VCs Invest Billions in Crypto Start-Ups Despite Slowdown

Despite a challenging period for the digital asset market, cryptocurrency start-ups have successfully secured an increased amount of venture capital (VC) funding in the recent quarter.

Venture capital (VC) investment in cryptocurrency start-ups increased in Q2 of 2023 despite a challenging period for the digital asset market, according to data from PitchBook.

VC investment in these companies reached $2.7 billion during the three months ending June, marking a 2.5% increase from Q1 of this year. However, this figure represents a 9.8% decrease compared to the same period last year when crypto prices were soaring due to the US's approval of Bitcoin ETFs.

The number of deals closed during April to June also experienced a 12.5% decrease from the first quarter.

“VC investing in crypto reached somewhat of a fever pitch in March and April,” said Rob Hadick, a general partner at crypto venture fund Dragonfly.

“But as the market turned later in April and into May, the VC market slowed again.”

Despite the market slowdown, the total investment value has seen its third consecutive quarterly increase.

“Continued institutional adoption of digital assets and recovery in token prices could lead to increased fundraising,” said Robert Le, senior analyst at PitchBook.

“The market downturn has also made investors more selective in their project selection and valuations.”

According to Jason Kam, founder of crypto venture firm Folius Ventures, project valuations rose during Q2 as founders sought to capitalize on a more optimistic secondary market.

“We saw valuations go up last quarter because founders were trying to take advantage of the market being up,” said Kam.

“But the market turned down again in May and June, so I expect valuations to come down again this quarter.”

Investment remained concentrated on infrastructure projects such as new blockchains, with venture capitalists showing caution toward consumer-focused applications.

MegaETH, a co-founder of blockchain startup, raised $20 million in seed funding in June.

“The market is still hungry for high-performance blockchains, and there's a lot of demand for projects like MegaETH,” said Kong.

“We're seeing a lot of interest from investors in this space, and we expect to continue to raise funds throughout the year.”

The only significant funding round for a crypto application during Q2 was social media platform Farcaster's $150 million raise in May.

Investors sold their stakes in a company to realize returns, increasing exit activities to the highest level since Q1 2022 with 26 exits in the April-June quarter.

This included Robinhood Markets Inc.'s acquisition of Bitstamp.

PitchBook anticipates that exit activities could continue throughout the year, with expectations of further consolidation among crypto exchanges, custodians, and infrastructure providers as the market matures.

The above is the detailed content of VCs Invest Billions in Crypto Start-Ups Despite Slowdown. For more information, please follow other related articles on the PHP Chinese website!