Crypto Startups See Uptick in Q2 Funding Despite Fewer Deals
Despite a decline in the number of venture capital deals, crypto startups managed to raise slightly more funding in the second quarter of 2024 compared to the first quarter, according to a recent report by Pitchbook. The report, released on August 9, highlights a 2.5% increase in total invested capital for Q2, even as the number of deals fell by 12.5% from Q1 levels.
This shift suggests a growing confidence among institutional investors in the cryptocurrency market, despite ongoing fluctuations in the broader financial landscape. Pitchbook noted that this trend could signal a sustained increase in investment activity throughout the remainder of the year, provided there are no significant market downturns.
“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,” Pitchbook stated in its report.
One of the standout trends in Q2 was the focus on infrastructure projects, which led the way in securing significant funding. Notably, Monad, a layer-1 platform, raised $225 million in a Series A funding round. Decentralized finance (DeFi) protocol BeraChain, which is pioneering a new proof-of-liquidity model, secured $100 million in a Series B round. Meanwhile, Bitcoin restaking platform Babylon raised $70 million in an early-stage round.
Additionally, the quarter saw two major funding rounds, or “mega-rounds,” that captured attention: decentralized social media protocol Farcaster raised $150 million in a Series A round, reaching a $1 billion post-money valuation, and blockchain gaming platform Zentry secured $140 million in an early-stage round.
However, despite the positive signs, the report acknowledges a significant slowdown in overall funding for crypto startups compared to the boom years of 2021 and 2022. During those years, the industry raised a staggering $25.3 billion and $29.4 billion, respectively. In contrast, the total investment for crypto firms in 2023 reached just $10.1 billion, with the current year on track to raise approximately $10.8 billion.
The competitive landscape for crypto startups has also shifted. While early-stage rounds have become increasingly competitive, later-stage rounds have seen a decrease in activity. This suggests that while new ventures are attracting attention, securing long-term backing remains more challenging in the current market environment.
The Pitchbook report comes on the heels of major fundraising efforts by prominent venture capital firms. Pantera Capital and Paradigm, for instance, are each seeking to raise $1 billion and $850 million, respectively, for new crypto-focused funds. If Pantera Capital successfully raises $1 billion, it would mark the largest cryptocurrency fundraise since May 2022, when Andreessen Horowitz (a16z) set a record with a $4.5 billion raise.
Interestingly, a16z recently announced a $7.2 billion raise in May 2024 to invest across various technology sectors, including artificial intelligence and gaming, but opted not to add to its cryptocurrency-focused fund, reflecting a more cautious approach to the volatile crypto market.
Digital Assets Desk
