Crypto venture funding falls for the second quarter in a row

According to a new report released by The Block Research, crypto venture funding has fallen for its second consecutive quarter for the first time since 2018. The number of VC deals also took a sharp turn, declining by 22% quarter-on-quarter. However, infrastructure startups continue to show strong growth at the seed stages.

In Q3 2022, VC funding for crypto startups slipped by about 35% to $6.2 billion, following a 22% drop in Q2, the new report said.

Previously, venture capitalists continued to pour cash into the sector for a record seven consecutive quarters. This quarter-on-quarter drop in funding confirms that funding for the sector has receded, and investors weary of the downturn are no longer as loose with their pursestrings as in the heady bull market days of 2021. 

(Source: The Block Research )

In H2 2018, this type of drop happened for the last time, during a previous bear market when the price of BTC fell below $4,000 after reaching an all-time high of more than $19,000 at the end of 2017.

The number of VC deals also took a downturn, following the falling amount of funding – declining by 22% quarter-on-quarter. Before, the number of deals in the sector had increased for three consecutive quarters. 

The mid to late-stage deal flow appears to be particularly hard hit by current market conditions. There was only one late-stage deal last quarter, compared to 13 in Q2 – a 92% drop. Startups granted mid-stage deals were also similarly hard to come by, with funding dropping by approximately 63%, and with only 11 deals compared to Q2’s 30.

However, despite every subsector seeing seed-stage deals decline, infrastructure startups raising seed rounds increased by approximately 24%.

Still, we are yet to see the amount of cash injected into the crypto sector plumb to pre-2021 levels. As the report points out, nearly $15.8 billion has been invested over the past two quarters. That’s more than all of the venture funding from 2017 to 2020, combined – when $15.3 billion was raised by the crypto sector.