Crypto Projects Attract More Than a Billion in VC Funding in March

Venture capital is flooding into the crypto market as investments in crypto projects surged to $1.16 billion in March.

March witnessed a 52% month-on-month surge in venture capital funding for cryptocurrency projects, culminating in investments totaling $1.16 billion. Among some of the high-profile investments were Ethereum layer-2 blockchain Optimism's $89 million raise and cryptography startup Zama's $73 million Series A funding. The increase in venture capital interest extends to accelerator programs as well, with Andreessen Horowitz (a16z) leading the charge by investing $30 million into Web3 gaming and launching its crypto startup accelerator for the spring of 2024.

Venture Capital Rushes into Crypto

Venture capital funding for cryptocurrency projects saw a big uptick in March. In fact, March saw a 52.5% increase from the previous month, with investments surging to $1.16 billion. The boost in funding, which was mostly directed towards infrastructure and decentralized finance (DeFi) projects, was the highest level of monthly investment activity since April of 2022, according to RootData.

A detailed breakdown of the investment patterns reveals that one-fifth of the deals fell within the $1 million to $3 million range, while just over 15% managed to secure between $5 million to $10 million. Despite a considerable number of projects being based in the United States, they represented less than 10% of the total deal count. The month’s largest raise was achieved by Ethereum layer-2 blockchain Optimism, which garnered $89 million through the sale of its tokens in a private deal. Meanwhile, cryptography startup Zama followed closely with a $73 million Series A funding round.

The surge in March's deal activity was a 25% increase from February and a 28% rise in the total amount raised compared to March of 2023. This renewed interest is partly fueled by several venture capital firms signaling a stronger focus on crypto-related ventures. Notable movements include Andreessen Horowitz (a16z) allocating $30 million to a fund dedicated to Web3 gaming and contributions from a16z co-founder Marc Andreessen and Galaxy Digital to VC firm 1kx’s $75 million fund aimed at crypto-based consumer apps.

Infrastructure projects were the most funded in March, attracting around $283 million, which accounts for about a quarter of the total VC funding. DeFi projects were not very far behind, securing $228.1 million, while centralized finance (CeFi) projects, including exchanges, received $85.5 million.

March was also the first time that crypto VC funding surpassed $1 billion in a month since November, which is in stark contrast from a sluggish 2023 that was slowed down by the fallout from the FTX collapse in late 2022. The rebound in venture capital interest certainly also coincides with a general recovery in the crypto markets, propelled by the launch of spot Bitcoin BTC exchange-traded funds (ETFs) in the U.S.

$30 Million Bet on Next-Gen Gaming

Venture capital giant Andreessen Horowitz (a16z) is making waves in the gaming industry with a fresh $30 million investment aimed at fueling innovation in technology-centric gaming startups, specifically those delving into AI, VR/AR, and Web3 games. The announcement was made by Andrew Chen, a general partner at the firm, who manages a16z’s Games One Fund. This ambitious move is part of their early-stage accelerator program named “SPEEDRUN,” which is designed to propel startups at the forefront of TECH x GAMES, including AI infrastructure, 3D tools, and gamified consumer applications, among other areas.

The SPEEDRUN program, which spans a 12-week period, offers selected startups an injection of $750,000 each. Beyond financial support, participants will also benefit from guidance by industry experts, mentorship, and access to a community of like-minded founders who want to shape the future of gaming.

The program admits only 1% of its applicants. The deadline for application submissions is slated for May 19, with the accelerator running from Jul. 29 to Oct. 20 of 2024, in Los Angeles, California. Among the program’s alumni are Web3 gaming platforms like soccer-themed Matchday and NFT-based Promodium.

In the past, a16z made big investments in industry heavyweights like Roblox, Sandbox, and Sky Mavis. The venture firm also extended its reach into blockchain gaming through investments in entities like Mythical Games and Yield Guild Games, among others. This strategic focus is set against the backdrop of a booming Web3 gaming market, projected to soar from $154 billion to $614 billion by 2030.

Crypto Accelerators

Web3 startups are also increasingly turning to accelerator programs for mentorship, guidance, and capital. These programs offer a unique blend of resources in exchange for equity, a trade-off that has attracted a wide array of participants from various sectors within the crypto ecosystem.

Y Combinator in the United States has been a breeding ground for successful crypto firms like Coinbase and OpenSea. Meanwhile, a16z has recently unveiled its spring 2024 lineup for its crypto startup accelerator. This program, set in London and spanning 10 weeks, will mentor 25 startups on projects ranging from Farcaster infrastructure to decentralized food delivery and zero-knowledge passport authentication. In exchange for their participation, startups cede 7% equity for $500,000.

The Avalanche Foundation and Ava Labs have also stepped into the accelerator arena with Codebase, offering investments between $500,000 and $1 million to their first cohort of startups. Additionally, the Web3 gaming sector is seeing a lot of momentum with Helika's collaboration with prominent venture capital firms to invest up to $50 million in startups through its Helika Accelerate program.

The growing importance of crypto accelerators is highlighted by the role they play in fostering a sense of community among founders and accelerating the development of network-centric Web3 projects. However, as Sam Lehman of Symbolic Capital points out, founders should still be wary of predatory practices by some accelerators that may look to take disproportionately large stakes in startups early on.

Despite these cautionary notes, there is a very clear trend of increasing venture capital activity in the crypto space.