Lightspeed Venture Partners is considering setting up a new cryptocurrency project that would be the first of its kind for a top-tier venture firm: An earmarked pool of cash within a bigger fund to be spent solely on crypto investments.

Lightspeed, the firm behind hits like Snap, has been exploring three different options as part of an effort led by partner Aaron Batalion to drastically scale up the firm’s activity in the space, Recode has learned.

The most probable outcome, sources say, is that Lightspeed would carve out some of its newly raised fund and reserve some of the cash exclusively for crypto deals, rather than creating an entirely separate fund.

The situation, however, has been fluid, and our sources say final plans have not yet been determined.

Lightspeed’s internal deliberations are just one example of the struggle that venture capital firms face: Nearly every top-tier firm in Silicon Valley is deliberating how exactly they should be set up in order to invest in crypto, which some enthusiasts believe is the next wave of innovation.

But skeptics worry about creating a separate fund — a legally-distinct, independent structure — if the sector melts under regulatory risk or if it isn’t as financially fruitful as its evangelists hoped when raising money.

Firms along Sand Hill Road are internally divided about how to proceed.

A Lightspeed spokesperson said in a statement: “We’ve been making many investments in the fintech space over the past several years, including Affirm, Blockchain, Basis and more that are unannounced. Blockchain-based technologies are a huge area of interest for us and we have partners focused on this. In terms of a dedicated crypto fund, we have nothing to announce at this time.”

Here are the three options Lightspeed is considering:

A carve-out: Lightspeed partners have made it very clear to industry players that they intend to quickly ramp up their investing in blockchain-related startups, and the firm is trying to figure out a way to structure itself such that it reflects the new marketing.

One way to get that message out would be to carve out some of their existing money specifically for crypto investments and publicize it — similar to how Kleiner Perkins Caufield & Byers set up the iFund to invest in Apple-related projects and Accel set up Big Data Funds to invest in aligned startups. Lightspeed is leaning toward this option for crypto, according to one person close to the firm.

A new fund: Lightspeed in recent months has seriously considered starting an entirely new, separate fund that would focus exclusively on crypto investments, according to people close to the firm, similar to Andreessen Horowitz’s recently unveiled offering. Sources say Lightspeed is now leaning away from this option — at least for now.

But these funds are attractive in general because they allow venture capitalists to court a base of investors, or limited partners, who are comfortable with the risk of speculating on the actual currencies themselves (which many aren’t). Plus, most standard funds consider themselves legally limited to hold no more than 20 percent of their money in assets that are liquid securities like cryptocurrencies. That’s not an issue in a crypto fund.

A spinout: It’s unclear, though, if Batalion wants to wait for that, according to people who are close to him. Batalion has also told people recently that he is willing to step down from Lightspeed as a general partner in the existing funds in order to launch a crypto project of his own, which wouldn’t carry the Lightspeed brand. Lightspeed has told Batalion that it would financially back any new entity, according to one person close to him.

This would be a fairly traditional move: Venture capitalists frequently start their own fund after a few years at a major firm so they can have more control over the money they’ve raised. But his departure as a general partner might still be a few years away, if it happens at all.

The firm disclosed in a filing in March that it is raising up to $1.8 billion for its twelfth venture fund along with a select fund for later-stage opportunities. But it has not yet formally announced the fundraise.

Batalion joined Lightspeed in 2015 after co-founding LivingSocial, which Lightspeed backed. He is also involved with non-crypto companies, leading investments into companies like aircraft company R2Air.

Batalion is one of several investors at Lightspeed — including Adam Goldberg — interested in digital currencies, though he and the firm have not been as active as some competitors over the last few years. Under the guidance of Jeremy Liew, Lightspeed was ahead of the curve and one of the leading investors in cryptocurrencies about five years ago. Observers say, though, that the pace of their deals in the space has waned.

Still, the firm though is participating in the initial coin offering at Telegram, sources say, and last month backed the initial coin offering at Basis, which raised $133 million.

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