Crypto VC Funding Hits 3-Year Lows as Market Rout Continues

Startup funding in the crypto industry plunges to Q4 2020 levels

Amid the ongoing cryptocurrency bear market, funding for startups in the crypto industry has dropped to levels not seen since Q4 of 2020, according to blockchain analytics firm Messari. In Q3 of 2023, a total of $2.1 billion was raised across 297 deals, marking a 36% decrease from the previous quarter and a staggering 70% decrease from Q3 of 2022.

Shift in funding towards early-stage projects

Seed funding was the largest category of fundraising, with $488 million raised over 98 deals. Analysts noted a significant shift away from later-stage projects towards early-stage projects in the past three years. Only a small fraction of deals (less than 1.4%) involved companies at the Series B round or later.

Harsh market conditions lead to short-term bridge rounds

The report also revealed that harsh market conditions are forcing crypto projects to raise short-term bridge rounds or seek acquisition by larger projects. Strategic financing rounds, which previously made up only 0.2% of total deal share in Q4 of 2021, now account for over 22% of funding rounds.

Regulatory uncertainty does not deter US investors

Despite regulatory uncertainty, 54% of all active venture capital investors in the crypto industry were from the US, outnumbering the rest of the world combined. Furthermore, investors' focus has shifted from user-facing applications to blockchain infrastructure, which has consistently outperformed in securing funding over the past three months. However, there are concerns that this trend may not last as investors realize the importance of successful user-facing crypto applications for generating desired returns.

What else is making headlines?

In other news, popular magazine Minecraft has banned Bitcoin P2E transactions, and excitement is building for the release of the highly anticipated iPhone 15. Additionally, the world of crypto gaming is making waves in the industry.