Learning from history: 1,200 crypto projects that raised funds 2 years ago are now

Author: Lattice Fund

Last year, we published our 2021 Seed Stage Review to provide a clear view of trends at the seed stage that year. How many companies have shipped to mainnet? How many have found product-market fit? Who has launched a token?

With the 2024 report, we are now turning our focus to 2022 to better understand progress and trends in the seed stage of crypto. The report analyzes over 1,200 public cryptocurrency pre-seed and seed rounds from 2022, providing insights into trends at the industry-wide, sector-specific, and ecosystem level.

I.Executive Summary

Projects in the Class of 2022 received funding during one of the most prosperous periods in cryptocurrency history. Teams that announced raises this year likely benefited from the bull run in 2021 and early 2022. Given the frothiness of the market, we expected these metrics to be negative compared to teams that raised funds during the bear market. Our analysis confirmed these expectations, but there were also positive takeaways.

Since 2022, nearly 1,200 companies have received a total of $5 billion in investment, a 2.5x increase from the previous year. Here are the main highlights:

1.1 2022 Breakout

Any year will have some major success stories, and 2022 is no exception.

On the infrastructure side, we saw re-collateralization protocol Eigenlayer, wallet-as-a-service provider Privy, and parallel EVM Sei all raise seed rounds. Notably, each of these teams helped kick-start a broader narrative.

In DeFi, the breakout stories of 2022 were perp Dex like Vertex and Apex, and specialist NFT exchange Blur.

Gaming was the leading consumer segment with nearly $700 million in investment. Despite the large amounts of money invested, the two biggest success stories raised relatively small amounts. Pixels and PlayEmber each raised less than $3 million in seed rounds.

1.2 Launching in a Challenging Market

Despite the bear market, nearly three-quarters of projects have successfully launched products on mainnet. Product-market fit (PMF) and follow-on financing have become more challenging compared to 2021, with both down significantly year-on-year.

18% of groups have shut down or stopped development, up from 13% in 2021.

Only 12% of teams have received follow-on venture capital, down significantly from 50% in 2021.

Only 15% of projects have launched tokens, down from 50% in 2021.

1.3 Refocus on Infrastructure and CeFi

After a detour in 2021, investors returned to more proven and consistent areas such as infrastructure and CeFi, investing nearly $2 billion and nearly $450 million in these areas, respectively, 3x and 2x the 2021 figures.

80% of CeFi projects and 78% of infrastructure projects have been launched on the mainnet, reflecting investors' strong confidence in these areas.

The results at the application layer are more mixed, with 66% of consumer-grade Web3 products and 68% of DeFi teams delivering products to the mainnet.

Consumer teams are more likely to cease operations, and the proportion of closed teams is almost twice that of infrastructure teams.

Payments (86%) and Wallets (90%) projects are most likely to launch on mainnet.

1.4 Ethereum Leads, Bitcoin Continues

Ethereum remains the dominant layer-one ecosystem in terms of fundraising, while Bitcoin projects continue to show resilience.

$1.4 billion was invested in Ethereum-based projects, followed by nearly $350 million in Solana-based projects.

The Polkadot ecosystem saw a significant drop in fundraising, down 40% year-over-year.

Teams building on Solana and Ethereum were equally likely to receive follow-on funding.

In contrast, no team in the NEAR ecosystem was able to raise follow-on funding.

Projects in the Binance ecosystem are least likely to remain active, with a third of teams ceasing operations. Solana’s failure rate also doubled from 2021 to 26%.

Bitcoin projects persist, with 100% of teams still active two years later.

II. Methodology

This report is based on a combination of first-party data, supplemented by insights from Messari, Root Data, Crunchbase, and other sources. To assess the progress of the seed-stage market, we categorized each company by stage, including “active but not delivering” and “no longer active,” with additional breakdowns by ecosystem and industry. While we have made every effort to ensure data accuracy, we acknowledge that errors may occur due to reliance on third-party data. Among ecosystems, we only included in the chart those with more than 15 teams that were able to raise a first round of financing.

One ​​of the most challenging aspects of this analysis is determining whether a project has achieved product-market fit (PMF). Unlike the objective milestone of "product delivery," PMF is often subjective and can be fleeting, especially in the rapidly changing crypto market. We combine on-chain data from analytics providers such as Dune Analytics and DeFiLlama with information from company websites and blogs to make these determinations.

(Note: Lattice's illustrations divide the analyzed products from left to right into several stages: active but not delivered, product delivered, with PMF, with tokens, no longer active, acquired, and shut down)

III.Seed Round Project Status

Our seed stage review began with an internal analysis to identify projects that are gaining attention but have not yet raised follow-on funds, which could become targets for Lattice. However, it turns out that the data is enough to share with the wider industry.

This research is valuable because it reveals the health of various sectors, ecosystems, and the broader early-stage market over time. Given that most seed-stage teams raise funds to sustain operations for about two years, we decided to use that time frame to review the seed years.

In 2022, more than 1,200 crypto companies raised more than $5 billion in seed and pre-seed funding. Looking back at this group, 72% of companies have launched on mainnet or equivalent networks, up from 66% last year. At the same time, 18% of projects either failed to deliver or have shut down, which is consistent with last year's data. However, the most significant drop was in teams looking for PMF, which fell to nearly 1.5%. It is worth pointing out again that for projects running off-chain, it is difficult to assess how much traction they actually have, so we may miss some teams with early PMF.

During the bear market, it has become increasingly difficult to attract users as retail interest has waned. Hot sectors in 2022, such as NFTs, the metaverse, and games, are not attracting users now as they did two years ago. In contrast, infrastructure projects that mainly serve other crypto companies have proven to be more resilient. The best example is Eigenlayer, which announced a seed round in January 2022 and has successfully expanded its AVS go-to-market strategy, with middleware projects eager to collaborate.

It's a good reminder that today's hot industries don't always appear with investor interest. For example, the Metaverse space has 75 teams raising nearly $280 million, but none of them have found a PMF, over 21% of the teams have closed, and you rarely hear anyone talking about the Metaverse. Compare that to DePIN or Ai, which barely registered in 2022 but are two of the hottest topics today.

(The data chart shows that 72% of seed round financing projects in 2022 already have a mainnet)

Fourth, Venture Capital Holds its Wallet Tight

The 2022 team raised funds during one of the most prosperous periods in the history of cryptocurrency. The teams that announced salary increases in 2022 were likely announced before the collapse of Terra and FTX, which caused the market to fall into a deep freeze. Although the overall financing amount increased by 92% from 2021, the subsequent market told a different story. Only 12% of the 2022 teams were able to raise more funds in the past two years. This is in stark contrast to teams in 2021, when nearly a third of teams received follow-on funding.

Interestingly, token issuance has also declined year-over-year, with only 15% of teams in the 2022 cohort launching a token, compared to 50% in 2021. This significant decline can be attributed to two main factors: 1) The 2022 cohort likely missed the bull run window, with many teams scrambling to launch products in the first half of 2024 before launches dried up over the summer. 2) As DeFi liquidity has fallen, launching on decentralized exchanges (DEXs) has fallen out of favor, and token issuance has shifted to centralized exchanges (CEXs). CEXs now charge high listing fees, often in the seven figures, and demand a large percentage of the token supply. The saturation of the token market, combined with the selectivity of CEXs and the diminishing appeal of launching on DEXs, makes it more challenging to bring tokens to market.

Five, Flying to Infrastructure

Infrastructure investment tripled compared to 2021, reflecting a clear shift in investor focus. While interest in infrastructure appears to have waned by the end of 2024, it is the most favored sector throughout 2022 and 2023. In contrast, DeFi was the only sector to see a year-on-year decline in investment, likely due to the fallout from DeFi’s surge in quick money schemes and Ponzi economics in the summer of 2020.

Investors were rewarded for following the infrastructure trend, and these teams were most likely to raise follow-on funds and launch on the mainnet. Conversely, DeFi and consumer teams were more likely to launch tokens, but also more likely to shut down. The application layer is feeling the pressure - without additional funding, teams are forced to either launch tokens or shut themselves down.

(The pie chart shows that more than 70% of the seed-round financing projects in each track have been delivered on the mainnet (black part); but most of them have not found PMF)

Six,Not all ecosystems are equal

Development across ecosystems reveals significant differences in project success rates. Nearly 80% of Ethereum-based projects have delivered products, outperforming Solana, of which only 61% have delivered products, down from 75% in 2021. While Solana has clearly weathered the bear market well, the massive influx of capital at the end of 2021 may have led to an overcapacity.

The failure rate for seed-stage teams in 2022 has remained consistent with that of 2021 teams, but significant differences have emerged within ecosystems. As observed last year, teams within the Binance ecosystem were most susceptible to shutdown, and now teams in the Avalanche ecosystem have joined the ranks. Notably, the failure rate for projects based on Solana doubled, with more than 25% of teams ceasing operations. This increase may be due to the influx of speculative capital during the bull market, leading to overextension and subsequent attrition during a particularly challenging period for Solana after FTX. However, it is clear that teams that have survived this difficult phase have been rewarded. Additionally, it’s worth highlighting the resilience of Bitcoin ecosystem teams, who not only continue to deliver, but also demonstrate extraordinary persistence, reflecting the reliability of the Bitcoin network itself.

The 2022 follow-on funding landscape reveals a significant decline across all major ecosystems. Only 13% of Ethereum-based projects were able to secure additional funding, down from 31% in 2021. Similarly, only 13% of Solana startups raised follow-on funding, a sharp drop from 30% last year. Notably, ecosystems such as Flow, StarkNet, and NEAR struggled to attract additional investment, with none of their projects receiving follow-on funding, highlighting the challenges these platforms face in maintaining developer and investor interest. This is particularly interesting given the amount of funding that has entered the base layer of each ecosystem in late 2021 and 2022, with Dapper Labs raising nearly $600 million in 2021, NEAR raising $500 million in 2022, and Starkware raising nearly $200 million in 2021 and 2022.

VII. What's Next

The situation for the 2022 vintage is more challenging than that of 2021. Finding PMFs in a sideways market without a lot of new retail net participation remains a challenge. Some teams have turned to hot industries with retail participation today (such as gambling-related applications). Additionally, the significant reduction in teams receiving follow-on funding will limit the time these teams have to pivot to new things. Finally, the significant increase in seed-stage startups and tightening token issuance market means more teams are trying to navigate a narrower range of token issuance opportunities.

Complicating all of these issues is the fact that investors have pivoted to today’s hotter sectors (e.g. DePIN and Ai) and ecosystems (e.g. Base and Monad). This highlights that returns come not from chasing what’s hot today, but from what’s hot 1-2 years from now.

We have no doubt that the seed-stage market in crypto will remain healthy, with active participation from nearly all funds, including a16z’s newly launched Crypto Startup School. For this group of teams looking to raise money for Series A and beyond, the robustness of the later-stage market remains a question. Even in our own portfolio, we’re seeing a shift in narrative that impacts founders’ ability to raise funds.

Eight,Industries and Trends to Watch

8.1 Privacy-Enabling Applications

Recently, investment in privacy-enhancing technologies has increased, and two privacy infrastructure trends have emerged in the past year: Zero-Knowledge Transport Layer Security (ZK TLS) and Fully Homomorphic Encryption (FHE). ZK TLS adds a privacy-enhancing layer to secure communications on the current Internet. ZK TLS projects such as Opacity are working with companies such as Lattice portfolio company NOSH to enable Nosh to leverage the existing web2 delivery market. In this example, the driver logs in with Doordash credentials in the nosh driver app, which the protocol treats as proof of identity. When the demand side of the network matures, drivers can make deliveries for Doordash in the nosh driver app, and if the order comes from the protocol network (not Doordash), the driver can earn tokens. We expect to see many more use cases for this new privacy primitive.

Similar to ZK TLS, advances in FHE infrastructure could enable a new class of crypto applications, from private DeFi to DePINfied data collection. An early practical example of this technology is sharing sensitive health information with AI companies. Lattice protfolio company Pulse is using the DePIN flywheel to collect health data that can be monetized by allowing researchers to analyze encrypted genetic data to identify patterns or biomarkers without having access to the original genetic information, thus maintaining confidentiality. As privacy infrastructure advances and converges with broader trends — namely AI agents and decentralized physical infrastructure networks (DePIN) for data collection — it could unlock a new wave of consumer and enterprise-focused applications.

8.2 Augmented Reality Applications and Infrastructure

Broader technology trends are heavily influencing where cryptocurrency founders’ efforts are directed and where investor funds flow. We’ve seen this firsthand with the surge in AI-related startups in 2023-2024 following OpenAi’s massive AI improvements. With Apple, Meta, and Snap all launching major strategies in the AR space, we expect to see more and more crypto startups in the space as AR-related technologies finally reach the masses. One example from the Lattice portfolio is Meshmap, which is building a decentralized 3D map of the world. As the installed base of AR devices explodes over the next few years, it will be critical for app developers to build 3D maps of their experiences. Excitement about the metaverse may be premature in 2021, but the lesson from last year’s and this year’s reports is that what people aren’t focusing on is where the alpha can be generated.

8.3 Blockchain-enabled Collectibles Markets

Collectibles trading is mostly associated with digital asset trading (especially NFTs), but blockchain-enabled collectibles markets are emerging, from spirits marketplaces such as BAXUS to watches on platforms such as watch.io and Kettle. Collectibles trading is already a large off-chain market, but is plagued by problems such as lack of instant settlement, physical custody, and reliable authentication.

We believe these challenges provide an opportunity for a "Blockchain Collectibles Market" (BECM), which is specifically designed to meet the needs of collectibles traders. BECM enables instant transactions through cash settlement, significantly reduces settlement time from weeks to seconds through the use of stablecoins, and adopts NFTs to represent physical assets held by trusted custodians. This model can unify fragmented markets, enhance liquidity, eliminate personal storage burdens, and establish trust through identity verification. BECM also supports financial innovations such as borrowing against collectibles, making the act of collecting more financially dynamic. As these efficiencies improve, BECM has the potential to significantly expand the total addressable market for collectibles by bringing in more traders, liquidity, and inventory.

IX. Ecosystem Rotation

Our tables and charts only include ecosystems with more than 15 projects raising venture financing, the smallest number was close to 15 projects and was therefore just excluded. Perhaps unsurprising, but we expect significant changes in the ecosystem, given the trends we are seeing, with Polkadot, NEAR, and Avalanche being replaced by L2 ecosystems and emerging L1 and 2 ecosystems such as Monad, Berachain, and MegaETH.