Crypto Startup Funding Rises 2.5% in Q2, Marking a Recovery in Venture Capital Interest
Crypto startups experienced a slight uptick in venture capital funding in the second quarter of 2024 compared to Q1, despite a decrease in the total number of deals, according to a report from Pitchbook published on August 9. This increase in funding could signal growing interest and confidence from institutional investors in the cryptocurrency sector.
Funding Increase Despite Fewer Deals
Pitchbook’s report indicates a 2.5% rise in total invested capital for crypto startups in Q2 2024, reaching a total of $10.1 billion. This is a modest increase from the first quarter’s funding, even as the number of deals fell by 12.5%. This trend suggests that while fewer deals are being completed, the deals that are being made involve larger amounts of capital, reflecting a more selective but promising investment environment.
Institutional Confidence and Market Sentiment
Pitchbook attributes this increase in capital to a positive shift in investor sentiment towards cryptocurrencies. “With positive investor sentiment returning to crypto and barring any major market downturns, we expect the volume and pace of investments to continue increasing throughout the year,” stated Pitchbook in its report. This optimism could lead to further investment growth if the market remains stable.
Key Funding Highlights:
Infrastructure projects were prominent in Q2, with notable raises including:
- Monad, a layer-1 platform, secured $225 million in Series A funding.
- BeraChain, a DeFi protocol with a new proof-of-liquidity model, raised $100 million in Series B funding.
- Babylon, a Bitcoin restaking platform, attracted $70 million in an early-stage funding round.
Additionally, two major “mega-rounds” were reported:
- Farcaster, a decentralized social media protocol, raised $150 million in Series A funding at a $1 billion post-money valuation.
- Zentry, a blockchain gaming platform, obtained $140 million in early-stage funding.
Comparative Analysis
Funding for crypto startups has significantly slowed compared to the peak years of 2021 and 2022, which saw capital infusions of $25.3 billion and $29.4 billion, respectively. Total investment for 2023 currently stands at $10.1 billion, with projections suggesting a year-end total of $10.8 billion at the current rate. Despite the slowdown, the sector remains a key focus for venture capital.
Competitive Landscape and Future Outlook
The report notes an increased level of competition at earlier fundraising stages for crypto startups, while later-stage funding has become less competitive. DefiLlama data reveals that over $102 billion has flowed into the blockchain industry across 5,400 funding rounds since June 2014.
The report follows recent efforts by venture capital firms Pantera Capital and Paradigm, which sought to raise $1 billion and $850 million, respectively, for new crypto funds. A $1 billion raise by Pantera Capital would be the largest for the cryptocurrency industry since May 2022, when Andreessen Horowitz (a16z) set a record with a $4.5 billion fundraise. In May 2024, a16z raised $7.2 billion across several technology sectors but chose not to increase its cryptocurrency-focused fund.
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