According to Crunchbase data, VC funding into Web3 startups tanked 82% year-over-year (YoY), declining from $9.1 billion in Q1 2022 to $1.7 billion in the first quarter of 2023.
Crunchbase News highlighted the data in an April 20 report, noting that the $1.7 billion figure for Q1 2023 also marks the lowest amount of Web3 seed funding since the $1.1 billion posted in Q4 2020, a time in which โa lot of people had never heard of Web3โ.
In this context, Web3 startups are defined as early-stage companies that work directly with crypto or blockchain technology (or both).
Deal flow, or the number of total deals between VC firms and Web3 startups, also saw a significant drop with 333 deals registered in Q1 2023, marking a year-over-year decline of about 33 %.
In addition, the report highlights that the number of large funding rounds for Web3 startups reaching nine figures has almost completely dried up over the past year.
โIn the first quarter of 2022, VC-backed startups raised 29 rounds of more than $100 million. That included massive raises of $400 million or more by ConsenSys and Polygon Technology, as well as, of course, FTX and its US affiliate FTX US,โ the report says, adding that:
"In the most recently completed quarter, only two rounds reached the nine-figure mark, as VCs reined in their spending in the space."
while the business information platform While acknowledging that interest in Web3 startups has cooled of late, he also emphasized that "venture funding has declined in almost all sectors."
The current state of venture capital in six graphs:
Source: Crunchbase pic.twitter.com/r2WwPC8cRDโ Nate O'Brien (@nateobrienn) April 19, 2023
Crunchbase attributed much of Web3's funding decline to investors opting for a risk aversion approach in recent months looking for opportunities in "industries they know best, like cybersecurity or SaaS, not the promise of the next iteration of the Internet [Web3].โ
โTo be sure, the industry is still reeling from the dramatic collapse of FTX, as well as several other cryptocurrency lenders, and even from some of the banking problems that rocked the broader economy.โ
โHowever, there are some positive signs,โ the report added, as it highlighted the significant price rallies Bitcoin (BTC) and ether (ETH) since the beginning of the year.
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โWhether that is enough to bring more venture dollars into the space, only time will tell,โ the report concludes.
In another report published by Galaxy Research On April 11, the firm analyzed the broadest amount of VC investment across all cryptocurrency companies over the past 12 months.
In a similar vein to the recent trend in Web3 funding, the report indicated that the $2.4 billion invested across all crypto companies in the first quarter of 2023 marked an 80% decrease from the $13 billion recorded in the first quarter of 2023. first quarter of 2022.
Notably, though, while equity investment plummeted significantly year-over-year, the report noted that the number of VC crypto deals had risen around 20% in Q1 2023 compared to Q4 2023. 2022.
โHistorically, risk activity has closely followed crypto asset prices. It will be interesting to see if crypto VC activity can pick up if prices remain resilient or constructive this year. Lots of macro and monetary headwinds though,โ wrote Alex Thorn, Galaxy's head of company-wide research.
CRYPTO VC IN LOOKS INTO THE ABYSS
The first quarter saw the lowest crypto VC activity in 2 years with $2.4 billion invested in 439 deals.
investment is down, valuations are down, VC fundraisings are down. find out why, see all the data and learn what the future holds pic.twitter.com/b3JKPjNfzz
โ Alex Thorn (@intangiblecoins) April 11, 2023
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