Web3 Venture Funding Rebounds Slightly From Last Year’s Lows

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Web3, once the buzzword in the venture landscape, saw its funding increase slightly in the first quarter of the year compared to the fourth quarter of last year, marking Web3’s first funding increase since the fourth quarter of 2021.

However, venture capital continues to decline year-on-year and is far from the highs seen in 2021-22.

Web3-related startups, defined as those in the cryptocurrency and blockchain sectors, raised just under $1.9 billion in 346 deals in the first quarter, according to Crunchbase data.

That dollar figure is a 58% increase from last year’s Q4, when startups in the space raised nearly $1.2 billion across 263 deals. However, this year’s Q1 venture dollar number is still a 17% decline from the same quarter in 2023, when startups raised $2.3 billion across a whopping 670 deals.

The number of agreements signed represents a 48% decline on a year-on-year basis.

The Bumpy Road of Web3

It hasn’t been long since Web3 and the thought of a decentralized internet he was the darling of the private marketwith new unicorns being minted seemingly every week and large coins being handed out like candy.

anyway, the Retreat of activities started in 2022 hit the Web3 sector harder than others, as investors fled to better-defined, more profitable sectors and cryptocurrencies entered their difficult winter. FTX founder Sam Bankman-Fritto‘S fraud and the failure of cryptocurrency lenders didn’t help either.

However, Q1 2024 marks Web3’s first venture funding increase since Q4 2021. That, however, was a very different time. That quarter-over-quarter increase went from about $8 billion to an almost unfathomable $10.5 billion.

Larger rounds remained hard to come by, as the three largest rounds in the last quarter totaled less than $300 million:

• Based in London Exohood Labswhich is pursuing an artificial intelligence project using quantum computing and blockchain, has raised a massive $112 million seed funding round, valuing it at $1.4 billion;
• Based in Seattle Own Laboratorythe creator of EigenLayer for Ethereum staking, has raised a $100 million Series B from a16z encryption; AND
• Based in Hong Kong Free chatsuper social networking apps Web3, have blocked an $80 million Series A funding round.

However, valuations appear to be on the rise in the sector, as Web3 I saw a handful of new unicorns mintedThis follows a pause in the fourth quarter where only the Cayman Islands-based blockchain messaging tool Hole in the wall he joined the herd.

In the most recent first quarter, Safety chainan Ethereum-compatible blockchain for financial applications, I.neta blockchain service to sell excess GPUs and a Web3 infrastructure startup Network of polyhedra they were all minted unicorns.

Increasing?

The next few quarters could prove very revealing for Web3’s future. While investors say they expect investment to eventually rebound as a decentralized internet becomes more developed, that may not happen for another year as the venture continues to stabilize after the go-go days of 2021.

Can Web3 startups survive with current funding levels?

Many startups in the space raised large rounds a few years ago, so they may have a financial runway. The number of deals also increased in the first quarter, so more money is being distributed.

There’s also the upside that cryptocurrency is seeing. Bitcoin’s price is up nearly 60% in 2024, while Ether is up nearly 50%. With approval earlier this year for U.S. exchange-traded funds holding Bitcoin from nearly a dozen asset managers, including giants like Black rock AND Fidelity — and Bitcoin halving eventCryptocurrencies could have even greater upside potential, which could attract new venture capital investments.

Just last week, based in New York, Monad Labs has locked up Web3’s largest funding round of the year so far, raising a $225 million funding round led by Paradigm. Monad is a layer-1 blockchain compatible with the Ethereum Virtual Machine but capable of processing transactions using the same ruleset faster. The round is reminiscent of the 2021-22 era when layer-1 protocols like Aptos Labs lifted up great.

Perhaps it is a harbinger of more big money funding to come. The first quarter showed that investor interest is still there.

Methodology

For Web3 funding numbers, we analyze investments made in VC-backed startups in both the cryptocurrency and blockchain sectors.

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