Golden Observation丨14 Charts Deconstructing the Crypto Venture Capital Market in the Second Quarter of 2023

Source: Galaxy official website; compilation: Jinse Finance Jason

Golden Finance reports, Encrypted currency venture capital firm Galaxy Digital released the second quarter encrypted venture capital market report. The data shows that the bear market continues. decline. Still, cryptocurrency venture capital activity remains robust compared to previous bear markets. The number of deals and invested capital is still about double what it was during the 2017-2020 bear market, suggesting net growth in the startup ecosystem over an extended period. Additionally, pre-seed deal activity remains fairly strong, with the US continuing to dominate the crypto startup ecosystem, while funds are flowing into emerging Web3, DAO, and verticals such as metaverse and gaming.

1. Analysis by transaction volume and investment scale

1. In the second quarter of 2023, the total investment scale of the cryptocurrency and blockchain industry was US$2.32 billion, the lowest level since the fourth quarter of 2020, and continued since the peak financing of US$13 billion in the first quarter of 2022 downward trend. In fact, cryptocurrency and blockchain startups have not been very optimistic about financing in the past year. The sum of financing in the past three quarters is less than that in the second quarter of 2022.

2. Although the scale of venture capital is gradually shrinking, the number of investment and financing transactions in the encryption industry increased slightly in the second quarter of 2023, with a total of 456 transactions completed, while the index value in the first quarter of 2023 was 439. The analysis found that the A round of the previous quarter Phase 1 financing deals increased, rising to 174, an increase of about 13% from 154 in the first quarter of 2023.

3. As far as the financing stage is concerned, early-stage transactions (pre-seed, seed round and A-round stage financing) accounted for the vast majority of investments in the encryption industry in the second quarter (accounting for 73%), while the number of late-stage transactions (27%) Relatively small.

2. Risk investment analysis by company year

4. In the second quarter of 2023, crypto startups established in 2021 and 2022 will complete the most financing transactions, with more than 100 transactions each.

5. Crypto startups established in 2022 received the most financing of any year (nearly $500 million), followed by crypto startups established in 2021 (over $450 million).

3. Risk investment analysis by geographic location

6. U.S.-based crypto start-ups dominate both in terms of the number of completed transactions and the scale of funds raised. In the second quarter of 2023, the scale of funds raised by U.S.-based crypto startups accounted for more than 45% of the total financing, followed by It was the UK (7.7%), Singapore (5.7%) and South Korea (5.4%).

7. From the perspective of the number of completed financing transactions, the situation is similar. In the second quarter of 2023, the number of financing transactions obtained by crypto startups in the United States accounted for more than 43% of the size of all completed financing transactions, followed by Singapore (7.5%), the United Kingdom (7.5%) and South Korea (3.1%).

4. Analysis by venture capital transaction scale and valuation

8. In the second quarter of 2023, the valuation scale of the entire venture capital field will continue to decline, and cryptocurrencies are no exception. The median pre-money valuation for cryptocurrency or blockchain VC deals fell to $17.93 million last quarter, the lowest level since Q1 2022, with the median cryptocurrency VC deal size at 3 million Dollar.

9. The decline in cryptocurrency venture capital deal sizes and valuations follows trends across the venture capital industry.

V. Analysis by type of venture capital investment

10. In the second quarter of 2023, crypto trading companies, exchanges, investment companies, and lending startups raised the most venture capital funds ($473 million, accounting for 20% of deployed capital).

Web3, NFT, Gaming, DAO, and Metaverse startups followed closely at $442 million, or 19% of all venture capital deployed in Q2 2023.

The Layer2/Interop space saw the largest funding deal of the past quarter: LayerZero, which raised $120 million in Series B funding. Magic Eden raised $52 million; infrastructure services provider Auradine raised $81 million; and River Financial raised $35 million.

11. From the perspective of the number of transactions, companies developing products in the fields of Web3 games, NFT, DAO and metaverse continue to maintain their leading positions, followed by trading, exchanges, investment and lending companies. These trends are unchanged from Q1 2023, but it is worth noting that companies building privacy and security products saw the largest quarter-over-quarter increase in the number of funding deals (275%), followed by infrastructure companies (114%).

12. The lion’s share of deals done at the later stage was in the mining and enterprise blockchain categories, while the compliance category, which includes chain analysis and regulatory tools, had the lion’s share of deals done at the pre-seed stage.

13. From the perspective of fundraising, mining and Layer 1 transactions are mostly in the later stage, while a large part of custody, media/education, compliance and DeFi are raised in the early stage.

6. Analysis by encryption venture capital institutions

13. Since Q3 2020, Q2 2023 will have the fewest new fund launches (10) and lowest allocations ($720 million).

14. Combined with the data for the first half of 2023, the average size of new funds is currently US$236 million, and the median is US$50 million, both of which have dropped significantly from last year.