Matthew Homer—a one-time crypto regulator with the New York Department of Financial Services and founder of VC firm Department of XYZ—is planning a second fund mere months after his first, according to four people familiar with the matter.
Homer’s early innings raise comes as crypto companies navigate stormy regulatory waters and await the outcome of an uncertain election. Such turbulence may make for good business, especially if uncertainty persists into the first half of 2025, when the fund is expected to launch.
New York-based Homer raised $5.1 million for his initial vehicle in May, Fortune reported, from LPs including Gemini founders Tyler and Cameron Winklevoss. Homer honed his VC chops at Nyca Partners, where he helped the fintech investor develop a crypto strategy.
The next president—especially his or her Cabinet—could change stringent digital asset oversight. Regulators say their crackdowns protected retail investors; many in the industry contend they’ve been held to a higher standard than Wall Street.
Homer has a few aces up his sleeve, including his resume, rapport with influential policymakers and a deep roster of LP advisors steeped in regulatory matters.
The new fund is set to adopt a strategy similar to its predecessor, which Homer used to back stablecoin AI maker Bridge and tokenized fund startup Superstate.
A deep bench
The Department of XYZ doesn’t lead rounds, instead writing smaller checks to founders who stand to benefit from regulatory guidance. The fund will also reserve capital for follow-on investments in standout companies.
It’s too early to ballpark the potential size of the developing fund, the people said. Homer declined to comment, citing SEC rules on private placements. The people were granted anonymity to discuss confidential business matters.
Crypto specialists have been eyeing the SEC’s probes into smaller operators. But the securities watchdog has not entirely pumped the brakes on investigating crypto’s upper echelon. Consider the SEC’s recent probe into decentralized exchange UniSwap as an example.
Current LPs include heavy-hitting former regulators, the sources said. Department of XYZ’s LP advisors include: fellow NYDFS alum Jon Blattmachr, now BNY’s managing counsel for digital assets and emerging technologies; former high-ranking CFTC official Melissa Netram, who leads policy at fintech platform Block; and DC-based Neel Maitra, a partner at law firm Dechert who spent nearly six years as a crypto specialist at the SEC.
Crypto VC fundraising is in the midst of a stop-and-go recovery. GPs raised $2.2 billion across 24 funds through July 31, on pace to surpass 2023’s total capital raised, according to PitchBook data.
‘A real value prop’
An LP in the firm said they could count on one hand the number of people with a resume as steeped in regulation as Homer. “It’s a real value prop for founders,” the person said. “It helps them think through nuance and complicated regulatory compliance.
SEC Chair Gary Gensler last year orchestrated a barrage of investigations into crypto companies, underscored by suits against Coinbase, Kraken and Binance. The former is ongoing; exchanges Kraken and Binance have settled.
Crypto VC investment has stabilized from declines following the asset class’ terrible end to 2022. VCs invested $2.7 billion in Q2, the third straight quarter of growth, according to PitchBook data.
Featured image by Howard Kingsnorth/Getty Images
