The encrypted fund Scalar Capital, which has been in operation for 6 years, officially bids farewell; under the pressure of US regulation, fund financing has become increasingly difficult.
By Zen
On September 18th, Linda Xie, co-founder and managing director of the encrypted venture capital company Scalar Capital, announced on the social media platform X that she will no longer serve as a full-time investor, but will return to the industry to focus on building. Scalar Capital will no longer deploy new capital in the future. Another co-founder, Jordan Clifford, also stated when forwarding this message that he will return to his family and personal hobbies. According to The Block, Linda and Jordan will continue to serve as managing directors, and their fund will enter maintenance mode.
This means that the encrypted fund Scalar Capital, which has been in operation for 6 years, is officially bidding farewell.
Former Coinbase employees join forces, a16z is one of the investors
Scalar Capital was founded in 2017 by Linda Xie and Jordan Clifford. This pair of partners raised $20 million the following year, with supporters including a16z partner Chris Dixon, Coinbase co-founder Fred Ehrsam, and angel investor Elad Gil, among others. Over the past six years, Scalar has invested in nearly 30 crypto projects, including decentralized social protocol Farcaster, L2 privacy solution Aztec Network, and Web3 music company Sound.
Linda Xie has a high profile in the field of cryptocurrency and blockchain technology and is widely regarded as one of the most outstanding women in the field. Linda studied economics at the University of California, San Diego. During her sophomore and junior summers, she interned as a risk management intern at insurance giant AIG, which was also where she first came into contact with Bitcoin in 2011 and developed a strong interest in this decentralized system.
In early 2014, US retail giant Overstock.com partnered with US cryptocurrency exchange Coinbase to accept Bitcoin payments, and Bitcoin began to be accepted by more people and entered the mainstream. Linda decided to join Coinbase as a result. She wrote a letter to Coinbase to apply and soon received an invitation. Coinbase invested a lot of money in regulatory licensing and compliance, and also worked closely with law enforcement agencies. It followed strict identity verification procedures to comply with regulations such as KYC and AML, and tracked and monitored the transfer of crypto assets. Linda’s main job after joining Coinbase was to work with law enforcement agencies to help them catch criminals, which led her to develop an interest in the open-source privacy project Monero. Later on, Linda became a product manager at Coinbase and met Jordan Clifford.
Jordan Clifford with Linda Xie
Jordan, a software engineer, and Linda are part of the same team. He received a Bachelor’s degree in Computer Science from Carnegie Mellon University in 2007 and later worked as a business analyst at Capital One for several years. He has worked for several startups and finally joined Coinbase in 2016. When the company was just starting to experience rapid growth, Linda realized that it was the best time to leave Coinbase and start her own career.
Linda wants to become an investor and gain a deeper understanding of cryptocurrency. She wants to research new trends in cryptocurrency and communicate with smart teams in the industry. She has decided to dedicate herself full-time to this pursuit. She has also considered creating her own project, but she is passionate about various fields in cryptocurrency and does not want to focus on just one area for a long time. It is worth mentioning that Linda’s husband, Will Warren, is the co-founder and CEO of 0x Labs, a DEX infrastructure provider. They support each other in their respective careers, and Linda has also served as an advisor to 0x for a long time.
The official website of Scalar Capital does not publicly disclose its investments. According to incomplete statistics from LianGuaiNews, the projects it has invested in over the past three years are mainly focused on the DeFi, social, infrastructure, and tools verticals. Its investments in the DeFi sector include DeFi derivatives protocol Perennial, fixed-rate lending protocol Element Finance, on-chain structured product Ribbon Finance, and DEX aggregation protocol Li.Fi, among others. Social projects include Web3 social platform Lines, decentralized social protocol Farcaster, and the company behind the decentralized social network protocol Farcaster, Merkle Manufactory. Infrastructure and tools startups include interoperability protocol Connext Labs, L2 privacy solution Aztec Network, DAO voting platform Snapshot Labs, and DAO management tool company LianGuaircel, among others. In addition, Scalar has also invested in Web3 music company Sound, South African startup NFTfi, and the recently disclosed Web3 marketing company DeForm.
Crypto funds face difficult times as US regulations tighten fundraising
Under Linda Xie’s tweet, investors from a16z, LianGuairadigm, LianGuaintera, and other crypto VCs have left messages expressing their support, indicating her popularity in the crypto community. Currently, she has not explicitly stated her next move, but investors have said they welcome contact at any time and support her future projects.
Although the two co-founders have not disclosed the reason for suspending Scalar Capital, given their qualifications and popularity, it would not be difficult for them to continue fundraising and operating funds in the crypto community. However, in the current bear market for cryptocurrencies, crypto funds are also facing challenges. Tightening regulations, a bearish market, and the market’s shift towards AI have made it more difficult for institutions to raise funds and invest.
Jocy, the founder of IOSG, said after attending Token2049, “I attended an exclusive event hosted by the Medici family, with about 120 people, half of whom were VCs. About 90% of these 60 VCs are currently fundraising.”
According to recent reports from LianGuaiNews, several well-known institutions have claimed to be fundraising for new funds or are about to do so. LianGuairadigm recently stated that it will not give up investing in the crypto field and plans to raise a $1 billion fund by the end of the year or early next year. Electric Capital plans to raise $300 million for its new fund. Mocha Ventures is seeking €30 million in funding for its crypto fund. HashKey Capital is fundraising for its first secondary crypto market fund. These funds will undoubtedly inject energy into the next bull market. While top-tier funds may still have opportunities, it may not be as easy for mid-tier funds.
In Jocy’s view, under the regulatory pressure in the United States, it has become very difficult for funds to raise financing. They believe that Asian Chinese LPs will be more generous in supporting them due to their brand and influence. However, the reality is different from the bustling scene of the 2049 event. Most LPs in the crypto sector are cutting back due to the bear market, and LPs in traditional sectors are skeptical about the value and use case of this industry.
According to a report by Swiss investment advisor 21e6 Capital AG, as of August this year, 97 out of over 700 cryptocurrency funds worldwide have closed. The institution stated, “Most funds have positive returns, but in many cases, this is not enough to attract capital.”
Previously, LianGuaiNews also reported that 10T Holdings, a well-known crypto investment firm with three funds, has run out of ammunition, with all its capital deployed and can only wait for the next bull market or further opening of IPOs for crypto firms to achieve exits from previous investments.
Perhaps there are more crypto funds “locked” waiting for the bull market along with 10T.
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