Crypto Startups Witness Dramatic Funding Slump Amid Market Downturn
Summary:
Crypto startups saw a significant drop in funding, harking back to Q4 2020 levels, amid a downward trend in the cryptocurrency market. According to Messari, a blockchain analytics firm, these startups raised only $2.1 billion in Q3 2023, marking a 36% decline from the previous quarter. Seed funding emerged as the leading fundraising category, while strategic financing rounds have seen a sharp rise. The analysis further reveals a shift in investor focus from user-facing applications to blockchain infrastructure.
Crypto startups have witnessed a slump in funding, returning to the lowest rates seen in Q4 2020. This comes in the backdrop of the unfavourable performance of the cryptocurrency market. Data analysis from blockchain firm, Messari, sheds light on the fact that just $2.1 billion was raised from 297 deals in Q3 2023, a sharp 36% drop from the preceding quarter and nearly a 70% fall from Q3 2022. Seed funding emerged as the principal category for raising funds, raking in $488 million from a total of 98 deals. Analysts have highlighted a substantial shift in deal counts over the past three years, leaning more towards early-stage projects and away from later-stage projects. Only a meagre 1.4% of the deals included companies at the Series B round or further. It has been noticed that Crypto VC funding has been steadily receding since Q2 2022. However, strategic financing rounds have seen a steep rise from a minuscule 0.2% of total deal share in Q4 2021 to a staggering 22% at present. Alpha Blue Ocean's ABO Digital made the biggest private equity round of the quarter with a $200 million investment in UAE-based Islamic Coin. Messari points out that the tough market conditions have coerced projects to opt for short-term bridge rounds or to simply be acquired by bigger projects. Even amidst regulatory ambiguity, 54% of all active venture capital investors hailed from the U.S., a considerably larger percentage than the rest of the world put together. Investors' interests have shifted from user-facing applications to blockchain infrastructure in recent months, with the latter consistently trumping the former in terms of funding. Analysts, however, believe that this trend may be short-lived as more investors recognize the importance of successful user-facing crypto applications in order to secure their desired returns from infrastructure investments.
Published At
10/5/2023 3:36:49 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.