September Report: Cryptocurrency VC Funding Faces Ongoing Challenges

In our exploration of the latest developments within the cryptocurrency venture capital (VC) arena, it becomes evident that the funding landscape is currently undergoing substantial transformations. Recent data from RootData highlights that September witnessed a total of 77 publicly disclosed investment projects in the cryptocurrency VC sector. While this number signifies a marginal 3% uptick compared to August 2023, it also serves as a stark reminder of a significant 44% dip compared to the same month in the preceding year, September 2022, which boasted an impressive 138 projects. It’s crucial to bear in mind that not all financing deals are revealed in the same month, potentially causing these figures to evolve over time.

Throughout September, the cryptocurrency market continued to diversify, with various segments vying for the attention of investors. Among these segments, Infrastructure projects led the way, securing approximately 30% of the total funding, closely followed by DeFi projects at around 22%. CeFi projects captured a smaller slice, representing roughly 4%, while the combined share of NFT and GameFi projects amounted to approximately 10% of the total financing.

However, the overall funding scenario in September paints a somewhat sobering picture. The month witnessed a total funding of $510 million, marking a 24% decline compared to August 2023 and an even more substantial 72% decrease when contrasted with the robust funding observed in September 2022, which had reached an impressive $1.84 billion.

Let’s take a closer look at some noteworthy developments within the cryptocurrency VC landscape for September:

1. Bitmain’s Strategic Move: Bitmain, a prominent player in the cryptocurrency mining industry, revealed a significant deal with the beleaguered Bitcoin mining firm, Core Scientific. In exchange for $231 million in cash and $539 million worth of Core Scientific common stock, Bitmain is set to provide 27,000 Bitmain S19J XP 151 TH Bitcoin mining machines. This agreement also encompasses a fresh hosting arrangement designed to bolster Bitmain’s mining operations.
2. Proof of Play’s Gaming Triumph: Blockchain gaming startup Proof of Play secured a substantial $33 million in seed financing. The round was spearheaded by Greenoaks and a16z, with participation from noteworthy investors such as Balaji Srinivasan. Proof of Play’s flagship game, “Pirate Nation,” a social role-playing game, had entered beta testing in December of the preceding year.
3. Bastion’s Crypto Custody Endeavors: Cryptocurrency startup Bastion successfully wrapped up a $25 million seed round, with a16z crypto at the helm. The round also witnessed participation from Nomura Group’s Laser Digital Ventures and Robot Ventures. Bastion specializes in cryptocurrency custody and related services, boasting a team with expertise in regulatory and compliance matters gleaned from exchanges like Kraken.
4. Story Protocol’s Intellectual Property Innovation: On-chain intellectual property protocol Story Protocol secured $25 million in a Series A financing round, under the leadership of a16z crypto. Several other prominent investors, including Hashed, Endeavor, Samsung Next, Foresight Ventures, Dao5, Insignia Venture Partners, and others, participated in the round. With this funding combined with the $29.3 million raised earlier in the year, Story Protocol’s total financing exceeds $54 million. Story Protocol is geared towards revolutionizing intellectual property management on the blockchain.
5. Supra’s Oracle Services: The Oracle project Supra managed to secure $24 million in financing, attracting investments from Animoca, Coinbase Ventures, HashKey, and several other notable backers. Supra is actively contributing to the transition from Web2 to Web3 by enhancing oracle services, cross-chain communication protocols, and implementing cutting-edge consensus mechanisms.
6. Mesh’s Payment Innovations: Cryptocurrency transfer and payment services startup Mesh secured $22 million in a Series A round, with Money Forward taking the lead as the investor. The round also saw participation from Galaxy, Samsung Next, Streamlined Ventures, and others. Mesh intends to employ the fresh capital for the further development of its deposit, payment, and expense tools, thereby supporting the launch of its products. Founded in 2020 by Bam Azizi and Adam Israel, Mesh has now raised a total of $32 million.
7. Mocaverse’s NFT Commitment: Animoca Brands disclosed that its NFT series, Mocaverse, secured a commitment of $20 million in financing, led by CMCC Global. In order to entice investors, Animoca Brands issued new common shares at a price of AUD 4.50 per share and provided free attached utility token warrants at a 1:1 USD conversion rate. The funds will be harnessed to drive forward project product development and foster the adoption of Web3.
8. IYK’s Web3 Vision: Web3 startup IYK managed to raise an impressive $16.8 million in seed funding, with A16z Crypto leading the charge. Other participants included 1kx, Collabcurrency, Lattice Capital, and gmoney. IYK, a participant in a16z Crypto Startup School, is geared towards assisting brands, musicians, and creators in crafting immersive digital experiences.
9. Brine Fi’s DEX Innovation: Decentralized Exchange (DEX) project Brine Fi successfully raised $16.5 million in an investment round led by Pantera Capital, resulting in a valuation of the project at $100 million. StarkWare Ltd and others also joined in on the investment. Brine Fi, with the support of StarkWare, operates as a non-custodial decentralized order book that became accessible to traders in May.

In summary, as of September 2023, the cryptocurrency VC landscape continues to show signs of a cooling trend when compared to the previous year. Despite these challenges, innovative startups and established players in the industry are securing financing for projects that hold promise for the future of blockchain technology and the broader crypto ecosystem. As the market evolves, it will be intriguing to observe how these developments impact the trajectory of cryptocurrency VC funding in the coming months.

Source: WuBlockchain