In April, private equity investor Orlando Bravo was publicizing how crypto entrepreneurs are “just so amazing, so creative.”
At the time, crypto startups had become all the rage in Silicon Valley, garnering rapid growth figures and high volumes, and even attracting pension funds to the cap table. Bravo’s PE firm, Thoma Bravo, had recently hired General Atlantic vice president Christine Kang to lead the firm’s growth equity business’ Web3 and crypto investments, and Bravo was hinting that its minority investments in the sector might just be an introduction into bigger buyout deals.
Oh, how quickly things can change.
In an interview yesterday with the Financial Times, Thoma Bravo’s chief executive said the private equity firm, which has backed at least five crypto companies since last fall, is pressing pause on new investments in the sector. Bravo took it a step further, calling into question some of the ethical practices he was seeing in the broader industry.
“I’ve gotten to know that world a little bit more, and some of the business practices don’t rise to the level of ethics that we’re all used to in private equity with your investors and your customers and your community, and that has been a bit disappointing,” he told the Financial Times, adding that he was happy with the deals Thoma Bravo had already done and believed the industry was young and that ethical issues would “get fixed over time.”
Bravo’s statements are certainly a radical departure from a mere five months ago, when he was praising how crypto business models tend to have better margins than software startups. Even in July, Thoma Bravo had brought on a new hire to invest in Web3 companies. Since the end of last year, Thoma Bravo has backed FTX, Anchorage Digital, FalconX, Figment, and TRM Labs. Thoma Bravo’s team had been working with crypto-native funds to better understand the space for a year prior to its first investments.
Why the sudden change of tone?
For starters, the crypto markets are horrendous, if you haven’t noticed already. Bitcoin is trading around $20,000 as I write this—worth about half of what it was going into this year. Ether is trading at around $1,300, down from $2,800 in January.
Not to mention a slew of suspicious activity has left a bitter taste in people’s mouths. There’s the two hedge fund investors who blew up their own multibillion firm. Do Kwon, who founded the Luna and TerraUSD tokens that collapsed in May, is facing arrest in Korea, and his whereabouts are unknown. The Celsius Network allegedly advertised its crypto deposit account as a high-yield savings account, and investors who say they lost …….