources to such projects as not just an equity investor, but an early institutional user, can play a valuable role in the ecosystem, several peers in venture capital told