The second quarter saw $2.34 billion in capital across 382 blockchain and cryptocurrency transactions.
Funding for cryptocurrency startups continues to be increasingly scarce. Venture capital flowing into the inds,tria fell for the fifth straight quarter since the first quarter of 2022 to $2,340 billion globally as investors hold onto their checkbooks fearing the risks of a tough regulatory stance and an economic downturn. uncertain.
The $2,340 billion second-quarter tab was raised in 382 deals, according to PitchBook data, but it's a sharp decline from the $12,140 billion peak the industry reached in Q2022 2023. The biggest increases during Q120 XNUMX were the $XNUMX million Series B round of LayerZero and the round Serie C of $115 million of WorldCoin.
"It's a numbers game," said Lyia Chiu, Ava Labs' vice president of business development. In general, investors see lower valuations, so they're writing "smaller checks."
This decline in capital deployment could be attributed to regulatory headwinds in the US, which has tipped a large number of crypto-related deal flows in the second quarter to structure like traditional risk structures, such as increasing the capital, as opposed to token investments or outright deals for future tokens. (SAFT), Chiu said.
Regulations have certainly stifled optimism around the industry, but there are other factors at play as well. A handful of popular crypto companies filed for Chapter 11 bankruptcy protection last year, stifling confidence in the industry, and some traditional companies and entrepreneurs left the US ecosystem altogether when the market turned. It also didn't help when investors suddenly took a much more demanding approach that valued earnings over growth.
According to Chiu, valuations in the industry fell a marked 50% from the first half of 2022 to the second half of 2022. Since then, valuations of cryptocurrency startups have fallen another 15% to the first half of 2023, totaling almost 70%. year after year..
That's a severe decline: Startups that raised money in January 2022, for example, would have a hard time raising capital again today without getting a deep discount on their price tags.
The Tiger Globals and Softbanks of the world are no longer going to invest in everything.
Lasse Clausen, founding partner, 1kx
But it's not all doom and gloom, and cryptocurrency founders and native investors have not given up hope yet. "That trend won't necessarily reverse, but it may subside in the third quarter or be less severe," Chiu said.
In fact, there is still “a lot of money being shelled out,” said Lasse Clausen, a founding partner of early-stage crypto investment firm 1kx. Funding seems to be going down, and it certainly is, but the all-time highs, they didn't make any sense."
