Veterans of Two Sigma Ventures, the VC arm of the secretive New York investment firm Two Sigma, are raising a $25 million crypto venture fund called Metalayer. The fund, which has already secured $20 million in committed capital, will focus on the intersection of crypto and mainstream financial services. The founders, Andy Kangpan, Mickey Graham, and David Winton, have already invested in three companies, including Ethena, Crossover, and Clear Token. Metalayer's raise comes despite a decline in crypto venture activity, with investment falling 20% in the third quarter of 2024 compared to the second quarter.
A new crypto firm is joining the venture race as the blockchain industry roars back.
On Thursday, a firm called Metalayer filed paperwork with the Securities and Exchange Commission that describes plans for a $25 million investment fund. According to sources familiar with the plan, the cofounders of Metalayer are three veterans of Two Sigma Ventures, the VC arm of the secretive New York investment firm Two Sigma.
The sources say Metalayer had its first close on Friday with $20 million of committed capital and plans to raise the full amount by the end of the year. Initial funding for Metalayer came from some senior Two Sigma Ventures executives, according to the sources, though the two firms will not have a formal relationship. Two Sigma is known for its hedge fund , which manages around $60 billion in assets. Metalayer is also raising capital from additional backers including family offices and other executives from crypto protocols.
One of the Metalayer founders, Andy Kangpan, worked as the digital asset lead of Two Sigma Ventures until August 2024, according to his LinkedIn profile. Mickey Graham served as the vice president of Two Sigma Ventures until 2021, leaving to work for the blockchain project Chainlink, and David Winton left as a VP software engineer in 2021, later working on the research team at the major San Francisco-based venture firm Greenoaks, according to their LinkedIn profiles.
Metalayer and Two Sigma Ventures declined to comment for the story.
Data-first
Two Sigma has gained a reputation in the cloistered hedge fund world as an elite quant firm, which describes outfits that take a data and software-engineering-first approach to trading. In the past few years, it has also become active in the crypto space, both from a trading and market-making capacity, as well as through its venture portfolio.
When Two Sigma Ventures raised $400 million across two venture firms months after the height of the last bull market in 2022, it also announced the intention to invest in crypto sectors including DeFi and developer tooling, led by Kangpan. According to Two Sigma Ventures' website, its investments in the Web3 space include the blockchain-enabled market data network Pyth and the financial blockchain layer Omni.
According to Metalayer's website, the firm has already invested in three companies, including the yield-bearing "synthetic dollar" project Ethena, the institution-only crypto exchange Crossover, and the blockchain clearinghouse Clear Token, suggesting the firm's focus is the intersection of crypto and mainstream financial services.
While prices for popular cryptocurrencies including Bitcoin and Solana have soared in the past month, crypto venture activity is down overall, with Galaxy finding that investment fell by 20% in the third quarter of 2024 compared to the second quarter. Still, venture firms are actively fundraising, with the fund of funds Lennertz announcing a $165 million close in October and Accolade finalizing a $202 million fund in November.
Metalayer's raise also comes at a turbulent time for its three founders' former employer, Two Sigma, which cut 200 staffers last week after a "strategic review." Its two billionaire founders, John Overdeck and David Siegel, stepped down from day-to-day management earlier this year amid a prolonged legal feud over the operations of the firm.
