Editor’s note: For more Web3 coverage, visit Crunchbase’s Web3 Tracker, where we track startups, investors and funding news in the Web3, cryptocurrency and blockchain space, powered by Crunchbase’s live, comprehensive data.
The crypto and blockchain news from Monday pretty much encapsulate the industry of late — one step forward, then a quick shuffle back.
San Francisco-based Blockchain Capital — whose portfolio includes Coinbase, Kraken and Circle — announced the closing of two new funds — its sixth early-stage fund and first opportunity fund — totaling $580 million.
That news opposed a Bloomberg report that Chinese fintech giant Ant Group was planning to pull out of its A&T Capital $100 million fund as the digital asset market remains turbulent at best. The early- to growth-stage venture fund is an investor in such startups as digital assets platform Matrixport and digital asset custodian Cobo.
Those two contradictory moves from noteworthy names come as venture funding to startups in crypto and blockchain — or Web3 — has plummeted to its lowest levels in years, according to Crunchbase data.
Funding Drop
With less than two weeks left in the third quarter, Web3 funding to VC-backed startups is likely to hit its lowest total since 2019. Startups in the sector have thus far seen less than $1 billion invested in the sector this quarter in fewer than 200 deals.
That’s in contrast to nearly double that amount of money — $1.9 billion — in 364 deals last quarter. It also represents about a 75% drop from the third quarter of 2022, which saw about $3.6 billion invested in more than 500 deals.
A good indication of the current investment chill in the sector is the dearth of big rounds in crypto and blockchain this quarter so far. There have only been two rounds of $100 million or more in Q3 — Palo Alto, California-based crypto custody firm BitGo and India-based Web3 security firm Zyber 365 both raised $100 million rounds.
The decline can be attributed to several factors, including the collapse of several crypto exchanges last year — led by FTX’s implosion — a tightening regulatory environment, and VCs turning their attention to other technologies such as generative AI.
Those things, along with a general cooling in venture capital spend, has led to a rocky funding environment in crypto and blockchain.
Watching a large fintech player like Ant back out of the industry is unlikely to strengthen investors’ faith in the market, however some remain undeterred.
“Over the past 20 months we’ve invested more capital into the next generation of innovators than any other time in our history,” Blockchain Capital wrote in a blog announcing the two new funds. “The reason is simple: today’s market offers unprecedented opportunities, driven by an influx of highly skilled founders who are developing a diverse range of innovative technologies.”
That innovative technology will need funding — something that seems to be in short supply for crypto and blockchain startups these days.
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Illustration: Dom Guzman
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