Crypto startup EigenLayer received $100m funding despite VC downturn

VC firm Andreessen Horowitz has made a $100 million investment in the crypto startup EigenLayer, demonstrating continued confidence in blockchain from leading investors. 

The funding comes despite a notable decline in VC flow into the sector. In the third quarter of 2023, venture capital investments in crypto hit a record low since 2020. 

Founded by former University of Washington associate professor Sreeram Kannan, EigenLayer a new concept of “restaking,” which enhances the security mechanism of Ethereum. The approach has rapidly gained popularity and enables emerging projects on Ethereum to enhance networks. 

The funding announcement came directly from the companies involved, with Andreessen Horowitz acting as the exclusive investor in this round. This follows a $50 million funding round in March, spearheaded by Blockchain Capital. Despite inquiries, Kannan has not disclosed the current market valuation of EigenLayer.

Crypto staking has come under regulatory scrutiny. The practice involves users depositing or staking tokens to participate in network validation and transaction verification. SEC Chairman Gary Gensler has expressed concerns over whether staking digital assets might infringe upon federal securities laws.

Addressing regulatory concerns, Kannan emphasized that EigenLayer’s model functions more as a marketplace for restaking activities rather than engaging in the direct staking operations that have attracted regulatory oversight. This distinction could be crucial in navigating the complex regulatory environment surrounding blockchain and cryptocurrency ventures.