Venture Capital Funds Shy Away from Crypto, According to Galaxy Research
A new report from Galaxy Research reveals that venture capital (VC) funds are increasingly hesitant to invest in the crypto industry. In Q4 2020, $6 billion was invested across 600 deals, but in the current period, only $1.98 billion has been deployed across 376 deals. This trend has persisted for the past 18 months. The decline in funding allocated to crypto and blockchain firms is evident, with just $2.3 billion invested this year.
One Crypto-Native Investor Remains Optimistic
Kavita Gupta, founder of Delta Blockchain Fund, believes that the crypto industry is still thriving, despite the lack of announcements about funding rounds. She stated that her fund recently closed three deals and is in the process of closing another. Gupta emphasized that many other firms are actively investing in crypto projects.
Positive Signals Amidst Negative Sentiment
Despite the negative sentiment surrounding the market, there are still signs of interest and investment in the crypto space. Tim Draper announced the launch of Draper Goren Blockchain (DGB), a new crypto-focused venture studio. MEXC Ventures also declared a sizable investment in Toncoin. These examples demonstrate that there is still significant interest from investors.
Market Downturn and Due Diligence
Gupta highlighted the overall downturn in the market as a factor impacting VC investments. She explained that during the previous bull cycle, there were numerous oversubscribed funding rounds. However, current rounds are not as oversubscribed, allowing firms to conduct more thorough due diligence before investing.
AI On-Chain Projects and Regulatory Clarity
Gupta noted that AI on-chain projects are gaining attention as potential alternatives to crypto investments. However, concerns remain about their effectiveness. She also emphasized that regulatory clarity is necessary for the crypto industry to thrive. Mainstream adoption is another crucial factor for future growth.
The Challenges for Entrepreneurs
Entrepreneurs seeking funding for their projects face challenges in the current environment. Gupta explained that there are more steps involved in raising money, and simply having an idea is no longer sufficient. Companies need to demonstrate credibility by showing contracts indicating product usage.
Hot Take: Venture Capital Funds Show Reluctance Towards Crypto Investments
Venture capital funds are displaying a growing reluctance to invest in the crypto industry, according to Galaxy Research. The decline in funding allocated to crypto and blockchain firms over the past 18 months is significant. However, despite this trend, some crypto-native investors remain optimistic about the industry’s future. Positive signals, such as new venture studios and sizable investments in crypto projects, indicate continued interest from investors. The market downturn has allowed for more thorough due diligence, although concerns persist regarding the effectiveness of AI on-chain projects. Regulatory clarity and mainstream adoption are identified as crucial factors for the industry’s growth. Entrepreneurs face challenges in raising funds, with credibility becoming a key requirement.
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