Crypto Startup- Investor Trends Shift: Focus Moves to Newer Sectors
Crypto Startup– A recent report by venture capital firm Lattice Fund reveals that more than 80% of early-stage startups that raised funds in 2022 remain active today, despite significant challenges in the cryptocurrency market. High-profile collapses and market downturns have affected many, but a considerable number of these startups continue to thrive.
Key Insights from the Lattice Fund Report
According to the October 1 report, over 1,200 crypto startups collectively raised $5 billion in 2022. Of these, 76% successfully launched a product on the mainnet, although 18.5% have ceased operations. Notably, the Eigenlayer Ethereum re-staking protocol emerged as a standout success, executing its go-to-market strategy and delivering a multibillion-dollar product by 2023. However, such success stories are relatively rare among the 2022 cohort.
The report indicates that only 1.5% of these startups achieved what Lattice describes as Product Market Fit (PMF), and just 12% managed to secure additional funding rounds. The infrastructure and centralized finance (CeFi) sectors showed promising results, with 80% of CeFi projects and 78% of infrastructure projects successfully launching products on the mainnet.
Sector Performance: Successes and Failures
While certain sectors thrived, others struggled significantly. The gaming and metaverse sectors were found to have the highest failure rates, leading Lattice co-founder Regan Bozman to caution that chasing narratives can get you rekt. This highlights the inherent risks in speculative investments within these trending areas.
The report also notes that Ethereum remains the preferred layer-1 ecosystem for new projects, with about $1.4 billion invested in 314 Ethereum-based projects—of which 18% ultimately failed. In contrast, Bitcoin-based startups showed remarkable resilience, with all 18 that raised funds remaining active and developing today.
Solana had a different trajectory, where $350 million was invested in 87 Solana-based startups; however, external factors, including the collapse of FTX and a drastic decline in the price of the native SOL token, led to a 26% failure rate among its projects.
Future Challenges for the 2022 Vintage Startups
Despite the relatively strong performance of the 2022 vintage, Lattice analysts caution that these startups face a more challenging environment compared to those that raised funds in 2021. A stagnant market with limited new retail participation poses significant obstacles for startups attempting to achieve product-market fit. Additionally, an increase in the number of new seed-stage startups and a tightening token launch market suggest that many teams will struggle to bring tokens to market and provide returns for their investors.
The report concludes that compounding all of those problems is that investors have moved on to the hotter sectors (e.g., DePIN & Ai) and ecosystems (e.g., Base & Monad) of today. This shift in focus underscores the need for 2022 vintage startups to adapt quickly and innovate to remain relevant in a rapidly evolving market landscape.
FAQs
What percentage of early-stage crypto startups from 2022 are still active?
According to the Lattice Fund report, more than 80% of early-stage crypto startups that raised funds in 2022 remain active today, despite significant market challenges and high-profile collapses.
Which sectors showed the highest success rates for startup investments?
The report highlighted that infrastructure and centralized finance (CeFi) sectors were the most successful, with 80% of CeFi projects and 78% of infrastructure projects successfully launching products on the mainnet.
Leave a comment