In the second quarter, the crypto industry secured $3.2 billion in venture capital, marking a 28% increase from the previous period’s $2.5 billion. This is according to a report by Galaxy Digital.
The number of deals slightly decreased from 603 to 577, a 4% drop, but their median value rose from $3 million to $3.2 million.
“The long-standing correlation between Bitcoin’s price and investments in crypto startups has broken—while the price has significantly risen since January 2023, venture capital activity has struggled to keep pace,” noted Galaxy experts.
Despite the increase in investment volumes since the start of the year, they remain well below the levels of 2021-2022, when digital gold first traded above $60,000.
This notable divergence in trends is attributed by specialists to the emergence of other attractive investment avenues in the industry, such as Bitcoin ETFs or restaking, as well as a series of bankruptcies in the industry and macroeconomic factors.
Nearly 80% of the quarter’s investments were directed at early-stage projects, with only 20% of funding going to more mature ventures. Galaxy explained this gap by the exit of many general-purpose venture funds from the sector, complicating capital acquisition for established startups.
In terms of categories, the greatest interest from venture investors was in projects grouped under “Web3/NFT/DAO/Metaverses/Gaming,” attracting $758 million or 24% of the total. The two largest deals in these areas were secured by Farcaster and Zentry, which raised $150 million and $140 million, respectively.
Following were projects focused on infrastructure (15%), trading (12%), and layer-one blockchains (12%). The latter category’s share grew sixfold, driven by Monad and Berachain with $225 million and $100 million, respectively.
Experts highlighted the performance of Bitcoin-based L2 solutions, with investments in them rising 174% quarter-on-quarter to nearly $95 million.
Geographically, over 40% of venture capital deals in the second quarter were executed by startups based in the United States, accounting for 53% of the total funds raised. Companies headquartered in the United Kingdom accounted for 10% and 12.78%, respectively.
A notable feature of the quarter was the sharp increase in pre-money valuations of startups. The median figure rose from $19 million to $34 million, approaching historical highs.
Companies founded between 2021 and 2023 dominated the fundraising during the period.
Galaxy specialists concluded that venture investors’ sentiment is improving. If trends continue, the current year could become the third largest in terms of capital raised, following the favorable years of 2021 and 2022, they predicted.
Analysts from DeFi Llama have calculated that since May 2014, crypto startups have received a total of $101.4 billion in venture financing.