Solana-Focused Fund Raises $60 Million With Promise Of Hackathon Insight

A venture-capital fund that seeks to profit from the Solana Foundation’s recently outsourced engineering and product-design competitions has raised $60 million that could help the blockchain attract new developers. The fund is run by Colosseum, a company that took over Solana’s hackathon program and will make early-stage investments in select winners of the six-week competitions run several times per year.

Solana only has about 20% the number of developers as rival Ethereum working on projects based on their respective blockchains, venture-capital firm Electric Capital estimates. The new approach by Solana could help narrow that gap by offering investors the inside track on early-stage funding of promising companies.

“With the model that we’ve implemented, we can really be at the earliest stages of working with these teams and taking on the risk of teams building at the application layer,” says Clay Robbins, co-founder of Colosseum. “It’s important for extending crypto beyond the insular set of users that exists today.” It helps that Matty Taylor, who ran the hackathon program for Solana, is a Colosseum co-founder, along with former Stripe software engineer Nate Levine and former Slow Ventures Principal Clay Robbins.

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The fund, known as Fund I, will be making pre-seed investments in select Solana-based projects that have been declared winners of Colosseum’s hackathon program, in which engineers compete to create an ecosystem project, and have entered a follow-on five-week accelerator program, wherein founders begin solidifying product-market fit. The additional capital is meant to help grow on-chain projects in categories including gaming, decentralized finance and decentralized physical infrastructure. The combined programming and investments aim to lend engineers an opportunity to not only flaunt their abilities, but also expand the Solana ecosystem by cultivating early-stage projects during a funding drought.

The Solana Foundation is one of the fund’s largest limited partners, with participation from other institutional investors, including some who are new to cryptocurrency, according to Robbins. Colosseum declined to list other partners. Though the company is not necessarily captive to investing in the Solana ecosystem, the initial fund is dedicated to that blockchain. “Colosseum’s model of integrating online hackathons with an accelerator and fund can shepherd the development, application, and growth of any early stage technology,” says Robbins.

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Solana tokens are currently trading at $127.60, down 22.92% in the past month. It is the fifth-largest crypto chain, with a market value of about $58 billion, according to CoinGecko The chain was favored by former FTX CEO Sam Bankman-Fried, and selling his investment in the token generated up to $1.9 billion for the bankruptcy estate.

The Solana Foundation has organized the preeminent hackathons for the Solana ecosystem the previous three years, giving the winners prizes in amounts ranging from $10,000 to $50,000 of usdc. Colosseum has already one hackathon, which ran in March and April, drawing 8,000 developers in almost 100 countries, with more than 1,000 projects submitted.

Though venture-capital interest in cryptocurrency has shrunk significantly from the 2021 and early 2022 bull market, where investments reached over $10 billion, deals rose 40.3% in the first quarter of this year, according to Pitchbook. Fundraising for the quarter totaled $2.4 billion across 518 transactions, despite global venture-capital investments falling nearly to their lowest point in five years.

Robbins says investment in the application layer has been relatively “anemic,” contending that Colosseum is taking the contrarian tack of underwriting programs “that can actually drive demand for the infrastructure.”

Hackathons and accelerator programs are a useful tool to sponsor blockchain ecosystem development in a sector where most engineers are not employees of a firm and are driven by cash prizes. According to Colosseum, 8,000 developers in nearly 100 countries participated in its first hackathon that ran from March 4th to April 8th, submitting over 1,000 projects.

Combined with previous three years of hackathons run by the Solana foundation directly, over 60,000 people have competed, with their projects raising over $600 million, says Colosseum. Winners of Colosseum’s first hackathon this year included a new digital currency mined via a proof-of-work algorithm called Ore, a marketplace for trading tweets called Banger.lol, and a transaction capacity and yield-boosting Solana client. Winners received between $10,000 and $50,000 in usdc.

Founders who participated in the first accelerator cohort will present their projects at Colosseum’s first demo day on this Thursday, June 27.