CryptoKitties Raised $12 Million to Expand Beyond Axiom Zen

CryptoKitties announced on March 20, 2018 that it had raised $12 million in venture financing, giving the Ethereum-based collectibles project substantial institutional backing only months after its public debut.

Andreessen Horowitz and Union Square Ventures led the investment. The project also identified participants including Digital Currency Group, Version One Ventures, CAA Ventures and several individual investors. Contemporaneous reports from TechCrunch and CoinDesk said the CryptoKitties team would separate from Vancouver-based venture studio Axiom Zen and continue as an independent company.

The financing mattered because it treated a consumer blockchain application as a venture-backed operating business rather than merely another token sale. Investors were financing a development team and its plans for a broader digital-collectibles platform. The announcement did not describe an initial coin offering, a new CryptoKitties token or a sale of the virtual cats themselves.

From experiment to funded company

CryptoKitties allowed users to acquire, breed and trade digital cats represented as unique objects on Ethereum. Unlike interchangeable units of ether or bitcoin, each cat carried its own combination of attributes. That design placed the application within the emerging market for non-fungible digital assets, then more commonly described as crypto-collectibles.

Version One Ventures, which confirmed its participation in the $12 million Series A on March 20, described each cat as a unique Ethereum object with a genome determining its appearance and traits. CoinDesk reported that the application used the emerging ERC-721 token design and had previously generated enough demand to congest Ethereum.

Those characteristics made CryptoKitties more than a conventional online game with a cryptocurrency payment option. The blockchain recorded control and transfers of the collectible itself. The application nevertheless still depended on company-operated software, artwork, interfaces and marketplace functions, so the financing did not make the entire product decentralized or eliminate execution risk.

What the investors were backing

The project’s own announcement offered a broad ambition: digital objects that players could retain and games capable of supporting economies shared by users and builders. It did not publish a detailed spending plan, revenue forecast, valuation or ownership table.

CoinDesk reported, based on an Axiom Zen representative, that the proceeds would primarily support a substantial expansion of the team. TechCrunch interpreted the longer-term opportunity as applying the same collectible model to additional games that could reach people unfamiliar with cryptocurrency. That was a contemporaneous interpretation of the opportunity, not a verified product roadmap or forecast of adoption.

The round also illustrated a notable financing choice during the 2018 token-fundraising boom. CryptoKitties obtained capital from established venture firms and angel investors instead of raising the reported $12 million by issuing a publicly traded project token. Equity financing did not remove the project’s commercial and technical risks, but it placed the investors behind a company responsible for building and operating products.

What was known on March 20

The verified event-day record established the financing amount, lead investors and participation of named funds and individuals. Multiple contemporaneous publications also reported the planned separation from Axiom Zen. The available announcement did not establish the new company’s valuation, the exact date on which the corporate separation became legally effective or binding commitments for future products.

No cryptocurrency price or trading-volume claim is attached to the financing. A private funding announcement cannot by itself demonstrate a causal move in ether, activity on Ethereum or demand for individual CryptoKitties.

Later context

Axiom Zen’s current corporate history identifies the independent company as Dapper Labs and dates its spinout to February 2018. That retrospective record clarifies the resulting organization, but it does not alter what the March 20 financing announcement disclosed or resolve the precise legal sequence of the separation.