Investors unfazed by Q1 crypto funding decline

Investors unfazed by Q1 crypto funding decline
Mar 2023

Crypto-focused venture capital investors are trucking along in their work. Many remain confident in their investing strategies despite an enervated first-quarter market for crypto startup fundraising. Others are noticing a sharper decline in investing pace.

"I definitely saw a big slippage and drop in activity [in] Western markets," in Q1 2023, said David Gan, founder and general partner of OP Crypto. "I don't think people are heavily deploying, and rounds are taking a lot longer to close than ever before."

In Q1, $2.53 billion in capital was raised across 347 crypto and blockchain companies, down 79% from $12.27 billion in the year-ago quarter and a decrease of about 18% from $3.08 billion raised by the same corporate cohort in the previous quarter, according to preliminary PitchBook data.

The stark contrast from the year-ago quarter is unsurprising. The crypto world was in a different place back then. FTX, for example, was still a prominent crypto exchange and raised a $400 million round, bringing its total capital raised to $2 billion and giving the company a valuation of $32 billion at the time.

The climate has changed since then: FTX crumbled and Terra/Luna collapsed (and brought down $40 billion with it). Meanwhile, a series of Chapter 11 bankruptcy filings transpired across mega crypto institutions, including FTX, BlockFi, Three Arrows Capital, Celsius Network, Voyager Digital and Genesis Global Trading.

This past quarter was a "thawing of people wanting to open their checkbooks," Michael Terpin, CEO of Transform Ventures, said. "Right after FTX, it's predictable that no one wanted to invest in anything."