Crypto Startups See Increased Venture Capital in Q2: A Closer Look

Crypto startups experienced a modest uptick in venture capital funding during the second quarter of 2024, despite a drop in the number of deals. According to Pitchbook’s August 9 report, total invested capital rose by 2.5% compared to the first quarter of the year, while the number of deals fell by 12.5%.

Pitchbook suggests that the increase in capital with fewer deals might indicate growing confidence among institutional investors in the crypto market. “With positive investor sentiment returning to crypto and barring any major market downturns, we expect the volume and pace of investments to continue increasing throughout the year,” the report noted.

Leading Funding Projects in Q2

Infrastructure projects were at the forefront of Q2 funding. Notable raises included:

Monad: A layer-1 platform that secured $225 million in a Series A funding round.

BeraChain: A DeFi protocol featuring a novel proof-of-liquidity model that raised $100 million in a Series B round.

Babylon: A Bitcoin restaking platform that garnered $70 million in an early-stage round.

The quarter also saw two significant “mega-rounds”:

Farcaster: A decentralized social media protocol that raised $150 million in a Series A round, achieving a $1 billion post-money valuation.

Zentry: A blockchain gaming platform that secured $140 million in an early-stage round.

Funding Trends and Historical Context

Despite these notable raises, overall funding for crypto startups has slowed compared to the explosive growth of 2021 and 2022. In those years, the sector saw $25.3 billion and $29.4 billion in new capital, respectively. Total investment for crypto firms in 2023 amounted to $10.1 billion, and the current year is on track to reach $10.8 billion at the current rate.

Pitchbook’s report highlights that early-stage fundraising has become more competitive, while later-stage funding has seen less intensity.

DefiLlama data shows that over $102 billion has flowed into the blockchain industry across 5,400 funding rounds since June 2014. This enduring investment trend underscores ongoing interest in the sector, despite recent funding slowdowns.

The report arrives shortly after venture capital firms Pantera Capital and Paradigm sought substantial raises for new crypto funds—$1 billion and $850 million, respectively. Pantera Capital’s $1 billion raise would mark the largest for the cryptocurrency industry since May 2022, when Andreessen Horowitz (a16z) set a record by raising $4.5 billion.

a16z’s Investment Focus Shift

Andreessen Horowitz has since raised $7.2 billion in May 2024 to invest in various technology sectors, including artificial intelligence and gaming, but chose not to increase its cryptocurrency-focused fund.

The slight increase in venture capital for crypto startups in Q2 2024, combined with a decrease in the number of deals, reflects a nuanced landscape of growing institutional confidence amidst a competitive funding environment. As the year progresses, the market will be keenly observing how these trends evolve and impact the broader crypto ecosystem.