On September 18th, Linda Xie, co-founder and managing director of the cryptocurrency venture capital firm Scalar Capital, announced on social media platform X that she will no longer serve as a full-time investor and will instead focus on industry building. Scalar Capital will no longer deploy new capital in the future. Another co-founder, Jordan Clifford, also shared this message and expressed his intention to return to 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 Scalar Capital, a cryptocurrency fund that has been operating for 6 years, is officially closing its doors.

Founded by Former Coinbase Employees, Backed by a16z

Scalar Capital was founded in 2017 by Linda Xie and Jordan Clifford. The duo raised $20 million in the following year, with support from 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 cryptocurrency projects, including decentralized social protocol Farcaster, L2 privacy solution Aztec Network, and Web3 music company Sound.

Linda Xie is widely recognized in the cryptocurrency and blockchain technology field and is considered one of the most outstanding women in the industry. She majored in economics at the University of California, San Diego, and during her sophomore and junior years, she interned as a risk manager at insurance giant AIG. It was during this job that she first encountered Bitcoin in 2011 and developed a strong interest in this decentralized system.

In early 2014, the U.S. retail giant Overstock.com partnered with the U.S. cryptocurrency exchange Coinbase to officially accept Bitcoin payments, leading to increased acceptance of Bitcoin and its entry into the mainstream. As a result, Linda decided to join Coinbase. She wrote a letter to Coinbase applying for a position and quickly received an invitation. Coinbase invested heavily in regulatory licensing and compliance, and closely collaborated 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 cryptocurrency assets. After joining Coinbase, Linda's main job was to collaborate with law enforcement to help them apprehend criminals, which sparked her interest in the open-source privacy project Monero. Later, Linda became a product manager at Coinbase and met Jordan Clifford.

Jordan Clifford with Linda Xie

Software engineer Jordan and Linda were part of the same team. He obtained 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 before moving through several startups, ultimately joining Coinbase in 2016. When the company was just beginning to experience rapid growth, Linda realized that it was the best time to leave Coinbase and start her own business.

Linda wanted to become an investor, to gain a deeper understanding of cryptocurrencies, research new trends in the industry, and engage with smart teams in the field. She decided to fully commit to this endeavor. She also considered creating her own project, but because she was passionate about various aspects of cryptocurrencies, she did not want to focus on just one area for an extended period. It is worth mentioning that Linda's husband, Will Warren, is the co-founder and CEO of DEX infrastructure provider 0x Labs, and they support each other in their respective careers. She 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 PANews' incomplete statistics, in the past three years, its investments have mainly focused on DeFi, social, infrastructure, and tool verticals. Its DeFi investments include DeFi derivatives protocol Perennial, fixed-rate lending protocol Element Finance, on-chain structured product Ribbon Finance, 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 tool startups include interoperability protocol Connext Labs, L2 privacy solution Aztec Network, DAO voting platform Snapshot Labs, and DAO management tool company Parcel. In addition, Scalar has also invested in Web3 music company Sound, South African startup NFTfi, and the recently disclosed Web3 marketing company DeForm.

Cryptocurrency Funds Face Tough Times as U.S. Regulations Tighten

Under Linda Xie's tweet, investors from prominent cryptocurrency VCs such as a16z, Paradigm, and Pantera left comments expressing their support, indicating her popularity in the cryptocurrency community. Currently, she has not explicitly stated her next direction, but investors have mentioned that they are welcome to contact her at any time and support her future projects.

Although the two co-founders did not disclose the reason for suspending Scalar Capital, given their experience and popularity, continuing to raise funds and operate a fund in the cryptocurrency community is not difficult. However, in reality, cryptocurrency funds are facing tough times in the bear market. Regulatory tightening, industry downturn, and the shift of market enthusiasm towards AI have increased the difficulty for institutions to invest and raise funds.

Jocy, founder of IOSG, stated after attending Token2049, "I attended an exclusive event hosted by the Medici family, with about 120 attendees, half of whom were VCs, and about 90% of the VCs were raising funds among these 60 people."

In recent reports by PANews, several well-known institutions have claimed to be in the process of or about to raise new funds. Paradigm recently stated that it will not give up on cryptocurrency investments 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 for its cryptocurrency fund. HashKey Capital is raising funds for its first secondary cryptocurrency market fund. These funds will undoubtedly inject energy into the next bull market, but while top-tier funds may find it relatively easier, mid-tier funds may not.

In Jocy's view, under U.S. regulatory pressure, fundraising for funds has become very difficult. They believe that Asian LPs will be more generous in supporting them due to their brand and influence. However, the reality is different from the bustling scene at the 2049 event. Most crypto LPs are tightening their belts due to the bear market, and traditional LPs 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, out of over 700 cryptocurrency funds globally, 97 have closed. The organization stated, "Most funds have positive returns, but in many cases, this is not enough to attract capital."

Previously, PANews also reported that 10T Holdings, a well-known cryptocurrency investment institution with three funds, has "run out of ammunition." All of its capital has been deployed, and it can only wait for the next bull market or further opening up of cryptocurrency institutions for IPOs to realize exits for its previous investments.

Perhaps, along with 10T, there are many more cryptocurrency funds waiting for the bull market.

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