Venture Capitalists Pull Back from Crypto as Funding for Startups Plunges to Lowest Level Since 2020

Published on

numen cyber focuses on Web3 Security and Threat Detection and Response. They provide industry-leading Web3 Security Solutions, which
can completely cover cybersecurity requirements of all kinds.

The cryptocurrency industry has been beset by a slew of scandals, a bear market, and regulatory uncertainty, which has led to a notable waning of interest from venture capitalists.

According to PitchBook, a leading research firm, private funding for cryptocurrency startups in the first quarter of this year has hit its lowest point since 2020.

PitchBook’s data indicates that global VC funding for the industry has dwindled to $2.4 billion during the quarter, a staggering 80% decline from the all-time high of $12.3 billion recorded in the corresponding period of the previous year.

Robert Le, Crypto Analyst at PitchBook

The firm’s crypto analyst, Robert Le, points out that this decrease is unsurprising, given the general downturn in venture investing this year, driven by the surging interest rates and the recent upheaval of Silicon Valley Bank, which is relied upon by many venture-backed companies.

It is evident that the cryptocurrency industry is undergoing a period of uncertainty and instability, with VC investors adopting a more cautious approach. Nonetheless, the current scenario should not be viewed as a death knell for the industry, but rather as an opportunity for innovation, introspection, and transformation.

In the coming months, it will be interesting to see how the industry adapts to these challenges and endeavors to create a more robust, transparent, and trustworthy ecosystem.

“There’s still a lot of fear about what’s going to happen since the macro environment is still very uncertain,” Le said.

The crypto industry has faced unique challenges, including the collapse and bankruptcy of crypto exchange FTX, which has resulted in a slowdown in funding rounds and a heightened need for due diligence.

According to Le, venture capitalists are now taking more time to conduct extensive research and ask more questions of founders before making a decision to back a startup, instead of rushing into deals.

“It’s not going to be based on FOMO or what other investors are doing,” Le said. 

Although the downturn was substantial, the PitchBook data contained some positive news for crypto startups.

According to Le, on a month-over-month basis, crypto venture investing saw an increase in February and March. This suggests that the worst of the funding drought may be over.

Despite the challenges, venture capitalists still have funds available, and there is continued interest in supporting crypto infrastructure startups, data analytics firms, and developer platforms.

“We’ll slowly start seeing investors get more comfortable,” Le said.

Berlin-based decentralized finance infrastructure startup, M^Zero Labs, announced that it has successfully raised $22.5 million in a recent funding round.

According to co-founder and CEO, Luca Prosperi, the company began fundraising talks in October, just before FTX’s collapse.

Prosperi admitted in an interview that the market turmoil caused by FTX’s downfall had made the fundraising process more stressful, with investors increasingly seeking more information.

However, he expressed gratitude for having venture backers who remain committed to the potential of crypto.

The fresh capital raised will be used to expand the M^Zero team, Prosperi added.

Image

Latest articles

Gensler’s SEC Alleges BNB is a Security, How Binance Will Beat the Charges

On June 5th, 2023, the United States Securities and Exchange Commission (SEC) filed a...

How Binance Plans to Fight Back: A Closer Look at Their Defense Against SEC Charges

In what appears to be a renewed effort to exert control over the cryptocurrency market, the U.S. Securities and Exchange Commission (SEC) has levied serious allegations against Binance, the world's leading cryptocurrency exchange, and its founder, Changpeng Zhao.

U.S. Securities and Exchange Commission Sues Binance, Changpeng Zhao


In a significant legal development, the Securities and Exchange Commission (SEC) has taken decisive action against Binance, the global leader in cryptocurrency exchange.

Bail Approved: Terraform Labs’ Do Kwon Walks Free, But What Lies Ahead?

The cryptocurrency world recently witnessed a major development, with Terraform Labs co-founder Do Kwon...

More like this

How Binance Plans to Fight Back: A Closer Look at Their Defense Against SEC Charges

In what appears to be a renewed effort to exert control over the cryptocurrency market, the U.S. Securities and Exchange Commission (SEC) has levied serious allegations against Binance, the world's leading cryptocurrency exchange, and its founder, Changpeng Zhao.

Bail Approved: Terraform Labs’ Do Kwon Walks Free, But What Lies Ahead?

The cryptocurrency world recently witnessed a major development, with Terraform Labs co-founder Do Kwon...

Morgan Stanley Predicts Sudden Downturn in US Corporate Earnings, Diverges from Wall Street Consensus

Morgan Stanley foresees a sudden downturn in corporate earnings that will significantly impact the flourishing US equity rally, diverging from the prevailing estimates on Wall Street.