Crypto Fundraising in Q3 2023 Hits 2020 Levels
A recent report by Messari, a crypto market intelligence firm, has revealed that crypto fundraising in the third quarter of 2023 has declined to levels last seen in the final quarter of 2020. The report states that funding amounts and deal counts hit new lows in Q3, with a total funding of under $2.1 billion across 297 deals, marking a 36% decline in both categories compared to Q2 2023.
Shift Towards Early-Stage Rounds
Messari’s researchers found that the majority of deals in Q3 were concentrated in early-stage rounds, such as pre-seed, seed, and series A investments. Seed funding was the largest stage, raising approximately $488 million across 98 rounds. This shift indicates a strategic bear market positioning by investors, as they aim to fund projects that can yield greater profits when the crypto market moves positively.
Over the past three years, investors have increasingly shifted their focus from later-stage projects to early-stage projects, as evident in the number of deals allocated to each stage in Q3.
Increase in Strategic Funding
Amid the bear market conditions, strategic funding deals have been on the rise. These rounds have seen significant funding from corporate and private equity deals. The total funding share for strategic deals increased to 22% in Q3 2023 from 0.2% in Q4 2021, indicating that projects are raising short-term bridge rounds or getting acquired by larger projects due to unfavorable market conditions.
DeFi and Gaming Lead Funding Sectors
In terms of sector funding, the chain infrastructure, gaming, and decentralized finance (DeFi) sectors emerged as the most well-funded in Q3. Chain infrastructure received the largest share of capital at 18%, while DeFi recorded the highest number of deals. The gaming sector also 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.
Hot Take: Investors Strategically Positioning for Bull Market
The decline in crypto fundraising during Q3 2023 reflects a cautious approach from investors in response to market conditions. By focusing on early-stage projects and strategic funding deals, investors are positioning themselves for greater profits when the market turns bullish. The chain infrastructure, gaming, and DeFi sectors have been particularly attractive to investors, receiving significant funding and attention. As the crypto industry continues to evolve, these sectors are expected to play a crucial role in its growth and development.
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