Andreessen Horowitz Debuts $600 Million Gaming Fund to Add to Web3 Bets

The venture firm, known as a16z, said Wednesday the fund is its first dedicated to the games industry, pointing to the billions of dollars in annual revenue that hit games such as “Fortnite” and “Minecraft” generate. The fund extends a16z’s yearslong practice of backing gaming startups and builds on its strategy to deploy billions of dollars into Web3 technologies. Web3 refers to a new iteration of the internet, with products and apps that are built on the blockchain, include the exchange of cryptocurrencies or tokens, and at times are housed in a virtual world, dubbed the metaverse.

Startup investors have said the technologies being built at virtual-reality gaming companies will help to form the foundation for the Web3 industry, which is still more a set of ideologies espoused by tech industry leaders than practical technologies. An early wave of such companies makes games that take place in the metaverse, in which users can play to earn tokens or cryptocurrencies.

“Games infrastructure and technologies will be key building blocks of the metaverse, an opportunity that dwarfs the current $300 billion game industry,” a16z said. The firm said it would invest in a spectrum of gaming services and apps, as well as companies building technology for the metaverse.

Andreessen Horowitz has been a vocal proponent of Web3, with its most recent and third fund dedicated to cryptocurrency-based startups totaling $2.2 billion. One of the firm’s investors,

Katie Haun,

left in December to start her own $1.5 billion fund also dedicated to crypto investments, a sign of the growing appetite for Web3 startups among not only venture capitalists but also the limited partners who fund venture firms.

A16z’s new fund coincides with a steep decline in cryptocurrency values as investors unloaded the risky assets amid broader market volatility and inflation, with more than $1 trillion worth of digital money wiped out since November. A breed of cryptocurrencies touted for their purported stability has crashed while other popular coins are down about 60% from November’s high. The steep and sudden drop creates risk for games whose objective is to spend and earn cryptocurrencies.

The crypto slide is part of a broader retrenchment in the venture-capital industry, as investors show newfound caution or flee the sector, startups layoff thousands of employees and entrepreneurs face pressure to cut costs and improve margins. The cooler market has created cheaper prices for investors still looking to spend, but also significantly increases uncertainty around investments.

Many new venture funds have been announced since the start of the year but were very likely raised before the current market correction.

Andreessen Horowitz has been an investor in games since well before the Web3 craze, including with a 2009 bet on

Zynga Inc.,

one of Silicon Valley’s gaming pioneers. Gaming apps grew in popularity during the pandemic, an outlet for virtual socializing amid Covid-19 restrictions.

Write to Heather Somerville at Heather.Somerville@wsj.com