Crypto Startup Funding Increases to $2.7 Billion in Q2, 2024 Despite Drop in Total Deals

A recent report indicates a rise in crypto venture capitalist funding, with substantial new capital raised in Q2 2024. According to Pitchbook's report, crypto infrastructure projects led the charge, with top infra projects amassing $685 million in new capital in quarter two.

The August 9 report shows that VC funding hit $2.7 billion in Q2, representing a 2.5% increase in the total invested capital in Q1. However, the number of deals for crypto startups decreased by 12.5% compared to the value in Q1, 2024.

According to the report, the current statistics hint at rising interest from institutional investors in the crypto market.

Pitchbook Reveals Vital Statistics for Investors in the Crypto Sector

The Pitchbook Q2 report revealed a mild increase in crypto fundraising as startups attracted $2.7 billion across 503 deals.

However, the number of deals declined slightly despite the increased invested capital. Pitchbook attributes this decline to larger deals executed by institutional investors in the second quarter.

Also, financial analysts predict that the positive investor sentiment for cryptocurrencies will continue throughout the year.

Investment platform Monad raised the largest capital of $225 million in the second quarter. The DeFi-focused platform Berachain followed closely with $100 million, while the re-staking platform Babylon raised $70 million.

Additionally, the decentralized protocol Farcaster raised $150 million in a Series A funding round from investors. This brings the total investment for crypto firms to nearly $10.8 billion, slightly higher than the $10.1 billion raised in 2023.

Pitchbook's report revealed that the crypto startup funding round is now highly competitive at the earlier stages. However, investor interest in crypto fundraising declines in the later stages.

Analytical platform DefiLlama reveals that the blockchain sector has attracted over $102 billion in funding. These figures cover 5,400 funding rounds that began in June 2014.

Expert Believes that VC Firms Are Slowing Down Crypto Investment

Partner at Venture Capital Firm Cinneamhain Ventures, Adam Cochran, shared his views on venture capital. According to Cochran, most venture capitalists (VCs) have reduced their investment rate in crypto due to certain factors.

1/10

VCs have slowed investing in crypto by a lot, and its a bit of a nuanced reason:

1. Most of them have LPs that just want to beat index fund returns.

2. Over a medium term the R:R of owning Bitcoin and ETH will easily beat index funds, and can only be beat by early stage... https://t.co/yOG4TPdkFx

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

He noted that most VCs have limited partners (LPs) who focus mainly on better performances rather than index returns. Cochran believes the risk-reward ratio of owning Bitcoin and Ether will soon surpass the value of index funds.

2/10

3. Most of the VC funds are incapable of deploying early in this space.

4. So they can sit in BTC ETH and a few breakout investments collect fees, and return capital.

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

He stated that in the last cycle, venture capitalists were actively investing in already launched apps. He advised investors to exercise patience since this trend has not emerged in the current crypto market cycle.

3/10

5. Last cycle they seemed active by investing in apps that had already broken out, hoping to make up the multiple on late stages with consumers (great example being OpenSea)

6. They've now realized they can't actually do that yet and so are waiting for the next trend.

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

Cochran believes that most VC firms do not have the patience to take some risks but wait for breakout trends. Although Bitcoin and Ethereum have retail exposure through ETFs, Cochran notes that crypto still has underdeveloped consumer apps.

4/10

While every VC firm brands themselves as pro-innovation and in the trenches with the builders, most of them don't actually pursue moonshots, they just throw capital at breakout trends.

Because they don't actually have enough industry insights to take novel risk.

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

5/10

But this leaves crypto in an awkward spot, because we have a bifurcated market that most industries don't.

BTC and ETH are still early stage, but have retail exposure via ETF products.

Crypto has underbuilt consumer apps and UX.

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

Also, he noted that previous trends, such as NFTs, DeFi, and L2s, are fading away, and the next direction is unclear.

6/10

We've also burnt out the last few narrative trends (NFTS, AMM forks, defi, L2s) and its not quite clear what's next.

So you go through a quiet period, of a few builders who don't need capital slogging away to try and build something new.

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

Nonetheless, he believes that VC firms will invest heavily again once the next trend is discovered. Cohen also stated that VC firms truly understand crypto can make early investments and enjoy massive gains.

7/10

And if something catches that ignites the industry again, then dry powder VCs come and dump money in and add fuel to that fire.

But normally in an industry you've got more VCs taking early shots because the idle gain that BTC/ETH provide doesn't exist in those markets.

- Adam Cochran (adamscochran.eth) (@adamscochran) August 9, 2024

Another market observer, Beanie, reacted to Adam Cochran's remarks. Beanie stated that most crypto VCs are more focused on tech but join crypto to raise money from investors. He claims that these VCs do not get into any significant project in the crypto space early.

The post Crypto Startup Funding Increases to $2.7 Billion in Q2, 2024 Despite Drop in Total Deals appeared first on The Tech Report.