According to Crunchbase data, VC funding at Web3 startups dropped 82% year-on-year, from $9.1 billion in Q1 2022 to $1.7 billion in Q1 2023.
Crunchbase News highlighted the data in an April 20 report, noting that the $1.7 billion figure for the first quarter of 2023 also marks the lowest amount of funding for Web3 startups since the $1.1 billion recorded in the fourth. quarter of 2020, a time when “a lot of people had never even heard of Web3.”
In this context, Web3 startups are defined as early-stage companies that work directly with cryptocurrency or blockchain technology (or both).
Deal flow, i.e. the total number of deals between VCs and Web3 startups, also saw a significant decline, with 333 deals recorded in Q1 2023 representing a year-on-year decline of around 33 %.
Furthermore, the report highlights that the number of large funding rounds for Web3 start-ups reaching nine figures has almost completely dried up over the past year.
“In the first quarter of 2022, VC-backed startups raised 29 rounds of more than $100 million. That included massive raises of $400 million or more by ConsenSys and Polygon Technology, as well as – of course – FTX and its US subsidiary FTX US,” the report read, adding that:
“In the most recent quarter, only two rounds reached nine figures, as private equity funds have reined in their investment in this sector.”
Although the business information platform acknowledges that interest in Web3 start-ups has cooled of late, it also notes that “venture funding is down in almost all sectors.”
The current state of venture capital in six charts:
Source: Crunchbase pic.twitter.com/r2WwPC8cRD
— Nate O’Brien (@nateobrienn) April 19, 2023
Crunchbase attributed much of Web3’s funding decline to investors opting for a risk-free approach in recent months by looking for opportunities in “industries they know best – like cybersecurity or SaaS, not the promise of the next iteration of the Internet [Web3].”
“To be sure, the industry is still reeling from the dramatic collapse of FTX, as well as several other cryptocurrency lenders, and even some of the banking problems that rocked the broader economy.”
“However, there are some positive signs,” the report added, as it highlighted significant price rallies for Bitcoin (BTC), and Ether (ETH) since the beginning of the year.
“Only time will tell if this is enough to attract more venture capitalists again,” the report concludes.
In a separate report published by Galaxy Research on April 11, the firm analyzed the broadest amount of VC investment across all cryptocurrencies in the last 12 months.
In a similar vein to the recent trend in Web3 funding, the report indicated that the $2.4 billion invested in all cryptocurrencies in the first quarter of 2023 was an 80% drop from the $13 billion reported in the first quarter of 2023. first quarter of 2022.
Notably, however, while equity investment plunged significantly YoY, the report noted showed that the number of cryptocurrency VC deals had increased by around 20% in Q1 2023 compared to Q4 2022.
“Historically, business activity has followed crypto prices very closely. It will be interesting to see if VC cryptocurrency activity can pick up if prices remain resilient or constructive this year. Lots of macro and monetary headwinds though wrote Alex Thorn, head of research for the entire Galaxy firm.
CRYPTO VC IN STARES INTO THE ABYSS
Q1 saw the lowest crypto VC activity in 2 years with $2.4bn invested across 439 deals.
investment is down, valuations are down, VC funds are down. learn why, view all the data, and learn what the future holds pic.twitter.com/b3JKPjNfzz
— Alex Thorn (@intangiblecoins) April 11, 2023
INVESTMENT IN CRYPTOCURRENCIES LOOKS INTO THE ABYSS
The first quarter saw the lowest cryptocurrency venture capital activity in the last two years, with $2.4 billion invested in 439 deals.
investment is down, valuations are down, and VC fundraisings are down. Find out why, check out all the facts and learn what the future holds for you.
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