Funding to VC-backed Web3 startups fell by 30% from $2.4 billion in Q4 2022 to $1.7 billion in Q1 2023.
The largest rounds of the quarter (per Crunchbase data)
– Blockstream raised $125 million in a convertible note and secured loan financing
– Ledger added another $108 million to its previously announced $380 million Series C at its same $1.4 billion valuation
– Chain Reaction raised a $70 million Series C
Total number of funding rounds >$100m: 2
Total number of funding deals: 333
Venture funding has decreased across all sectors not just Web3. The reason Web3 has been affected more than most other sectors is that during turbulent economic conditions investors tend to seek out industries they are more familiar with, such as cybersecurity or SaaS.
The industry is also still recovering from the dramatic collapse of FTX and other crypto lenders as well as banking issues that affected the economy in general; however, there are positive signs. Certain small sub-sectors within Web3 have seen renewed interest from venture capitalists, such as blockchain infrastructure players who can help lay the foundation for Web3. Chain Reaction, QuickNode and EigenLayer all raised significant funds in the past quarter.
Whether these positive signs begin a new trend, which attracts more venture capital back to the Web3 space remains to be seen.