Despite regulatory headwinds and a bearish environment, US crypto companies continue to grow with vast support from venture capital. However, the value of crypto-focused VC investments hasn’t followed the uptick in Bitcoin’s price in recent quarters, even though both trends more or less overlap in the long term.
In Q2 2023, the median pre-money valuation of a crypto VC deal dropped to $17.93m – the lowest level since Q1 2021, according to the “Crypto & Blockchain Venture Capital - Q2 2023” report from Galaxy.com. Crypto and blockchain investments totaled $2.32 billion, slightly less than the previous quarter but heavily down from the peak of 13 billion in Q1 2022 and the lowest value since Q4 2020.
Still, the numbers are significantly better than in most quarters prior to 2021. Also, the median deal size increased slightly quarter-on-quarter, with 456 deals completed in Q2 compared to 439 in Q1 2023. The capital favors early-stage deals. Pre-seed, seed, and series A projects attracted 73% of the investment, with companies founded in 2021–2022 completing most deals in the last quarter.
Unsurprisingly, startups directly linked to money-making raked in the biggest chunk of the funding. Companies from the trading/exchange/investing/lending category raised $473 million, 20% of the pool. Web3/NFTs/gaming/DAOs/Metaverse businesses ranked second with 19% or $442 million in their pockets.
Still, the largest deal holder was the layer-2/interop company, Layer Zero, which landed $120 million in a series B round.
The Galaxy report also indicates the firm hegemony of the US in the VC web3/crypto funding space. US-based companies raised 45% of all crypto VC funds in Q2 2023, followed by the UK (7.7%), Singapore (5.7%), and South Korea (5.4%). In terms of completed deal numbers, the proportions are similar, with US-based companies sealing 43% 43% of all web3/crypto VC deals, followed by Singapore (7.5%), the UK (7.5%), and South Korea (3.1%).
