Home » Web3 Funding Sees Huge Drop As Big Rounds Dip

Web3 Funding Sees Huge Drop As Big Rounds Dip

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Investors are now tightening their purse strings on everything. This seems to mean the next iteration of the Internet.

For the past two years, venture capitalists have been obsessed with all things Web3. Web3 is a hot buzzword that covers everything from cryptocurrency startups to blockchain developers to decentralized tech builders. But after his record-breaking 2021, when more than $30 billion was invested in this burgeoning sector, investors seem to be pausing.

Funding and deals for VC-backed Web3 startups have fallen to their lowest level since the end of 2020. Reflecting the overall venture market.

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Just over $3.3 billion was put into startups in this space in the most recent quarter, down nearly 50% from the previous quarter. This is the lowest amount since nearly $1 billion was invested in startups in the fourth quarter of 2020, and a far cry from his nearly $9.3 billion high invested in the fourth quarter of last year.

Deal flow also declined in Q3, with only 408 deals announced. That’s over 200 fewer deals from both Q4 2021 and Q1 this year. It is also the lowest number since his fourth quarter of 2020, when only 262 deals were announced.

In total, investors have poured $17.7 billion into Web3 so far this year. This is well off the pace of reaching his $30 billion record last year.

slow big transactions

One issue affecting Web3’s funding is a story that has been repeated by many VCs this year. There are currently no large growth rounds at very high valuations.

We certainly had some big rounds in the third quarter, including:

  • September, based in Palo Alto, California misten labSui Layer 1 blockchain developer, Closes $300M Series B at a valuation of over $2 billion led by FTX Ventures.
  • In the same month, a sports metaverse company based in Santa Monica, Calif. booty moguls secured a $200 million investment commitment from jewelryThe startup aims to build virtual sports cities based on real-world brands and professional athletes.
  • Based in Palo Alto, July aptos lab was locked up $150 million Series A Led by FTX Ventures, jump crypto At a valuation of over $2 billion. The round comes just four months after the company, which creates its own Layer 1 system blockchain, completed his $200 million investment that minted Unicorn.

However, these deals were more of an anomaly than the norm in the third quarter. In fact, in the third quarter he only had five rounds of $100 million or more. This is the lowest number as he had only two incidents in the fourth quarter of 2020. It’s also a big departure from the 26 rounds announced in the first quarter of this year, or the 21 rounds witnessed in the fourth quarter of last year.

big names go quiet

It’s important to remember that nearly every technology sector has seen a similar phenomenon of dramatic declines in the number of large rounds.large growing companies including tiger global When Dragonia So-called tourist investors (who are less familiar with a particular technology) fled to focus on portfolios and sectors they knew better.

Many of the technologies are relatively new, and many investors are less familiar with them than in other industries, which may have influenced Web3’s funding more than other areas.

Giant crossover investor Tiger made 30 investments in Web3-related startups in the first two quarters of this year, but only four such deals in Q3.

just this week The Wall Street Journal reported Andreessen Horowitzflagship cryptocurrency fund Lost 40% in value in the first half, according to a person familiar with the matter. The company, one of the biggest proponents of cryptocurrencies and the Web3, has slowed its investment in cryptocurrencies and blockchain in recent quarters, according to Crunchbase data. After making 53 deals in those sectors from Q4 2021 to Q2 this year, the company only made his 9 deals in Q3.

An additional aspect is that investors see limited exit options in a still-mature market like Web3. M&A activity has been sparse in the industry, especially in recent quarters, with investors wanting to see a direct path to liquidity when needed, according to Crunchbase data. Only about a dozen deals have been announced.

maybe some positives

Not all these numbers paint a very promising picture, but a closer look reveals some positive trends.

According to Crunchbase data, September was actually the best month for Web3 funding since June, with VC-backed startups raising about $1.6 billion. Investors are optimistic about a small recovery in Q4 as valuations slip and a new reality sets in.

The Web3 sector also minted a handful of unicorns in Q3, despite large growth rounds and a general slowdown in funding. misten laba San Francisco-based continuous payments protocol Zebeca Swiss crypto product developer 21.co Blockchain network based in London 5ire.

With so many dry powders in circulation right now, there’s definitely money to make more. But in this uncertain economy, investors seem wary of high valuations So a big rebound in Q4 is unlikely.

methodology

Web3’s funding numbers analyze investments in VC-backed startups in both cryptocurrencies and blockchain.

figure: Dom Guzman

Stay up to date on our latest funding rounds, acquisitions and more on the Crunchbase Daily.

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