2023 Q2 Crypto Assets and Blockchain Venture Capital Analysis Report

Market Overview

In the second quarter of 2023, the total investment in the Crypto Assets and Blockchain industry dropped to $2.32 billion, marking a new low since the fourth quarter of 2020, continuing the downward trend after the peak of $13 billion in the first quarter of 2022. Despite this, trading activity saw a slight increase, completing 456 transactions, up from 439 in the previous quarter. This small growth mainly came from an increase in Series A transactions, rising from 154 to 174.

In terms of capital investment, early-stage transactions ( including Pre-Seed, Seed, and Series A ) accounted for 73% of the total investment, while later-stage transactions accounted for 27%. Companies established in 2021 and 2022 completed the most venture capital transactions this quarter, with companies founded in 2022 raising the most funds.

Regional Distribution

American companies continue to dominate in crypto assets venture capital. In the second quarter, American companies raised 45% of the crypto venture capital funding and completed 43% of the deals. The UK, Singapore, and South Korea followed, accounting for 7.7%, 5.7%, and 5.4% of the total funding, respectively.

Valuation and Trading Volume

In this quarter, the valuation of Crypto Assets venture capital continues to decline. The median pre-investment valuation of transactions has dropped to $17.93 million, the lowest level since the first quarter of 2022. The median transaction size is $3 million, slightly up from the previous quarter. This trend is consistent with the overall performance of the venture capital industry.

Investment Field Distribution

Startups related to trading, investing, and lending raised the most funds this quarter, totaling $473 million, accounting for 20% of total investments. Projects related to Web3, NFTs, gaming, DAOs, and the metaverse followed closely, raising $442 million, accounting for 19%.

In terms of transaction volume, companies in the Web3 gaming, NFT, DAO, and metaverse sectors maintain a leading position, followed by transaction, exchange, investment, and lending companies. Notably, the transaction volume of privacy and security product companies saw the largest month-on-month increase at 275%, followed by infrastructure at 114%.

Risk Capital Financing Situation

In the second quarter of 2023, the fundraising situation for crypto assets venture capital funds is not optimistic. The number of new funds issued has dropped to 10, the lowest level since the third quarter of 2020, with a total fundraising amount of only $720 million. In the first half of 2023, the average size of new funds was $236 million, with a median of $50 million, a significant decline compared to last year.

Conclusion and Outlook

1. Despite being relatively strong compared to the bear market from 2017 to 2020, the current Crypto Assets venture capital activity is still filled with challenges in the overall investment environment.

2. Venture capitalists are facing a difficult financing environment, which may put greater pressure on entrepreneurs. Founders need to focus more on revenue and sustainable business models, and be prepared to accept smaller scale financing.

3. Trading activity before the seed stage remains active, with early-stage trades accounting for nearly 75% of total trading volume, demonstrating the ongoing vitality of entrepreneurs and the interest of venture capitalists.

4. The United States' dominant position in the encryption startup ecosystem remains solid, despite facing regulatory challenges.

5. The Web3 sector continues to lead in transaction volume, while traditional trading-related companies still attract the most investment funds.

Overall, the Crypto Assets venture capital market is still in a period of adjustment, but innovation and entrepreneurial activities remain active. As the market matures, we may see more projects focusing on practical applications and sustainable business models emerging.