Venture capital (VC) funding for Web3 startups fell from $9.1 billion in Q1 2022 to $1.7 billion in Q1 2023, up 82% year-over-year (YoY), according to Crunchbase data. % decreased.
Crunchbase News data The April 20 report notes that the $1.7 billion figure for Q1 2023 is Web3’s lowest start-up capital since $1.1 billion spent in Q4 2020.
In this context, Web3 startups are defined as early stage companies working directly with cryptography and/or blockchain technology.
Deal flow, or total number of deals between VCs and Web3 startups, also dropped significantly, with 333 deals recorded in Q1 2023, down about 33% year-on-year.
Additionally, the report highlights that the number of large Web3 startup funding rounds, reaching nine figures, has almost completely dried up over the past year.
“In the first quarter of 2022, VC-backed startups raised over $100 million in 29 rounds, including massive funding of over $400 million by ConsenSys and Polygon Technology, and of course FTX and its U.S. It includes our affiliate, FTX US,” the report said, adding:
“In the most recent quarter, only two rounds hit the nine-figure mark as VCs put the brakes on heavy investment in the space.”
While the business intelligence platform acknowledged that interest in Web3 startups has cooled recently, it also stressed that “venture funding is declining in nearly every sector.”
Six charts show the state of venture capital.
Source: Crunchbase pic.twitter.com/r2WwPC8cRD
— Nate O’Brien (@nateobrienn) April 19, 2023
Crunchbase said much of Web3’s decline in funding was due to investors risk-off approach Over the past few months, by looking for opportunities in “the industries they know best,” such as cybersecurity and SaaS, rather than the promise of the next iteration of the Internet [Web3]”
“Undoubtedly, the industry is still reeling from the dramatic collapse of FTX, several other crypto lenders, and some of the banking issues that have rocked the economy at large.”
“However, there are some positive signs,” the report added, highlighting significant price gains for Bitcoin (BTC) and Ether (ETH) since the beginning of the year.
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“Time will tell if that is enough to bring more venture capital back into the space,” the report concludes.
In a separate report published by Galaxy Research on April 11, the company looked at the broader amount of VC investment in all cryptocurrency companies over the past 12 months.
Similar to recent Web3 funding trends, the report found that $2.4 billion invested in all cryptocurrency companies in Q1 2023 is down 80% from the $13 billion recorded in Q1 2022. showed that it did
However, while capex plummeted significantly year-on-year, the report notes that the number of VC crypto trades increased by about 20% in Q1 2023 compared to Q4 2022.
“Historically, venture activity has tracked cryptocurrency prices fairly closely. If prices remain resilient or constructive this year, we will see if crypto VC activity rebounds. It’s interesting to see, but there are a number of macro and financial headwinds,” writes Alex Thorne, Galaxy’s head of corporate-wide research.
Crypto VC staring into the abyss
The first quarter saw the lowest crypto VC activity in two years with $2.4 billion invested in 439 deals.
Less investment, less valuation, less VC fundraising.Learn why, view all your data and learn what the future holds pic.twitter.com/b3JKPjNfzz
— Alex Thorn (@intangiblecoins) April 11, 2023
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