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Crypto Fundraising Picks up as VC Investors Take Note of Market Rally

Last Updated December 6, 2023 2:37 PM
James Morales
Last Updated December 6, 2023 2:37 PM

Key Takeaways

  • After a yearlong funding drought, the recent market rally has reinvigorated investment in crypto startups.
  • Throughout November, crypto firms collectively raised $2.15B across 119 funding rounds.
  • However, many venture capital investors are still focused on small checks and early-stage startups.

Fundraising prospects for blockchain and Web3 startups tend to be tied to the general health of the crypto market. For example, as crypto markets tanked in the final months of 2022, investment activity dropped sharply.

But after a year in the doldrums, Web3 fundraising picked up in November as the market rallied and venture capital (VC) investors warmed to crypto.

Dealmaking Spikes in November as Investors Embrace Crypto

Throughout November, crypto firms collectively raised $2.15B across 119 funding rounds, which included VC deals, debt financing, and Phoenix Group’s $370M IPO

Among the most prominent investors in the month, Coinbase Ventures participated in 2 of the biggest crypto investment rounds of recent weeks: Blockchain.com’s $110M Series E and Wormhole’s latest fundraising initiative – a $225M round that gave the blockchain interoperability platform a $2.5B valuation.

Coinbase’s VC arm also threw its weight behind emerging Decentralized Finance (DeFi) projects, investing in Definitive  and taking part in DeFi’s Initial Exchange Offering (IEO).

Meanwhile, one of the most active investors in the space, Andreessen Horowitz (A16z), led 2 financing rounds in November, backing the Web3 restaurant loyalty platform Blackbird and the Ethereum infrastructure developer Pimlico.

Smaller Checks Boost Web3 Funding

Away from IPOs and $100M+ mega-rounds, smaller, early-stage VC investments also play an important role in supporting the crypto ecosystem.

In fact, many VC firms specialize in supporting early-stage Web3 and DeFi startups with 5 or 6-figure checks rather than multi-million dollar investments. For example, in the past 30 days, HashKey Capital has participated in 6 seed and pre-seed funding rounds, rarely contributing more than $1M.

Meanwhile, on November 9, the latest VC investor to arrive on the scene, Faction, came out of stealth, unveiling a $285M crypto venture fund geared toward opportunities at the Seed and Series A stages.

Ultimately, for the sector to flourish, investors need to support businesses at all stages. With a fresh batch of crypto IPOs expected in 2024, VC firms that participated in the funding rounds of a previous era may soon be able to cash out their investments, potentially freeing up capital for a fundraising renaissance in the year ahead.

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