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Venture capital (VC) funding into Web3 startups has plummeted 82% year-over-year, declining from $9.1 billion in Q1 2022 to $1.7 billion in Q1 2023, according to data from Crunchbase. This marks the lowest amount of funding for Web3 startups since Q4 2020.
The decline in Web3 funding is attributed to investors opting for a risk-off approach and seeking opportunities in industries they know best, such as cybersecurity or SaaS, instead of investing in the promise of the next iteration of the internet (Web3). However, the report notes that there are positive signs, such as significant price rallies of Bitcoin since the start of the year, that could bring more venture dollars back to the space.
Galaxy's head of firm-wide research, Alex Thorn, wrote that historically, venture activity has closely followed crypto asset prices. He added that it will be interesting to observe if crypto VC activity can rebound in case prices remain resilient or constructive this year, despite the various macro and monetary headwinds.
While interest in Web3 startups has cooled off lately, Crunchbase emphasized that venture funding is down in almost every sector, with the decline in Web3 funding being part of a broader trend.