As Crypto Winter continues and macro volatility continues, global funding for Web3 and blockchain companies is down 50% from the previous quarter, according to data from Crunchbase.
After venture capital firms poured money into crypto startups during the 2021 boom — peaking at $9.8 billion in the fourth quarter — funding fell along with the prices of notable cryptocurrencies like bitcoin and ether. The recent drop, from $6.6 billion in the second quarter to $3.3 billion in the third quarter, is the largest quarterly drop in venture capital funding over the past two years.
Even as markets dip — total global venture capital funding fell from $121.8 billion in the second quarter to $80.1 billion, or about 34% — crypto startups are feeling the heat even more. Confidence in the industry appears to have plummeted following the collapse of high-profile projects such as algorithmic stablecoin TerraUSD and crypto lender Celsius.
“Web3 has taken a bit of a hit, just because people are becoming more vulnerable to risk in these times of uncertainty,” said Chris Mitenko, Crunchbase’s Enterprise Technology Correspondent.
But it seems that a few of the major venture capital firms focused on cryptocurrency have not shied away from it. Haun Ventures, founded by former federal prosecutor Katie Haun, launched in March for $1.5 billion. Sam Rosenblum, partner at Haun Ventures, said the company’s funding posting has not changed, with one exception. While many Web3 investors were eyeing consumer-facing companies during the bull market, Haun Ventures is now focusing more on infrastructure-focused startups.
“We’ve allocated more bandwidth to things early on and less to later things, and it’s going to remain dynamic, based on what’s happening in the market,” he said. luck.
In August, Haun Ventures backed a $24 million Series A round for Thirdweb, a technology platform that helps companies build Web 3 infrastructure.
Over the past month, many of the largest crypto financing deals have been for infrastructure and security companies. These include crypto-fraud prevention service Sardine, which has raised $51 million, and shared security company Hyperlane, which has raised $18.5 million.
Another dynamic factor is the speed with which trades take place. Before the economic downturn, venture capital was racing to participate in the rounds.
“Now we don’t feel we have to compete for this vector as much,” Rosenblum said. “Big deals are still being done…but at a more reasonable pace.”
According to Crunchbase, the largest crypto increase in the third quarter was by Mysten Labs, which closed a $300 million Series B in September to build a proof of stake, Layer-1 blockchain to challenge Ethereum and Solana.
As the latest global adoption index from crypto intelligence firm Chainalysis showed, emerging markets are driving growth. Kate Kewell is an early stage emerging markets investor based in Mexico City in Rallycap and founder of khoraHe said emerging markets are better prepared to weather a macroeconomic slowdown.
Singapore, a growing hub for cryptocurrency startups despite regulatory uncertainty, saw two major Web3 funding rounds this quarter: the bug-bounty platform immunitywhich raised $24 million in September, and the predictive platform for risk and intelligence in crypto Merkel flagwhich extended its Series A tour to $24 million in August.
“Many founders are used to individual risks and political, economic and social instability,” Kewell said. luck. “A unique opportunity emerges for the impact and potential of Web3 in economies struggling with deteriorating monetary regimes, major policy shifts, and economic opportunity.”
She said that after the boom of 2021 and the depression of 2022, 2023 is likely to be a crucial year for startups.
“Building a company is a marathon, not a sprint,” Kewell said.
Even as the prices of the most prominent cryptocurrencies continue to fluctuate, Rosenblum said that short-term volatility will not affect the strategy of most venture capitalists, which are diversified in the crypto space.
“We consider it the natural cycle of cryptocurrency,” he said. luck. “I’ll bet a little bit on the fact that things like Ether and Bitcoin will survive the volatility in [Crypto] Winter is fine, as it always has been.”
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