The first thing to dry up during a crypto bear market is venture capital investments. This appears to be occurring at the moment as market momentum remains subdued and regulatory pressure on the industry intensifies.
Venture capital crypto investments have been pretty dismal in 2023 compared to previous years. However, there are still some web3 startups managing to raise funds from the dwindling pot.
Crypto Venture Capital Declines
Crypto and web3 startups raised just $2.34 billion across 382 deals in Q2 2023, according to Pitchbook data.
This makes it the fifth quarter of declines since the first three months of 2022, when $12.14 billion was invested.
On July 11, Bankless reported that data through mid-May “indicates crypto VC fundraising is down by 98% from the year prior.”
“Fundraising is dismal, but hope is not lost,” it noted before adding that projects that deserve venture capital can still access it. “VCs have plenty of dry powder remaining to invest!”
Data from The Block paints a slightly different picture, but the outlook is the same —a dismal year for crypto VC funding. The data suggests that funding in 2023 is down 64% from the previous year.
Financial services, NFTs, gaming, DeFi, trading, and analytics firms have seen the largest investment decline.
Nevertheless, funds are still flowing into crypto and web3 projects. According to FlagshipFYI, 50 crypto projects raised capital from venture capital firms in June, a slight decrease compared to May.
The total value raised was $344 million, with a focus on pre-seed, seed rounds, and Series A funding, it added.
VC Funding in June
According to industry analysts, several crypto companies managed to raise big bucks in June despite the overall slump.
AI platform for enterprise Cohere raised $270 million in a Series C in early June. Sharia-compliant Islamic Coin secured $200 million in funding from ABO Digital, and Celestial AI raised $100 million to develop optical interconnect technology.
VC giant Andreessen Horowitz was busy last month with a16z pouring funding into Gensyn and Mythical Games.
Other AI and web3 projects raising money recently include Thunes, One Trading, Wow Earn, and Galaxy Finance.
One clear trend is that anything to do with artificial intelligence is currently in the sights of VC companies. A new crypto bull run next year may change that as crypto and web3 become the investment of choice again.
However, too much VC influence over crypto projects has been criticized by decentralization advocates.
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