As crypto comes roaring back, Khosla Ventures’ Keith Rabois is making a bet on Bitcoin lending

If you haven’t heard, crypto is back. Bitcoin topped $100,000, President-elect Donald Trump named podcast host and occasional VC David Sacks as crypto and AI czar, and Hawk Tuah girl launched a meme coin that promptly rug-pulled its somehow credulous buyers. And perhaps most telling of all: Generalist venture funds are returning to blockchain.

Lava, a New York-based Bitcoin lending platform, has raised $10 million for its Series A from Khosla Ventures and Founders Fund, Term Sheet can exclusively report. While Founders Fund has been cautiously active in the crypto space through its partner Joey Krug, who joined from the blockchain fund Pantera in 2023, Khosla Ventures has mostly stayed away after helping plow $100 million into Sam Altman’s eyeball-scanning Worldcoin in 2022.

I asked Keith Rabois, who returned to Khosla Ventures from Founders Fund early this year, whether the latest bet means he’s leaping back into crypto. He demurred. “This is a very specific opportunity and a specific entrepreneur,” Rabois told me.

So what does Lava do? Imagine you’re sitting on a pile of Bitcoin, but you also want to buy a new seafront property in Miami . Real estate brokers won’t exactly accept crypto as payment, but you also don’t want to part ways with your Bitcoin as prices rip. That’s where Lava comes in, allowing users to borrow cash against their holdings. “Our tagline is save in Bitcoin, spend in dollars,” Lava’s founder and CEO Shehzan Maredia told me.

Crypto lending has a fraught history, to put it lightly. Similar services such as Genesis, BlockFi, and Celsius all went bankrupt in 2022 and early 2023, contributing to the sector’s collapse and the demise of FTX. One of the issues was rehypothecation—in short, the practice of taking one client’s collateral and doling it out to other ones—and new crypto businesses have popped up that pledge not to engage in the risky behavior, including Arch , which raised $5 million earlier this year.

But Maredia and Rabois argue that crypto lenders should go a step further and allow their users to “self-custody” their assets, meaning the lender never holds the Bitcoin on its clients’ behalf. It’s a concept core to the Bitcoin ethos—not allowing intermediaries, from banks to exchanges, to control your coins—but is rarely practiced. Rabois described Lava’s ability to lend while allowing users to self-custody securely as a “technical breakthrough.”

The service is still pricey, with Lava making its money off an origination fee as well as an interest rate of around 7.5%, but Maredia argued that his approach is more “anti-fragile” than his competitors. “Users are very aware of the risks of what went down the last cycle and want something better,” he told me. Lava plans to build out other services, including payments and the ability to buy Bitcoin. And unlike many other crypto startups, he doesn’t plan to launch a token (the Series A is an all-equity round).