In a surprising turn of events, XAnge, a prominent European venture capital firm, has halted its efforts to raise capital for its inaugural cryptocurrency-focused fund. This decision comes at a time when the Web3 market is showing signs of recovery, highlighting the ongoing hesitancy among investors toward the volatile crypto sector.

Background on XAnge's Crypto Fund Initiative

XAnge, managing over €600 million in assets, announced its plans to launch the Digital Ownership Fund in 2022. The firm set an ambitious target of €80 million for this crypto-specific venture, aiming to focus on seed and Series A blockchain investments. To lead this initiative, XAnge brought on board Luc Jodet, co-founder of Arianee, a Paris-based Web3 luxury platform.

Challenges in Fundraising

Despite initial enthusiasm, the fund struggled to attract sufficient backers to reach its first close. Industry insiders suggest that European limited partners, who typically invest in venture capital funds, remained cautious about allocating capital to digital assets. This hesitancy persisted even as the crypto market showed signs of recovery in early 2024.

Regulatory Progress Amid Fundraising Setbacks

While XAnge faced difficulties in convincing investors, the firm made significant strides on the regulatory front. In 2023, XAnge secured a license from the French financial regulator to invest in crypto tokens. This regulatory approval allows the firm to participate in token-based fundraising, an alternative to traditional equity investments in the blockchain sector.

Broader Context: Crypto Winter and Market Recovery

XAnge's fundraising attempts coincided with a tumultuous period in the crypto industry. The collapse of FTX in late 2022 triggered a significant downturn, with global investments in crypto startups plummeting from $21.2 billion in 2022 to just $4.1 billion in 2023. However, recent developments, including new regulations in the US and Europe, have sparked a resurgence in the crypto market, with Bitcoin reaching new highs in early 2024.

European Landscape for Crypto Funds

XAnge's crypto fund would have joined a select group of venture vehicles in Europe focused solely on digital assets. This group includes Cathay Capital's crypto fund in France and Cherry Ventures' $34 million Web3 fund in Germany. More recently, Denmark's Heartcore raised €15 million for blockchain startup investments, indicating continued, albeit cautious, interest in the sector.

XAnge's decision to halt its crypto fund fundraising efforts reflects the ongoing challenges faced by the cryptocurrency sector in attracting institutional investment. While the crypto market shows signs of recovery, investors remain wary, influenced by past volatility and regulatory uncertainties. As the industry continues to evolve, firms like XAnge are adapting their strategies, integrating crypto investments into broader, more diversified portfolios. This shift may signal a new approach to crypto investments in the European venture capital landscape, balancing opportunity with caution in an ever-changing market.