Web3 VC Funding Hit Lowest Levels Since 2020

Venture capital funding for Web3 startups has dried up, as deal flows slow. 

Data from Crunchbase shows that Web3 VC funding dropped 82% year-to-year from $9.1 billion to $1.7 billion. 

In the fourth quarter of 2020, there was $1.1 billion worth of VC funding. Despite the term Web3 being coined in 2014 by Ethereum co-founder Gavin Wood, there wasn’t a lot of reporting on the space until 2021.

When looking at Google Trends, there’s a clear spike in December of 2021, though interest had been building throughout 2021. 

Deal flow also declined, and Crunchbase’s Chris Metinko wrote “only 333 deals were completed in the first quarter — down from 369 in the previous quarter and a sharp drop from the more than 500 announced in Q1 2022.” Just like the total funding number, this is the lowest number of deals announced since the fourth quarter of 2020.

Out of over 300 hundred deals, only two “hit the nine-figure mark.” Those were Blockstream in January, which received $125 million from Kingsway Capital, a London-based firm, and Fulgur Ventures. 

Ledger, a crypto hardware maker, secured $108 million in a Series C round with investors from 10t, Morgan Creek Capital, Cathay Innovation, among others. 

On the other hand, Galaxy Digital found in a recent report that crypto startups saw a 20% increase in VC deals last quarter. The jump was mostly driven by pre-seed activity, though it notes that more deals didn’t mean more capital. 

Altogether, VC funding came in around $2.4 billion, which is the lowest amount since the fourth quarter of 2020.

However, “crypto and blockchain startups raised less than half the amount raised just two quarters ago,” Alex Thorn, head of firmware research at Galaxy, wrote in the report.

Overall, Galaxy’s findings line up with what Crunchbase found, which is that “venture funding is down in almost every sector.”

“Web3 no doubt has been more affected by the dip since in uncertain times investors seek out industries they know best — such as cybersecurity or SaaS, not the promise of the next iteration of the internet.” Metinko noted in the report.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
• Empire: Start your morning with the top news and analysis to inform your day in crypto.
• Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
• 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
• Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
• The Drop: For crypto collectors and traders, covering apps, games, memes and more.
• Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.