Venture capital exec says ‘lack of innovation’ drives funding away from crypto

Decline in venture capital funding for crypto

Venture capital funding for the crypto space has seen a significant decline in 2023. In the first quarter, around $2.6 billion worth of crypto VC deals were made. In Q2, the space saw around $2.1 billion across 292 funding rounds, marking one of the worst performances in terms of crypto fundraising compared to the previous year.

Lack of new innovations driving venture capital firms away

In an interview with Cointelegraph, Tony Cheng, a partner at the crypto investment firm Foresight Ventures, addressed the current VC funding situation. Cheng believes that the lack of new innovations in the crypto space may be driving venture capital firms away. He suggests that most of the popular narratives in the industry, such as layer-2 solutions, zero-knowledge, and nonfungible tokens (NFTs), have lost their charm due to low trading volume on exchanges and in decentralized finance (DeFi).

Cheng also mentions that the limited market activity and number of users in the space have hindered significant traction. However, he remains optimistic that things can turn around when there is a better macro landscape and renewed excitement about the next crypto cycle.

Surviving the bear market

When asked about the funding offers founders may receive in the current market, Cheng advises them to prioritize survival. He suggests that if founders lack capital and runway to sustain their businesses, they should take as much funding as they can get because the availability of such capital might dwindle in the coming months. Cheng emphasizes the importance of self-preservation for founders, stating that all the work done in the past few years could be wasted if they don't stay in the game.

Cheng further adds that in the bear market context, adopting a "growth at all cost" approach is not sensible. Instead, companies should focus on becoming profitable. Surviving the downturn is the top priority, according to Cheng.