Venture capital’s interest in web3 startups seems to be diminishing continuously, as data provided by Crunchbase unveils a seventh consecutive quarter of declining investments within this industry. This plummeting trend began in the final quarter of 2021, post a crypto venture fundraising peak, and has relentlessly carried on all the way till the third quarter of 2023.
The web3 sector closed deals around $1.3 billion in the third quarter of 2023, pointing towards a notable contraction from around $2 billion fundraised in each, the first and second quarters of the same year. Compared to the massive amounts recorded during Q3 2021 and Q2 2022 periods, when web3 startups were raising above $8 billion every quarter, these recent figures definitely seem lackluster. To accentuate this deviation, we can look at Q3 2022 when the sector accumulated just $4.5 billion, half of what was raised in the quarter before, lucidly bringing out the sector’s instability and its ramifications on investor trust.
The persistence of this descending trajectory seemingly signifies that investors are approaching the crypto sphere with a margin of precaution. The web3 sector has to overcome numerous uncertainties and challenges, prevalently linked to regulatory concerns, that many contend needs tackling before full faith can be restored. This declining trend is starting to encroach upon the future prospects of venture capital involvement in the crypto industry. However, several reports from earlier in the year have suggested that numerous venture investors retain optimistic expectations over the crypto territory for the long-term forecast.
Earlier this year, a report from Mike Novogratz’s digital asset management enterprise, Galaxy Digital, confessed the grounds for crypto venture capital fundraising to be “extremely challenging”, riding on the wave of five continuous quarters of dwindling funding. The report expressed that given the bear market in cryptoasset prices, coupled with the fact that many allocators have had sour experiences post the spectacular failures of multiple venture-backed corporations in 2022, venture investors may continue to face difficulties in raising new funds in 2023. Such an atmosphere definitely poses an intriguing landscape for crypto enthusiasts and investors, drawing attention to the broader booms and busts of the crypto world coming years.
Source: Cryptonews
