After a significant downturn in the crypto market, it appears that in the first half of 2023, the venture investment market, much like the price of Bitcoin, has found its bottom. But unlike the BTC price, the recovery trend in fundraising has not been observed yet; the raised amount fell by 87% in Q2 2023 compared to Q2 2022.
A total of $5.1B was raised across 619 funding rounds in the first half of 2023. Improved market sentiment has not had a significant impact on fee growth. Historical data shows that the total fees figure often lags behind the Bitcoin price by several months.
Highlights
- Service, СeFi, and Infrastructure startups received the highest amount of funding.
- The largest crypto raise was by Stripe, which closed a $6.5B funding round in March
- Vitalik Buterin, Jack Dorsey, and Sam Altman were prominent investors in the funding rounds.
In the first half of the year, Blockchain Service emerged as the dominant category in the fundraising market, capturing a significant 38% of total investments. Interestingly, there has been a notable decline in venture capital’s interest in DeFi, which now accounts for only 9% of the overall funding.
Blockchain service projects are leading the way, largely due to the growing adoption of Web3 technologies. They serve as the main connection between users and blockchain, bridging the gap between web2 and web3 and making the experience of using decentralized networks more convenient. Among blockchain service projects raising money in 2023, Ledger, a crypto wallet developer, and EigenLayer, a liquid staking derivatives restocking platform, are noteworthy.
VCs continue to prioritize early-stage rounds, with pre-seed and seed rounds accumulating a total of over 1 billion USD in funding.
In contrast, in later stages such as Series A, B, C, and D, the number of successfully closed rounds tends to decline. Meanwhile, the average amount raised per round is significantly higher at later stages of fundraising.
However, with the expansion of the crypto market and the emergence of high-quality projects, we can anticipate a potential shift towards increased funding in post-seed rounds.
Trending Categories in Crypto FundraisingA detailed analysis of the category reveals that the position of DeFi projects in terms of fundraising is not as weak as it may appear. While DeFi projects are not leading in terms of fundraising, they are in second place in terms of the number of funding rounds.
In contrast, Blockchain Infrastructure projects have the opposite pattern. These projects are second in terms of fundraising per month, but they have one of the smallest numbers of funding rounds. Infrastructure projects often have the largest funding rounds, but they occur quite rarely.
Let's take a look at the most popular categories among the most active investors. The chart below not only displays the most active investors but also allows us to assess the prioritized sectors for each fund. Coinbase Ventures and Circle prioritize investing in DeFi, while Polygon Fund and a16z Crypto prioritize GameFi.Most of the most active investors primarily invest in blockchain service and DeFi projects. However, for some, GameFi is an important area of focus, as they are quick to adopt and allow them to build an entertainment ecosystem, such as Animoca Brands.
Notable Funding Rounds of 2023
Currently, most projects are raising small amounts. Nearly half of all rounds with a known raised amount were in the range of $1 million to $5 million.
Investors are still hesitant to invest significant amounts in crypto startups, as evidenced by the top 10 largest fundraising rounds of the first half of 2023. The top three projects in terms of fundraising are only partially integrated into web3 and blockchain, relying mostly on web2 technologies.
Apart from Stripe, other notable investments in the top funding rounds include a digital exchange eToro, and character.ai, backed by prominent investors such as a16z and Elad Gil. These strategic investments highlight the diverse range of opportunities and the growing interest in innovative platforms and AI-driven technologies within the investment landscape.
Among the key figures in the crypto during the first half of the year were notable individuals such as Vitalik Buterin and Jack Dorsey. These influential figures have actively participated in funding rounds, demonstrating their belief in the potential of blockchain and cryptocurrency. Additionally, seasoned venture capitalists like Tim Draper have also joined the fray, making strategic investments in projects like EtherMail.
The Bottom LineThe first half of 2022 witnessed a weak outcome in raising funds from private investors in cryptocurrency startups. This is evident from the significant drop in raises during Q2, reaching the lowest level of funds raised since the end of 2020. Many investors who were highly active in 2021-2022 have now considerably reduced their investments in Web3.
However, can we expect a trend reversal? The answer is unequivocal: yes. With the emergence of new trends, further market recovery, and better regulation standards, many investors will return to the market, and we should also expect an influx of new investors.
As the year progresses, it will be fascinating to observe how these developments shape the future of the industry and pave the way for new innovations and collaborations.
To keep up-to-date on crypto VC deals you can visit the funding rounds page on CryptoRank: https://cryptorank.io/funding-rounds.
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