Fresh off the hike, Haun, her crew, and a few limited partners who had tagged along returned to Haun Ventures’ sublet office in Menlo Park, where the team settled in among 70-odd assembled LPs and founders from Haun’s portfolio companies. Star dealmaker Sam Rosenblum pulled up a display of the Gartner Hype Cycle, long used to assess tech trends, to reassure attendees. The message: Troughs in the cycle are when real building takes place.

Crypto may go in cycles, but this was a far steeper trough than the investors had signed on for, exacerbated by the spectacular collapse of many of the crypto industry’s leading projects. As for Haun, who had hopped from a Supreme Court clerkship to an influential Justice Department stint to the top of the VC world, crypto’s implosion threatened the first serious setback to her meteoric career rise and carefully cultivated reputation.  

Threading the needle

The timing was awful. Launching a new crypto fund in the spring of 2022 was akin to starting a new movie theater chain right before the pandemic. In the space of a few months, an extravagant bull market—which saw Bitcoin hit $69,000—turned sour; high-profile projects like Terra collapsed; and the VC industry got battered by rising interest rates. Then came November, which saw industry leader FTX collapse in a massive fraud and U.S. regulators embark on the most ferocious crackdown in the history of the industry.

The upshot was that Haun had raised $1.5 billion—a hefty amount even for Silicon Valley VCs—but many of the best opportunities had dried up. In the course of raising the money, which was spread across a pair of funds, Haun had touted a deployment schedule of around two years, according to a fundraising document. But that timeline was now out the window. 

Venture capital funding of crypto projects fell to $2.3 billion in the second quarter of 2023, over a 70% decline from the same period in 2022, as many investors instead looked to the buzzier sector of A.I. The crypto venture playbook was being rewritten in real time. 

Some crypto firms are plowing through their dry powder all the same. Polychain Capital, for example, has already deployed most of its third fund, which it raised in 2022 and 2023. Although it has managed to raise $200 million for a fourth fund so far, other crypto VCs have not been so lucky. Capital raised by crypto VC firms is only around $2 billion so far in 2023, compared to over $22 billion throughout 2022. 

Haun Ventures has proceeded more cautiously and now plans to take around three years to spend its cash. As of mid-June, the firm had deployed around 30% of its capital in about two dozen positions, which includes stakes in publicly traded, liquid tokens. Those can include prominent cryptocurrencies such as Bitcoin and Ether, as well as smaller-cap tokens tied to projects that are often included as part of VC investments alongside traditional equity. Haun Ventures declined to name any it holds.

Over that time, the firm’s bets have been split almost evenly between digital tokens and traditional equity, although it has been emphasizing startup investments so far in 2023, according to partner Rosenblum. 

Haun Ventures has invested in the likes of Zora, an NFT creation platform, and thirdweb, a Web3 infrastructure platform. It has also invested in a $32 million extension to a Series B round for Aleo, a privacy-focused blockchain network, and provided backing for Artemis, a crypto data analytics platform, both of which Fortune is reporting for the first time. The firm plans to announce additional deals soon.

As is the case with other VC firms, Haun Ventures will flex its influence to help startups in its portfolio. When Aleo nearly lost banking access after the collapse of Silicon Valley Bank and First Republic, Haun served as a behind-the-scenes fixer, setting up introductions to other banks and deploying her staff to help answer policy questions.

Amid the regulatory quagmire in the U.S., Haun has also been looking for opportunities abroad. She recently returned from a trip to Japan, where she met with a member of parliament pushing for Web3 adoption. 

For now, any assessment of Haun Ventures’ returns is premature since—as the firm's own LPs acknowledge—it’s far too early to assess startups’ performance. What’s more, many LPs are giant investors—including the sovereign wealth fund of Saudi Arabia—taking a flier on crypto. “If this goes to zero, like, it's not going to crush our portfolio,” one Haun investor said.

While some may appreciate the firm’s relative caution, there will still be pressure for Haun Ventures to do something with its capital since the firm, like other venture funds, charges a management fee. The industry average for such fees is around 2%. Haun Ventures declined to comment on its fees.

Rosenblum acknowledged the firm is threading a needle with its pacing in the changing market: There are “two ways to get that wrong: One is going too fast,” he told Fortune. “And then the other is going too slow.” 

An unconventional VC

Haun faces the same challenges as other VCs trying to hone an investment strategy amid a black-swan event. But she also faces more—and possibly unfair—scrutiny as a woman in a male-dominated industry who has raised the largest first-time fund ever by a solo female founding partner.

At a venture capital dinner this spring, the topic of Haun’s background came up. One diner made the case that Haun may be an authority on regulation, but that she lacked a deep background in technology and deal-making. Haun's supporters, however, suggest this is immaterial.

“She’s not an engineer, she's not a tinkerer, and she's not a builder,” Fred Wilson, cofounder of Union Square Ventures, who has co-invested in deals with Haun, told Fortune. Instead, Wilson said, Haun offered her wealth of government experience—and her Rolodex.  

“She's one of the best networkers I've ever worked with,” Wilson said. “She can get meetings with anybody.”

Haun’s networking has helped her climb to the top ranks of the venture capital world—as has her ability to sell her own story. Although she’s known today as one of the first federal prosecutors to take on crypto, she was not part of the earliest cases, including the landmark operation to take down the dark web marketplace Silk Road. Instead, she headed up a follow-on case to take down rogue government agents who stole crypto from Silk Road, and later worked on investigations into the crypto giant Ripple and the massive hack of the early crypto exchange, Mt. Gox.

Haun would go on to parlay this experience into a Coinbase board seat, and later into a general partner position at the venture powerhouse Andreessen Horowitz, a role she held for four years, investing in top companies like NFT marketplace OpenSea. 

“Many storied investors have transitioned to venture from legal backgrounds,” said Rachael Horwitz, a spokesperson for Haun Ventures. “We think it’s self-evident that Katie is among the most experienced leaders and dealmakers in crypto.”

Some in law enforcement begrudge that her short stint in digital assets prosecution helped Haun attain wealth and fame, even as others who established the field didn’t reap the same benefits. Especially frustrating for some was an article that billed Haun as “D.C.’s top crypto cop”—a title she never held, nor has ever claimed to have held.

“It’s not like she slaved away for a decade, or for two decades, for three decades in the government—she did a couple of crypto cases,” said a person familiar. “I do give her credit for playing the game smarter and not harder.” 

One former law enforcement agent recalls an episode where a former DOJ prosecutor took to LinkedIn to call out media coverage they felt misrepresented Haun’s roles in the government. The agent, who spoke on the condition of anonymity, told Fortune that drama ensued, with Haun’s friends apparently pushing to take down the post. Soon after, it disappeared. 

Whether coverage overstated Haun’s accomplishments or not, the former agent said, Haun clearly benefited from her growing fame. “Her positioning herself in the greatest [and] in the best light possible, in terms of her career in the government, is where it kind of all started,” they said. 

Law enforcement is a world of ego and shrouded narratives, with agents only able to speak about cases under specific circumstances, and so professional bickering should be taken with a grain of salt. Other agents defended Haun, noting that she has never misstated her record. 

“There are definitely haters,” said Grant Rabenn, a former prosecutor at the DOJ and current director of financial crimes at Coinbase, who asserts that 99% of Haun’s detractors “didn’t have the vision that she had, or haven’t been as successful.” 

The VC world has a notoriously fraught relationship with the media. While many venture capitalists view themselves as iconoclasts, some are thin-skinned and lash out at negative coverage.

But unlike her onetime Andreessen Horowitz colleague Marc Andreessen, who's given to sparring with journalists on social media, or her partner at the firm’s crypto fund, Chris Dixon, who prefers to stay behind the scenes, Haun leaned into mainstream press engagements. She debated Paul Krugman, sat down with Ezra Klein, and appeared on the cover of Fortune, arguing that crypto and compliance could be compatible. In May 2022, two months after Haun's funds launched, she took the stage with Sam Bankman-Fried and Michael Lewis at the now-disgraced FTX founder’s infamous conference in the Bahamas.

After FTX’s collapse in November, however, Haun has largely avoided the media she once courted—save for an op-ed she penned for the Wall Street Journal in March 2023 and a short interview in December for a Bloomberg list—a decision her team attributed to a focus on deal-making and working with regulators. And while she sat for interviews for Fortune’s cover last year, Haun rebuffed multiple interview requests for this story. 

Horwitz told Fortune that the best use of the firm's time is prioritizing investing in companies.

‘They’re going to want to have a really tight story’ 

When venture capital firms host investors for “LP Days,” it is often a lavish affair. Mindful of the soured mood in crypto, Haun Ventures’ April gathering radiated a modest frugality: Peet's Coffee in a large dispenser and picnic box lunches from La Fromagerie. LPs, founders, and the Haun team all mingled on the outdoor patio. 

Brian Armstrong, the cofounder of Coinbase, where Haun got her start in the crypto industry after joining the board in 2017, made an appearance, delivering his standard stump speech about how he wanted his firm to remain an American company despite its existential battle with U.S. regulators. 

The LP Day presentation seems to have reassured investors for now, as none have publicly complained or asked to withdraw their money. This may be in part because of an investment Haun chose not to make: FTX, the notorious exchange run by Sam Bankman-Fried, whose parents taught Haun at Stanford Law School. Other funds, including famous names and crypto specialists, did choose to back the fraudster, leading to eye-popping losses: Sequoia Capital vaporized $200 million of its investors’ capital, while Paradigm reportedly marked its $290 million stake in FTX down to zero last year. 

After shutting out the media she once embraced, Haun’s crypto advocacy now occurs almost entirely behind closed doors. She courts lawmakers, hosting fundraisers and educational sessions for leading politicians, including Democratic New York Sen. Kirsten Gillibrand, and inviting founders like thirdweb’s Furqan Rydhan to extol the benefits of blockchain. 

With deals few and far between (as one LP put it, Haun Ventures is “not off to the races”), much of the firm’s focus seems to be on political advocacy. Chris Lehane, who once led Airbnb’s policy battles and is plugged into Democratic politics, said that he spends about a third of his time on crypto policy advocacy, including Coinbase’s new Global Advisory Council, which has a vague mandate to “strengthen our efforts with stakeholders” and “responsibly deploy crypto.”

It’s early days in Haun’s venture journey—and in her first funds' life cycle. Still, by choosing to stay largely behind the scenes, the former prosecutor has relinquished her title of public booster at a time when crypto is fighting for its survival. And even if her firm navigates the crisis, it’s unclear whether investors will want to continue making bets on the volatile sector.

“When they go back to raise a second fund, they’re going to want to have a really tight story around what they did and how they reacted to the changing market,” Union Square Ventures’ Wilson told Fortune. “Hopefully, they’re going to have some successes to talk about as well.”