Crypto Venture Capital Investments Drop In Q3 2024

According to CoinDesk, crypto venture capital (VC) investments totaled $2.4 billion in the third quarter of 2024, marking a 20% decline from the previous quarter. This funding was spread across 478 deals, representing a 17% decrease in the number of deals. The industry is projected to receive slightly more funding in 2024 than in 2023, with $8 billion invested over the first three quarters. However, these figures are significantly lower than the $30 billion seen annually in 2021 and 2022. Alex Thorn, head of firmwide research at Galaxy Digital, attributed the reduced interest in crypto VC to high interest rates, the availability of spot bitcoin and ether ETFs, and the lingering effects of the industry's downturn in 2022. These factors have made it challenging for venture investors to secure large sources of capital for new fund vehicles, leading to a tightening of the crypto venture investing market. Despite this, the ETF-driven market surge has increased competition among surviving crypto VCs for deal flow, giving entrepreneurs more leverage in valuations. Early-stage firms received the majority of the capital, accounting for 85% of investments, while later-stage companies received 15%. Crypto company valuations, which had plummeted in 2023, rebounded in the second quarter of 2024 and remained stable in the third quarter, with a median pre-money valuation of $23 million and an average deal size of $3.5 million. Certain sectors within the crypto ecosystem attracted more interest than others. Crypto exchanges, lending, investing, and trading platforms raised over $460 million, representing 18% of VC capital. Layer 1 projects followed with approximately $440 million, Web3/Metaverse projects with about $360 million, and infrastructure projects with $340 million. Projects combining crypto and artificial intelligence (AI) saw a significant increase, securing about $270 million, five times more than in the previous quarter. The United States led in terms of investment, providing 56% of all capital and accounting for 44% of all crypto deals. The United Kingdom was second in capital provision at 11% and third in deals at 6.8%. Singapore-based VCs contributed 7% of all capital and accounted for 8.7% of all deals. Fundraising for crypto venture funds has been challenging, with only $140 million raised across eight new funds. The report indicated that 2024 is on track to be the weakest year for crypto VC fundraising since 2020, with only 39 new funds raising $1.95 billion, significantly lower than the peak years of 2021-2022.