The past year was marked by the painful crypto bear market, which, in addition to the problems at Terra, Three Arrows Capital (3AC) and FTX, among others, was also characterized by continued interest from venture capitalists. Despite the challenges, 2023 was quite positive for the market, but venture capitalists remained in the background.
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Venture capital is less happy with 2023
In an investigative report, The Block writes that there was no interest from this group of investors. Venture capitalists typically invest in crypto companies and protocols at a very early stage and therefore play a crucial role in the industry.
In 2023, these parties invested $10.7 billion in fledgling blockchain projects. That sounds like a lot, but it’s a 68% decline compared to 2022, when new projects received $33.3 billion. The largest amount of this was incurred in the first half of this year. The rest of this year was marked by a downturn, although venture capitalists were bolder again in November.
At the same time, projects in the pre-seed, seed and Series A funding rounds actually received more capital in 2023. Capitals in a more advanced stage were less fortunate and shrunk this year. This last group is therefore the cause of the sharp decline. Abhishek Saxena, CEO of Polygon Ventures, said:
The sharp decline in funding in 2023 was largely expected and was related to macroeconomic conditions, regulatory uncertainty and challenges (associated into 2022). Still, most investors and founders were surprised by the extent of the decline. This “financing winter” is a healthy and necessary correction for the industry can concentrate again.
It is also positive that the amount, at around $10.7 billion, was still more than in previous bear markets. For example, in 2018 this amount was $8.1 billion, and in 2019 and 2020 combined it was only $6.4 billion.
MiCA good for financing young projects?
The increased venture capital earlier this year corresponded with the huge increase in funding for young European crypto projects. This was shortly after the Markets in Crypto-Assets Act (MiCA) took shape. At first glance, the world seemed to agree with this law. A little later, investigations revealed that Europe had added three “crypto hubs.”
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