Main topic: Decreased venture funding for crypto companies and increased interest in secondary deals.
Key points:
1. Global venture funding for crypto companies fell by 78% in the first half of the year compared to the same period last year.
2. Crypto-focused venture capitalists still have ample funds and are increasingly buying shares in secondary deals.
3. Shares of previously high-valued crypto startups are being sold at significant discounts in secondary transactions.
Main topic: Decline in venture capital funding for Latin American startups
Key points:
1. Latin American startups experienced a 70% YoY decline in venture capital funding during Q2.
2. Funding for Latin American startups totaled $800 million in Q2, compared to $2.6 billion in the same period last year.
3. Fintech sector in Mexico led the way in terms of investment, with companies like Clara and Kapital securing significant funding rounds.
Main topic: Decline in venture capital (VC) funding for cryptocurrency startups
Key points:
1. Crypto startups secured the lowest amount of VC funding ($2.3 billion) since Q4 2020 in Q2 2021.
2. Regulatory concerns and crypto market volatility have contributed to the decline in VC funding.
3. Reduced VC funding could hinder innovation and intensify competition among startups in the crypto sector.
Main topic: Declining valuations and potential contraction in the late-stage venture market for startups
Key points:
1. Valuations across startup stages have sharply declined, with a more significant decline in later stages.
2. A sharper decline in late-stage dealmaking could make it harder for Series B and C companies to raise pre-IPO capital.
3. A smaller late-stage market could benefit the wider tech market by filtering out weaker startups and promoting faster recycling of human capital.
In July, capital inflows from venture capitalists in the crypto sector decreased by 10.26%, with $700 million raised, as macroeconomic conditions and geopolitical events continued to impact investment decisions, although some notable outliers, such as Polychain Capital and CoinFund, launched new funds totaling millions of dollars, and the potential approval of spot Bitcoin exchange-traded funds (ETFs) in the U.S. could bring renewed attention and capital into the industry. Infrastructure and Web3 sectors received the most capital inflows, while overall investor activity in the blockchain industry remained low, suggesting a slow return to a steady upward trend.
Main topic: Slowdown in venture capital investment in creator-focused startups
Key points:
1. Venture capital investment in creator-focused startups significantly decreased in the second half of 2022.
2. The slowdown is attributed to the bursting of the "creator bubble" and the temporary factors that drove the growth of the creator economy.
3. Startups in the creator space are struggling to raise money and expand, except for outliers like OnlyFans.
The lack of funding for emerging managers in venture capital is impacting early-stage funding opportunities, as VC fundraising decreases and the number of new startups declines, but there is a slight thaw in exits via public markets with promising IPOs from companies like Cava.
Venture capital firm Vessel Capital has launched a $55 million fund to invest in Web3 infrastructure and applications, aiming to assist early-stage crypto founders in launching and growing their projects by providing guidance and advice. The fund's resources will be deployed over a five-year period, and the team's experience as startup founders will enable them to better understand entrepreneurs' needs.
Crypto funding in August appeared promising with a $819 million investment, but without two large funding rounds, it would have actually shown a decline from July and a significant decline from the same time last year, reflecting a continuing slowdown in the industry.
Venture capital funding has significantly declined, with global funding nearly half of what it was last year, leading to a shift towards AI funds; however, the overall VC market is still far from its peak in 2021-2022, as higher interest rates and supply chain shortages create an unfavorable environment for investors.
China-focused investment firms have struggled to generate returns for their investors, with only four U.S. dollar-denominated venture capital funds established between 2015 and 2020 able to return all the money invested, reflecting a lack of IPOs and the need for alternative exit strategies such as mergers and acquisitions or general partner-led deals.
Venture capitalists are making fewer and smaller deals in the crypto industry, with funding levels falling back to Q4 2020 levels amid the ongoing bear market.
Global venture funding in Q3 2023 reached $73 billion, marking a slight increase from the previous quarter but a 15% decline compared to the same period in 2022, with seed and early-stage funding continuing to decline while late-stage funding increased, particularly in strategic sectors such as semiconductors, AI, electric vehicles, and sustainability. The IPO markets also showed signs of easing, with two venture-backed startups going public in September for the first time in 18 months. Additionally, AI companies raised over $10 billion in Q3, and late-stage funding saw growth outside of North America, particularly in Asia and Europe. However, the global funding slowdown persisted, with a 42% decline year over year in the first three quarters of 2023.
The cryptocurrency ecosystem experienced a significant decline in fundraising during Q3, reaching its lowest point in three years, with crypto-focused firms raising just under $2.1 billion across 297 deals, down 36% from Q2.
Canadian startups experienced a decline in funding, with a 57% decrease in Q3 2023 compared to the previous quarter, and no new unicorns were created during this period.
The global venture capital market continued to decline in the third quarter of 2023, according to data visualization provided by TechCrunch+.
The blockchain gaming industry received $600 million in venture capital investment in Q3 2023, a 38% decrease from Q2, bringing the total funding for the year to $2.3 billion; however, this is only 30% of what was raised in 2022, while the broader gaming industry has been hit hard with over 6,100 job losses.
Venture capital funds are showing reduced interest in crypto, with investments reaching their lowest levels in over a year, but there are still crypto-native investors actively deploying capital and showing faith in the industry. The overall downturn in the market and regulatory uncertainty are contributing factors, pushing investors to conduct thorough due diligence and prioritize projects with tangible credibility and mainstream adoption potential.
While venture funding in Asia declined 8% from Q3 last year, it increased by 8% from the previous quarter, with China and Israel driving the growth despite geopolitical tensions, according to Crunchbase data. Chinese startups raised $14.1 billion in Q3, a 20% increase from Q2, possibly fueled by significant funding rounds for EV and semiconductor companies. Israeli startups also had a strong quarter, raising $1.4 billion, supported by investments in cybersecurity and AI. However, India's venture funding decreased by 34%, and South Korea saw a drastic 40% decline.
China is experiencing a surge in venture capital fundraising, while India and Southeast Asia are seeing a decline in startup investments, with the top sectors for investment being AI, Web3, asset tokenization, and semiconductors. Additionally, the fusion of AI and blockchain is creating new investment opportunities, and the prospects for Web3 and AI markets remain strong.
