In areas from consumer products to apps to gaming, U.S. venture firms have raised fresh capital to invest in industries where funding levels remain drastically below peak. This, along with a modest uptick in first-quarter venture investment, indicates some sectors may have hit a cyclical low last year and should be heading higher.

To get a sense where newly allocated capital is going, we aggregated U.S. fundraising data for all new startup investment vehicles announced this year. We then looked at some of the sectors where investors plan to focus.

To a large degree, they will continue to fund hot themes of recent quarters, and AI in particular. However, we also saw a number of funds targeting areas that might be considered more out of favor. Let’s take a closer look.

The app economy

Most of us are more addicted to our apps than ever. Yet even so, venture investment in app startups has been tapering off for years.

Per Crunchbase data, funding for U.S. companies tied to the app economy peaked as a percentage of total investment back in 2016. In 2023, it hit its lowest point in a decade.

Against that backdrop, it’s interesting to see that Andreessen Horowitz has earmarked $1 billion out of the firm’s latest $7.2 billion fundraise to go toward an apps-focused fund. One expects AI will factor heavily into this strategy, given the firm’s stated enthusiasm for AI-driven companionship, wellness and creativity tools.

Gaming

After several slow quarters, funding to gaming startups has picked up this year, driven by a resurgence in early-stage dealmaking. New funds are also looking to tap into the momentum.

Earlier this month, Bitkraft Ventures, an early-stage gaming-focused investor, closed on $275 million for its third fund. And last week, Andreessen Horowitz announced it raised $600 million for a gaming-focused fund, as part of its massive total fundraise.

Consumer

Consumer-focused startups haven’t been an investor favorite of late. VCs have essentially abandoned the direct-to-consumer startup model, and they’re not backing a lot of consumer products startups either.

Maven Ventures, however, offered a bit of encouragement for the space. The Silicon Valley-based firm closed on $60 million this month for a fourth fund continuing its strategy to “invest in seed stage software startups tapping into new consumer behavior and trends.”

Andreessen Horowitz, meanwhile, is enthused about the intersection of AI and consumer-facing investment. A recent post notes that: “Consumer software companies are amongst the most valuable in the world (FAANG is all consumer) and were built during a major platform shift or product cycle. We expect this time to be no different.”

Web3

Startups related to Web3 — defined as those in the crypto and blockchain sectors — saw a slight increase in funding in Q1 of this year, per Crunchbase data. It was the first quarter-over-quarter rise for the space, once among the buzziest in the venture landscape, since the fourth quarter of 2021.

San Francisco-based Hack VC, a Web3-focused venture investor, landed $150 million for a new fund in February. It’s been investing busily, participating in more than a dozen known rounds this year, per Crunchbase data.

Deals are also getting done at high valuations. In March, for instance, three global crypto-related companies crossed the $1 billion valuation threshold to clinch unicorn status: Berachain, an Ethereum-compatible blockchain for financial applications, Io.net, a blockchain service to sell excess GPUs, and Polyhedra Network, a Web3 infrastructure company.

Cybersecurity

Cybersecurity is among the sectors that saw U.S. funding perk up in Q1, after hitting a multiyear low two quarters earlier. Rounds in the hundreds of millions are happening again, per Crunchbase data, as is talk around potential exits for some of the more heavily funded players in the space.

Just in time for the rebound, San Francisco-based Ballistic Ventures announced in March that it has raised $360 million for an oversubscribed second fund that will invest exclusively in cybersecurity.

What was out is in again (with a twist of AI)

Rising interest and investment in sectors that hit cyclical lows last year doesn’t mean venture investors are turning away from their recent favorite investment theme: AI. Rather, there’s a vast array of applications for artificial intelligence in almost any industry.

Still, it’s reassuring to see startup sectors bouncing back, and to see funds with stores of capital dedicated to these spaces.

Related Crunchbase Pro lists:

• ​​Funding To VC-Backed Web3 Startups
• Cybersecurity Funding

Related reading:

• The Mixed State Of Startup Funding In 2024, In 11 Charts
• Investors Re-Engage With Gaming Startups
• Web3 Venture Funding Bounces Back Slightly From Last Year’s Lows
• Cybersecurity Funding Shows Resilience In Q1

Illustration: Dom Guzman

Web3, once the buzziest of all buzz words in the venture landscape, saw its funding slightly increase in the first quarter of the year compared to last year’s fourth quarter — the first uptick Web3 funding has realized since the fourth quarter of 2021.

However, venture dollars are still down year to year and well off the highs seen in 2021-22.

Startups related to Web3 — defined as those in the crypto and blockchain sectors — raised just less than $1.9 billion in 346 deals in Q1, per Crunchbase data.

That dollar figure is a 58% increase from last year’s Q4, when startups in the sector raised nearly $1.2 billion in 263 deals. However, this year’s Q1 venture dollar number still is a 17% decrease from the same quarter in 2023, when startups raised $2.3 billion in an eye-catching 670 deals.

The deal count number represents a 48% drop year to year.

Web3’s bumpy road

It wasn’t that long ago that Web3 and the thought of a decentralized internet was the darling of the private market, with new unicorns being minted seemingly every week and big rounds being handed out like candy.

However, the venture pullback that started in 2022 hit the Web3 sector harder than most, as investors fled to better defined — and more profitable — industries and cryptocurrencies entered its difficult winter. FTX founder Sam Bankman-Fried’s fraud and crypto lenders going bankrupt also didn’t help.

However, Q1 2024 represents the first increase Web3 venture funding has seen since Q4 2021. That though, was a very different time. That quarter-over-quarter increase was from about $8 billion to an almost unfathomable $10.5 billion.

Big rounds remained difficult to come by, as the three biggest rounds last quarter totaled less than $300 million:

• London-based Exohood Labs, which is undertaking an AI project that uses quantum computing and blockchain, raised a massive $112 million seed round that valued it at $1.4 billion;
• Seattle-based EigenLabs, the creator of EigenLayer for staking Ethereum, raised a $100 million Series B from a16z crypto; and
• Hong Kong-based Freechat, super applications based on Web3 social networks, locked up an $80 million Series A.

Valuations seem to be on the rise in the industry, however, as Web3 saw a handful of new unicorns minted. That follows a Q4 lull in which only Cayman Islands-based blockchain messaging tool Wormhole joined the herd.

In the most recent first quarter, Berachain, an Ethereum-compatible blockchain for financial applications, Io.net, a blockchain service to sell excess GPUs, and Web3 infrastructure startup Polyhedra Network all were minted unicorns.

On the rise?

The next few quarters could be very telling for the future of Web3. While investors say they expect investment to eventually bounce back as a decentralized internet becomes more built out, that may not happen for another year as venture continues to stabilize after the go-go days of 2021.

Can Web3 startups continue to survive at the current level of funding?

Many startups in the industry raised big rounds a few years ago, so they may have financial runway. Deal count also increased in the first quarter, so more money is being spread around.

There also is the boon crypto is seeing. The price of Bitcoin is up nearly 60% in 2024, while Ether has increased nearly 50%. With the approval earlier this year for U.S. exchange-traded funds that hold Bitcoin from nearly a dozen asset managers — including giants such as BlackRock and Fidelity — and the Bitcoin halving event, crypto could have even more upside and that could bring in new venture investment.

Just last week, New York-based Monad Labs locked up the biggest Web3 funding round of the year thus far, collecting a $225 million funding round led by Paradigm. Monad is a layer-1 blockchain that is compatible with the Ethereum Virtual Machine but can process transactions using the same set of rules faster. The round is reminiscent of the 2021-22 era when layer-1 protocols like Aptos Labs raised big.

Perhaps that is a harbinger of more big-money funding to come. The first quarter did show that interest from investors still exists.

Methodology

For Web3 funding numbers we analyze investments made into VC-backed startups in both cryptocurrency and blockchain.

Related Crunchbase Pro Query:

• Funding To VC-Backed Web3 Startups

Related reading:

• Web3 Funding Cratered In 2023
• FTX Founder Bankman-Fried Sentenced To 25 Years For Fraud, Conspiracy
• With Bitcoin Hitting New Highs, Will VCs Take Notice?

The funding also includes previous and new investors including a16z crypto, Bain Capital Crypto and Distributed Global. 

The San Francisco-based startup is building tools in support of Worldcoin, an Ethereum-based token currently in beta. Its World ID platform is attempting to create unique digital identities — based on blockchain technology — for people by scanning their eyes with a small orb.

The startup has raised many questions surrounding AI, data and privacy. While such an identity platform could be useful as AI makes it more difficult to know who or what one is dealing with over the internet, the scanning of people’s eyes to create a digital identity and how that information could be used has raised privacy and data concerns.

Due to its decentralized nature and hopes to create true unique digital identities, Worldcoin also has been associated with being involved in the process of distributing a universal basic income if AI starts to eliminate massive amounts of jobs — something that also has caused debate.

“As we embark on the age of AI, it is imperative that individuals are able to maintain personal privacy while proving their humanness,” said Alex Blania, CEO and co-founder of Tools for Humanity. “In doing so we can help ensure that everyone can realize the financial benefits that AI is poised to deliver.” 

The company did not reveal a valuation, but an earlier report said it was looking to raise money at a $3 billion valuation.

Bucking the trend

While Tools For Humanity may have had a successful fundraise, that has not been the case for most crypto and Web3 startups.

Venture funding to VC-backed Web3 startups plummeted 82% in the first quarter of the year — dropping from $9.1 billion in Q1 of 2022 to only $1.7 billion, per Crunchbase data.

The funding number is the lowest total since the fourth quarter of 2020 — which saw only $1.1 billion — when many people had never heard of Web3.

VC-backed crypto startups saw just more than $800 million invested, the lowest total since more than $600 million was invested in Q1 2020.

Further reading:

Web3 Funding Continues To Crater — Drops 82% Year To Year

Illustration: Dom Guzman

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In its first acquisition, San Francisco-based Ripple has acquired Switzerland-based Metaco for $250 million — half in cash and half in equity, according to Ripple.

So what does each of these companies do and why does this acquisition make sense? Let’s take this nice and slow.

Privately owned Ripple is the world’s sixth-largest cryptocurrency exchange. 

Metaco makes technology allowing financial institutions to store and manage digital assets. This is a big deal, especially after several major firms (FTX) collapsed, leaving investors facing big losses.

Why Metaco matters

The fact that Metaco is based outside the United States where crypto regulation is much clearer is a bonus for Ripple as the U.S. Securities and Exchange Commission wrestles to figure out the future of crypto regulation.

The Swiss company is also a legit player in its own right with clients including Citi, BNP Paribas and Societe Generale‘s digital asset arm.

Metaco has raised a total of $20 million in funding over four rounds. Its latest funding was raised on July 14, 2020, from a Series A round. Metaco is funded by 11 investors. Verve Ventures and Standard Chartered Bank are the most recent backers, according to Crunchbase data.

Investor enthusiasm in crypto waned after a drop in cryptocurrency prices in 2022. A slew of major crypto firm failures didn’t help. Yes, we are talking (again) about FTX.

In a statement on its website, Ripple CEO Brad Garlinghouse said, “Through the strength of our balance sheet and financial position, Ripple will continue pressing our advantage in the areas critical to crypto infrastructure. Bringing on Metaco is monumental for our growing product suite and expanding global footprint.”

Ripple is no slouch either.

It  has raised a total of $293.8 million in funding over 14 rounds. Its latest funding was raised on Aug. 21, 2021, from a  Series B round. Ripple is funded by 43 investors. Uday Kumar Bangalore Shivaraman and Azure Ventures Group are the most recent investors, according to Crunchbase data.

While crypto prices are on the rise, the dramatic collapse of FTX still hangs over the entire sector with several other lenders and exchanges.

Related query:

• 2023 Crypto Funding

Related reads:

• Ledger Locks In $108M To Lock Up Crypto
• SVB, Signature Shutdowns Not Chilling Crypto

Illustration: Dom Guzman

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The France-based crypto hardware maker raised its initial Series C of $380 million in June 2021. The extension was done at the same valuation — about $1.4 billion — when taking into account currency conversion.

The round includes existing investors Molten Ventures, 10T, Cité Gestion Private Bank, Cap Horn, Morgan Creek, Cathay Innovation, Korelya Capital and new investors with True Global Ventures, Digital Finance Group and VaynerFund.

Ledger’s main products are cold hardware wallets for digital assets, allowing the owner to have full custody and security over their assets.

The company currently says it secures more than 20% of the world’s cryptocurrencies and more than 30% of NFTs.

Founded in 2014, Ledger has raised $468 million, per Crunchbase.

“These funds will accelerate our mission to bring a new generation of secure consumer devices to hundreds of millions exploring critical digital assets and blockchain-enabled technology,” said Pascal Gauthier, CEO and chairman, in a blog.

“As you know, 2022 was a trying year for the crypto industry, including the collapse of significant crypto exchanges and shifting macroeconomic conditions,” he added.

Crypto funding

Ledger was able to raise despite a very unfavorable funding environment in crypto currently.

While crypto prices are on the rise, the dramatic collapse of FTX still hangs over the entire sector with several other lenders and exchanges having their own problems and issues.

Crypto funding for the current — almost over — first quarter is at a low ebb. So far, the quarter has seen less than $1 billion invested into VC-backed crypto startups in only 174 deals, per Crunchbase data.

Compare that to last year at the same time when $6 billion of venture capital rolled to crypto startups in 426 deals.

It seems unlikely any quarter this year will match that.

Illustration: Dom Guzman

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About $2.2 billion of that total went to Bankman-Fried himself, according to a release. Ex-FTX director of engineering Nishad Singh received the second-highest amount — $587 million. Singh already has pleaded guilty to charges including fraud and conspiracy.

The $3.2 billion does not include more than $240 million spent to purchase luxury property in the Bahamas, and make political and charitable donations as well as “substantial transfers” to subsidiaries in the Bahamas and other jurisdictions.

“The FTX debtors are investigating causes of action against the recipients of these transfers and their subsequent transferees,” the release said.

The story so far

FTX filed for bankruptcy protection in November after it was not able to repay customers who had deposited funds on its exchange. 

FTX was the fourth-largest crypto exchange by volume when it failed, and Bankman-Fried was one of crypto’s biggest evangelists and financial backers. Through FTX Ventures and his other trading firm Alameda Research, the crypto whiz kid made hundreds of bets on the industry and the future of digital finance.

Investors in FTX included big names like Sequoia Capital, NEA, Lightspeed Venture Partners, Insight Partners, Temasek, SoftBank Vision Fund, Thoma Bravo, SoftBank Vision Fund 2 and Coinbase Ventures.

At its peak, FTX and FTX US — its U.S.-based exchange — were valued at $32 billion and $8 billion valuations, respectively.

In December, federal prosecutors charged Bankman-Fried with a slew of criminal counts after his arrest in the Bahamas — including conspiracy to commit wire fraud and securities fraud, individual charges of securities fraud and wire fraud, money laundering and conspiracy to avoid campaign finance regulations.

Bankman-Fried has denied any wrongdoing and is out on bail. His fraud trial is to start in October.

Illustration: Dom Guzman

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It’s no secret that the relationship between the Securities and Exchange Commission and the crypto industry is akin to that of a dog and a feral cat.

However, an interesting report by The Wall Street Journal further illustrates that frayed relationship and the fact that the SEC will not make it any easier for crypto to break out of its tailspin.

According to the story, the SEC did not give approval for public listings to crypto-focused companies such as Bullish Global, Circle Internet Financial and eToro. The companies all were looking to go public through mergers with special-purpose acquisition companies.

While the SEC did not stop any of the firms from merging, the slow pace of the review process and extensive questioning seemed to hurt their efforts to list, per the report.

Circle’s plight

Boston-based Circle’s effort to go public certainly caught our eye before finally reaching its long, winding conclusion last month.

Circle’s proposed merger with blank-check firm Concord, which is backed by former Barclays boss Bob Diamond, has been its own long and winding story.

The company — an issuer of USD Coin, a type of stablecoin — announced in July 2021 it would merge with Concord in a deal that would value the company at $4.5 billion. However, USD Coin’s circulation quickly doubled and, in February of last year, Circle terminated its previously announced merger agreement and agreed to new terms that doubled the crypto company’s valuation to $9 billion. 

That deal was expected to close last month, but instead the company called off its proposed merger agreement.

According to the report, the SEC raised more than 100 questions with Circle’s disclosures about the SPAC agreement.

Again, none of this comes as a surprise, but it is significant. VCs and other institutional Investors are likely more wary than ever about backing crypto startups. If it becomes clear one of the paths to a liquidity event is blocked by an agency such as the SEC, the appetite to invest in the space becomes even less.

In a market where it likely will be hard to raise funding for crypto-focused startups, the SEC’s actions may increase that difficulty level even slightly more.

Further reading:

• Funding To Web3 Startups Plummets 74% in Q4
• FTX Collapse Will Reverberate Throughout The VC World For A Long Time
• How VCs Invest In Crypto Will Be Changed By FTX’s Spectacular Fall
• Semafor To Buy Back Bankman-Fried’s Stake — Report

Illustration: Dom Guzman

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“Stability” and “crypto” are not two words normally associated with each other, but hey, these are strange times.

October has seemingly brought some stability to what has been a tumultuous time for crypto, as large cryptocurrencies like Bitcoin and Ether seem to have found a level — at least for now.

Bitcoin has remained relatively stable this month, staying above $19,000, but not getting above $20,400. Ether has been above the $1,270 range, but staying below its recent highs seen in August. It, however, saw significant gains Tuesday to put it above $1,400.

While this won’t cause investors to celebrate — certainly not those who bought in high last November — it is an interesting moment in time where crypto seems to be separating from its normal trends.

While the markets have held reasonably strong for the past month, concerns about inflation, interest rates and the strength of the dollar continue to swirl. Those issues have usually rankled the crypto market as investors turn away from higher-risk assets.

However, now crypto seems to be working like an actual hedge against inflation. In fact, it’s resembling a store of value, similar to gold — a correlation many have made over time but the markets have not borne out.

Crypto is perhaps working more like it was supposed to when DeFi originated. Or maybe it’s just a brief blip and high volatility will return.

It’s crypto, so we’ll bet on the latter.

In other news

This was a slow week in the Web3 world, so take a moment and read about the new Web3 unicorns minted last month in our monthly recap here.

Note: Our list includes a Switzerland-based crypto product startup, 21.co, which raised a smallish $25 million round at a whopping $2 billion value — which is so very Web3.

Illustration: Dom Guzman

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Funding for the third quarter in Europe totaled $16 billion, down 44% year over year from $28 billion and down 35% quarter over quarter from $24 billion, per an analysis of Crunchbase data. 

This downward trend for European venture funding in the past quarter is in line with global and North American funding trends. We find the largest quarterly decline on a global basis year over year since Crunchbase started tracking venture funding in the mid-2000s.  

Funding in Europe is at its lowest since the fourth quarter of 2020, which totaled $13.4 billion. 

The biggest dip quarter over quarter was at early-stage funding, while late stage fell by a greater proportion year over year.

Early-stage funding dropped

The most significant shift in European venture in the third quarter was at early-stage funding which dropped below $5 billion for the first time since the beginning of 2021. 

Early-stage funding declined by more than 40% quarter over quarter and year over year, a signal that European venture capital firms have scaled back their investment pace due to the global economic downturn. 

In the first half of 2022 early-stage funding remained high, in defiance of the economic downturn.

Late-stage funding

Late-stage funding continued to fall further from the second quarter into the third quarter. It reached $9.4 billion in the third quarter, down by almost a third quarter over quarter and close to half of Q3 2021 funding. 

Late-stage funding in 2021 in Europe grew over 200% year over year, as global investors sought out growth companies in Europe. Those investors have scaled back since the second quarter of 2022. 

However late-stage funding into European startups has remained a larger proportion of funding at 60% this past quarter compared to around 50% in 2020.

Seed-stage funding

Seed-stage funding dipped below $2 billion for the first time since the beginning of 2021. Year over year seed-stage funding fell by a lesser proportion compared to other funding stages but still down 29% quarter over quarter and 20% year over year. 

The larger drop quarter over quarters is an indication of investors declining appetite for new investment opportunities in the current climate.

New unicorns 

Only four companies from Europe joined The Crunchbase Unicorn Board this past quarter, compared to 21 new European unicorns in the second quarter of 2022. 

Cryptocurrency companies 21.co from Zurich and Copper from London joined the list. Also new to the board is sustainable blockchain provider 5ire headquartered in London. Payments company Satispay, which helps consumers and merchants avoid fees from traditional credit card providers, is the fourth European company to become a unicorn. 

It’s been a chilly time for unicorns all around: Buy now, pay later payments provider Klarna shed $39 billion in value in the second quarter and dropped off the list of the top 10 most highly valued private companies. 

In summary

While overall funding is down from the peak in 2021, European startups still garnered funding amounts above 2020 quarterly totals. 

In the meantime median and average seed and Series A funding have held up compared to 2021 amounts. Median and average fundings from Series B onwards declined. 

European venture firms have continued to raise record funds into 2022 including Northzone, Felix Capital, LocalGlobe, Creandum alongside settlers from the U.S. venture markets who raised record funds in recent years and set up shop in Europe.

Crunchbase Pro queries relevant to this article

• European funding 2022
• European private unicorns (193)

Methodology

The data contained in this report comes directly from Crunchbase, and is based on reported data. Data reported is as of October 3, 2022.

Note that data lags are most pronounced at the earliest stages of venture activity, with seed funding amounts increasing significantly after the end of a quarter/year.

The most recent quarter/year will increase over time relative to previous quarters. For funding counts, we notice a strong data lag, especially at the seed and early stages, by as much as 30 percent to 40 percent a year out.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

For M&A transaction analysis, we include venture-backed companies and exclude companies that previously went public. 

Glossary of funding terms

Seed and angel consists of seed, pre-seed and angel rounds. Crunchbase also includes venture rounds of unknown series, equity crowdfunding and convertible notes at $3 million (USD or as-converted USD equivalent) or less.

Early-stage consists of Series A and Series B rounds, as well as other round types. Crunchbase includes venture rounds of unknown series, corporate venture and other rounds above $3 million, and those less than or equal to $15 million.

Late-stage consists of Series C, Series D, Series E and later-lettered venture rounds following the “Series [Letter]” naming convention. Also included are venture rounds of unknown series, corporate venture and other rounds above $15 million.

Technology growth is a private-equity round raised by a company that has previously raised a “venture” round. (So basically, any round from the previously defined stages.)

Illustration: Dom Guzman

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Kim Kardashian agreeing to settle SEC charges for $1.26 million obviously was the biggest story in crypto and Web3 this week.

OK, it probably wasn’t, but it was a quiet week (and yes, she did pay up because she endorsed EthereumMax without disclosing that she was paid to do so. Don’t feel bad, she is worth $1.8 billion.).

However, since this is the first column of October, I thought maybe we’d take a look back at the biggest funding rounds around Web3 in September.

The sector saw 125 funding rounds (rounds that went to startups in the crypto, blockchain and Web3 space), with three of those topping $100 million, according to Crunchbase data.

The big three

Palo Alto, California-based Mysten Labs closed a $300 million Series B last month at a more than $2 billion valuation led by FTX Ventures. Layer 1 system startups build their own blockchain—meaning it will not sit on Ethereum or another network, but be its own decentralized network. Layer 1 players have seen big money and valuations recently, as fellow Palo Alto-based startup Aptos Labs closed a $150 million Series A led by FTX Ventures and Jump Crypto at a $2 billion valuation in July.

Santa Monica, California-based sports metaverse company LootMogul secured a $200 million investment commitment from Gem. The startup is looking to build virtual sports cities based on real-world brands and professional athletes. Sports are big in the real world; we’ll see how big they get in the metaverse.

The final nine-figure round last month went to Hong Kong-based blockchain gaming developer Animoca Brands. The company snagged $110 million in funding as it starts to prepare for a possible initial public offering. Temasek, GGV Capital and Boyu Capital were some of the big names taking part in the financing that held the company’s value at roughly $5.9 billion.

Those rounds pushed crypto and Web3 funding to its best month since June, with VC-backed startups raising nearly $1.6 billion in September, per Crunchbase data.

Illustration: Dom Guzman

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