Web3 funding was mixed last quarter, although investors in the rocky sector over the past few years are likely to embrace it.
Web3 startups raised $2 billion across just over 300 deals last quarter, according to Crunchbase data. The dollar figure represents a 43% increase from the $1.4 billion raised by such startups in the third quarter of last 12 months, but a 13% decline from the second quarter of this 12 months – which was the third straight quarter of growth for the industry.
The low variety of deals is, in fact, the lowest deal total since the second quarter of 2020 – just before investment exploded in the sector. In the first quarter of 2022, investors closed nearly 1,200 financing deals for Web3, an industry high.
Great deals
Perhaps surprisingly, investors moved broadly over several rounds last quarter. In fact, eight rounds of $50 million or more were raised in the third quarter – compared to just 4 in the second quarter.
- Infinite realityConnecticut-based developer of immersive 3D environments raised $350 million at a $5.1 billion valuation from an undisclosed multifamily office.
- Bellevue, Washington Story Protocolblockchain technology aimed at protecting the mental property rights of content creators raised $80 million in Series B, led by Andreessen Horowitz which valued the startup at $2.25 billion.
- The Web3 metaverse and the L1 blockchain center in New York Identification planet raised $80 million in Series B financing.
Emphasis on cryptocurrencies
Investors in the space industry see that the jump in financing from 12 months to 12 months is caused by certain changes in the financial market.
“I think it’s primarily due to the increase in interest in Bitcoin and Ethereum ETFs, but primarily Bitcoin ETFs,” he said Tomasz Tunguzfounder Theoretical undertakingswhich invests in early stage data, artificial intelligence and Web3/blockchain based startups. “Furthermore, the amount of growth in stablecoins is absolutely astronomical.”
in January KNOT Chairman Gary Gensler – which has never been a fan of cryptocurrencies – has given an allowance to U.S. exchange-traded funds that hold Bitcoin from nearly a dozen asset managers, including giants similar to CzarnyRock AND Faithfulness. The acceptance proved groundbreaking for the industry. Investors have flocked to funds that allow them to trade digital currencies without having to own them and without having to trade them on cryptocurrency exchanges, which generally charge significant transaction fees.
“I would say that the Web3 ecosystem has improved significantly compared to last year,” Tunguz said. “The Fed policy change should benefit risky assets, particularly in public markets, and we are seeing this with some tokens, particularly SUI, which has seen a lot of interest lately.”
Looking to the future
However, not all numbers are positive. While some may argue that the decline in transaction volume is statistically insignificant, the third quarter was the second consecutive quarter in which transaction volume declined.
This means fewer startups in the industry are receiving funding. This, in turn, means there will likely be fewer candidates for investment when these firms start looking for the next larger round of investment, which could reduce the amount of funding.
Of course, investors could also be increasingly mindful of where they put their money when it comes to Web3, or that fewer attractive Web3 firms are being created.
Regardless, the dollar figures point to stability, and stability is rare in Web3 investing.
Methodology
For Web3 funding numbers, we analyze investments made in VC-backed startups in the cryptocurrency and blockchain industry group.