3 reasons why Andreessen Horowitz chose London for first overseas crypto office

On Sunday, Silicon Valley-based venture capital firm Andreessen Horowitz (a16z) announced its decision to establish its first office outside the United States in London, UK, underscoring its confidence in the UK government's commitment to creating a favourable environment for blockchain and Web3 startups.

UK PM Rishi Sunak has welcomed a16z's move, saying he is "thrilled" at Andreessen Horowitz’s arrival. In a statement, he added the move is a “testament to our world-class universities and talent and our strong competitive business environment”.

Sunak told a16z, “As we cement the UK’s place as a science and tech superpower, we must embrace new innovations like Web3, powered by blockchain technology, which will enable startups to flourish here and grow the economy."

In May last year, a16z crypto—the VC firm's crypto arm—unveiled a $4.5 billion fund for Web3 investments.

Recognising the importance of a robust regulatory framework for the success of blockchain and Web3 startups it invests in, a16z emphasised the need for regulations that encourage entrepreneurial innovation and safeguard consumers from fraudulent activities.

Chris Dixon, a16z's General Partner who leads the firm's crypto investments, tweeted that the Silicon Valley VC is excited to help the UK government in building such regulations.

Why the UK?

According to Andreessen Horowitz, "the UK is on the right path to becoming a leader in crypto regulation." Here are three reasons why:

1. Hub for Web3

The VC firm has been engaging with policymakers and regulators globally, and during these discussions, the UK government demonstrated a strong commitment to Web3 innovation, it claimed.

In fact, Prime Minister Sunak has expressed his belief in the UK's potential to become a hub of Web3 development.

In 2022, the UK government began work on figuring out if stablecoins can become officially recognised as a valid form of payment, forming part of a broader strategy to establish Britain as a global centre for crypto assets.

The government's initiatives also include the creation of a "financial market infrastructure sandbox" to support innovative Web3 firms, among other similar efforts.

2. Unique approach for Web3

In its blog, a16z explained UK policymakers are taking a "uniquely tailored" approach to Web3, and highlighted the following efforts by the UK government"

• Working constructively with industry to identify the unique attributes of blockchain technology and how those attributes shape the risk profile of decentralised services vs. centralised services. 
• Laying the foundation for future applications of blockchain technology. 
• Putting forth an innovative sandbox approach to regulation. 
• Focusing on an outcomes-based approach. 
• All the while continuing to keep consumer protection front and centre of any regulation. 

3. Entrepreneurial talent

"The UK also has deep pools of talent, world-leading academic institutions, and a strong entrepreneurial culture," Andreessen Horowitz added.

"It is home to more “unicorns” than Germany, France, and Sweden combined; to some of the world’s largest financial markets and pools of capital; and to highly sophisticated, world-class regulators. All of these make the UK strongly positioned to lead in Web3."

A16z choose London despite the likes of Dubai and Singapore emerging as crypto hubs in the last two years. Dixon told Financial Times, “London is a major financial hub, it’s a major tech hub and frankly it’s a very attractive place for people to live."

He added, "You just need to get it to a critical mass to really get it going and we’re hoping that we can become a part of that and nudge [London] into being a more active hub of technology.”

A16z's UK plans

With approximately $35 billion in assets under management and a history of early investments in major tech giants such as Facebook, Twitter, Coinbase, and Stripe, a16z has positioned itself as a prominent player in the venture capital space.

It has invested in a number of UK-based crypto firms such as Arweave, Aztec, Improbable, and more recently, Gensyn.

General Partner Sriram Krishnan will lead Andreessen Horowitz's new office in London. Krishnan had recently served as an advisor to Elon Musk at Twitter, following his takeover of the social media firm.

The move comes in the wake of the US Securities and Exchange Commission (SEC) pursuing a crackdown on crypto exchanges in the US. The crypto market is also experiencing a bear market, with the value of crypto tokens plunging from their all-time highs in early 2022.

The Wall Street Journal reported in October 2022 that a16z's crypto fund "cratered by more than 40%" in the first half of 2022.

At the time Dixon said he remained unperturbed by the fall in crypto prices, and he reiterated his faith in crypto while announcing a16z's UK expansion.

He tweeted, "Crypto/web3 is still in the early innings, and needs clear regulations to provide an open pathway for startups to build constructive solutions, while protecting consumers and stamping out the harmful “casino” culture that has developed around crypto."

Besides looking to invest in more UK-based Web3 firms and working on crypto policy together with the UK government, Andreessen Horowitz plans to host its next Crypto Startup School accelerator programme in London in spring of 2024.

"We had over 8,000 applications to our most recent Crypto Startup School programme based in Los Angeles, with the final 26 teams coming from a range of countries including the UK, U.S., India, Germany, France, Argentina, Ecuador, and Canada," a16z said.

"By basing the next CSS in London, we hope to attract even more great teams from the UK, Europe and beyond to build Web3 projects."