Recent research conducted by the crypto market intelligence firm Messari has revealed that crypto fundraising in the third quarter of 2023 declined to levels last seen in the final quarter of 2020.
According to the State of Crypto Fundraising report, the last quarter recorded new lows in both funding amounts and deal counts. The overall funding for Q3 sat under $2.1 billion across 297 deals, indicating a 36% decline in both categories from Q2 2023.
Q3 Crypto Funding Declined to 2020 Levels
Messari’s researchers found that the majority of the deals in Q3 were concentrated in early-stage rounds: pre-seed, seed, and series A investments. Seed funding was the largest stage, with roughly $488 million raised across 98 rounds.
Early-stage deals increased to a 48% deal share in Q3 2023 from a 37% share in Q4 2020, while later-stage deals – Series B and other rounds – plunged to 1.4% from 8% within the same period. Messari noted that the development shows a strategic bear market positioning on investors’ part as they try to fund projects that can return greater profits when the crypto market moves in a positive direction.
Notably, investors have shifted from later-stage projects to early-stage projects in the last three years, evident in the number of deals allocated to each stage in Q3.
Furthermore, strategic funding deals have been increasing amid the bear market. Such rounds saw significant funding from corporate and private equity deals. The total funding share for strategic deals rose to 22% in Q3 2023 from 0.2% in Q4 2021, suggesting that unfavorable market conditions are causing projects to raise short-term bridge rounds or get acquired by larger projects.
DeFi and Gaming Among the Most Funded Sectors in Q3
Regarding sector funding, the chain infrastructure, gaming, and decentralized finance (DeFi) sectors emerged as the most well-funded in Q3. Chain infrastructure saw the largest share of capital at 18%, while DeFi recorded the highest number of deals, and the gaming sector received approximately $250 million in investments.
“The services sector, defined by complementary business functions such as marketing, incubators, security, and legal services, was the only other sector to average over $100 million in funding over the last 12 months. While other sectors are important to growing the crypto industry as a whole, these four sectors continue to attract the majority of investor attention,” Messari said.Investors are strategically positioning themselves for the bull market by focusing on projects that can return greater profits.
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