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Crypto Venture Investments in Web3 Startups Decline for Seventh Consecutive Quarter

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Source: Adobe / LALAKA

Venture capital interest in web3 startups continues to wane as data from Crunchbase reveals a seventh consecutive quarter of declining investments in the sector.

The decline, which started in the fourth quarter of 2021 after a peak in crypto venture fundraising, persisted through the third quarter of 2023, according to the data.

The news was first reported by TechCrunch.

Web3 startups secured approximately $1.3 billion in Q3 2023, marking a significant decrease from the roughly $2 billion raised in both Q1 and Q2 of the same year.

The numbers are a far cry from the impressive figures recorded between Q3 2021 and Q2 2022 when web3 startups were routinely securing over $8 billion per quarter.

In Q3 2022, the sector raised $4.5 billion, only half of what was secured in the previous quarter, underscoring the sector’s volatility and its impact on investor confidence.

Sector faces challenges and uncertainties

The continued decline suggests that investors are exercising caution in the crypto space, with the web3 sector still facing uncertainties and challenges, often related to regulations, that many believe need to be addressed before confidence is fully restored.

The declining trend has also raised questions about the future of venture capital interest in the crypto sector, although reports from earlier this year have indicated that many venture investors remain bullish on the crypto sector long-term.

‘Extremely challenging’ funding environment, Galaxy Says

Earlier this year, a report from Mike Novogratz’s digital asset management firm Galaxy Digital admitted that the environment for crypto VC fundraising remains “extremely challenging,” after what had then been five consecutive quarters of decline in funding.

“When combined with the bear market in cryptoasset prices and the fact that many allocators feel burned after the spectacular blowups of several venture-backed companies in 2022, venture investors will continue to find it difficult to raise new funds in 2023,” Galaxy Digital wrote in its report at the time.