Crypto Venture Capital Sees Modest Rebound in Q2 2024

According
to

Galaxy
Digital,
the
crypto
venture
capital
market
showed
signs
of
recovery
in
Q2
2024,
with
total
investments
rising
to
$3.2
billion,
up
from
$2.5
billion
in
Q1.
However,
the
number
of
deals
dropped
slightly
from
603
to
577.

Deal
Count
&
Capital
Invested

Venture
capitalists
invested
$3.194
billion
into
crypto
and
blockchain-focused
companies
across
577
deals
in
Q2,
marking
a
28%
increase
in
capital
invested
quarter-over-quarter
(QoQ).
Despite
this,
the
deal
count
saw
a
4%
decline
QoQ.

Capital
Invested
&
Bitcoin
Price

The
historical
correlation
between
Bitcoin’s
price
and
venture
capital
investment
has
weakened.
Bitcoin
has
risen
significantly
since
January
2023,
yet
venture
capital
activity
has
not
kept
pace.
Factors
such
as
Bitcoin
ETFs
and
regulatory
challenges
have
contributed
to
this
divergence.

VC
Investment
by
Stage

In
Q2
2024,
78%
of
venture
capital
was
allocated
to
early-stage
companies,
while
later-stage
companies
received
20%.
Larger
generalist
venture
capital
firms
have
reduced
their
activities
in
the
sector,
making
it
challenging
for
later-stage
startups
to
secure
funding.

Valuation
&
Deal
Size

Median
pre-money
valuations
for
VC-backed
crypto
companies
surged
to
$37
million
in
Q2
2024,
nearly
doubling
from
$19
million
in
Q1.
Median
deal
sizes
also
saw
a
slight
increase
to
$3.2
million.

Investment
by
Category

The
“Web3/NFT/DAO/Metaverse/Gaming”
category
attracted
the
most
capital,
raising
$758
million,
led
by
significant
deals
from
Farcaster
and
Zentry.
Infrastructure,
Trading,
and
Layer
1
companies
followed,
accounting
for
15%,
12%,
and
12%
of
the
total
capital
invested,
respectively.

Deal
Count
by
Category

Web3
led
in
deal
count
with
19%,
driven
by
decentralized
social
media
and
gaming-related
deals.
The
infrastructure
category
came
second,
followed
by
Trading
and
DeFi-related
companies.

Investment
by
Geographic
Location

Over
40%
of
all
deals
involved
companies
headquartered
in
the
United
States,
which
also
attracted
53%
of
the
total
VC
capital
invested.
The
United
Kingdom,
Singapore,
UAE,
and
Hong
Kong
followed.

Investment
by
Cohort

Most
deals
and
capital
raised
in
Q2
2024
involved
companies
founded
between
2021
and
2023,
indicating
a
strong
interest
in
newer
startups.

Key
Takeaways

• The
  crypto
  venture
  capital
  sentiment
  is
  improving,
  although
  it
  remains
  below
  the
  2021-2022
  levels.
  With
  Bitcoin
  and
  Ethereum
  rising
  approximately
  50%
  year-to-date,
  capital
  invested
  rose
  28%
  QoQ.

• Web3
  and
  Layer
  1
  sectors
  saw
  significant
  investments,
  with
  notable
  deals
  from
  Farcaster
  and
  Monad.

• Median
  valuations
  have
  spiked
  to
  levels
  not
  seen
  since
  Q4
  2021,
  driven
  by
  increased
  competition
  among
  investors.

• Bitcoin
  Layer
  2
  projects
  continue
  to
  attract
  substantial
  investments,
  with
  a
  174%
  QoQ
  increase
  in
  capital
  raised.

• Early-stage
  deals
  dominated
  the
  quarter,
  capturing
  nearly
  80%
  of
  the
  investment
  capital.

• The
  United
  States
  continues
  to
  lead
  in
  both
  deal
  count
  and
  capital
  invested,
  although
  regulatory
  challenges
  could
  impact
  its
  dominance.

Image
source:
Shutterstock