As cryptocurrency markets face turbulence, venture capital investments in crypto startups have seen a decline, mirroring trends from the end of 2020. The number of companies that went bankrupt or made losses, such as Three Arrows Capital, is also thought to affect the figures.
A recent study on October 5 by blockchain research agency, Messari, reveals that crypto startups amassed just $2.1 billion from 297 deals in Q3 2023. This marks a 36% decrease from Q2 and a stark 70% drop from the same period in 2022.
Early-stage ventures dominated the funding scene. Seed funding led the categories, securing $488 million across 98 deals. Researchers have observed a notable transition in investments, with a drift towards early-stage projects and away from mature, later-stage ones in recent years. In fact, only a mere 1.4% of deals engaged Series B or subsequent stages.
On a brighter note, strategic financing deals have witnessed a significant surge, jumping from constituting 0.2% of the overall deal portion in Q4 2021 to a substantial 22% currently. Among these, a standout was a hefty $200 million infusion into UAE’s Islamic Coin by family-owned fund, Alpha Blue Ocean’s ABO Digital.
“Challenging market dynamics are pushing projects to secure interim bridge funding or consider mergers with bigger ventures.”-Messari
In Spite Of the Pressure, The Majority Are American Venture Capital Companies
Despite looming regulatory ambiguities, a dominant 54% of venture capital contributors hailed from the U.S., surpassing global counterparts combined. There’s also a clear pivot in investment interests from user-centric crypto apps to foundational blockchain systems. The latter has consistently eclipsed the former in financial backing over recent quarters.
Yet, researchers caution this shift might be ephemeral. As they noted, “The long-term viability of investments in blockchain infrastructures hinges on the success of consumer-focused crypto platforms; otherwise, anticipated returns may fall short.”