Crypto funding rounds reached a significant milestone in October, surpassing $2 billion. The surge in funding was led by Animoca Brands, which played a prominent role in 102 out of the 107 deals. This notable achievement indicates the major trends in selecting new crypto startups, with a focus on utility and infrastructure projects rather than meme tokens.
The month of October witnessed a resurgence in fundraising after a slowdown in the previous month, with funding rising by a remarkable 263%. This boost brought the total number of deals to 107, spreading the funding sum across a diverse range of projects.
This renewed interest in crypto funding comes after a dip in September, when the total deals amounted to $672 million. However, the funding level for October was still far from reaching its peak in April 2022, which saw a staggering $7.21 billion in funding. The cyclical nature of crypto VC funding, often reliant on ETH-denominated treasuries rather than fiat, contributes to these fluctuations.
The year so far has shown signs of recovery, with over $11 billion raised in funding. This positive trend comes after a period of funding drought in 2023, following a peak of $21.6 billion in late 2022. The crash of FTX and 3AC was responsible for the decline in funding during that time. However, the past year has demonstrated that top funds are eager to rebuild, opting for more cautious and targeted rounds. The selected projects in this latest funding round differ from the community-based ethos of meme tokens and do not possess a significant social media presence.
The funding landscape in October featured a smaller number of large-scale deals, with the average round ranging from $3 million to $10 million. Nonetheless, there were outliers like Glow, which attracted $30 million in funding. Overall, there remains some skepticism around VC-backed projects, especially due to instances where teams have extracted value by selling their tokens.
Notable funding rounds in October included $10 million in strategic funding for Toncoin (TON), highlighting the growing popularity of the chain. Additionally, there were outsized deals such as the $210 million fundraising for Blockstream and an undisclosed round worth $525 million for Praxis Society.
Animoca Brands’ significant involvement in the funding rounds solidifies its position as a leading player in the crypto space. The fund’s focus on utility projects marks a shift from its previous emphasis on NFT projects, P2E games, DAO startups, and AI. Animoca Brands also demonstrated a particular interest in the Arbitrum ecosystem, managing a 145% return by the end of 2024, despite the associated risks.
Infrastructure and developer tools were the main focus areas in this round of funding, with more than 26% of deals dedicated to developer tools and AI also attracting attention. However, funding for AI projects slowed down compared to previous periods. DEX, data services, and Ethereum-based projects also garnered significant interest from VCs.
Seed rounds accounted for over 31% of the funding, indicating a wave of new crypto startups entering the market. Furthermore, 37% of the funding went towards undisclosed rounds, including the two leading deals that were secured by established companies.
Despite the global crunch in VC projects, crypto funding has shown resilience. In Q3, overall funding experienced a contraction, reaching a seven-year low of $70 billion raised for the three months ending in September. VC funding outside of the crypto realm also slowed down, even though one quarter saw a surge in AI startup funding amounting to $19.1 billion.
In today’s crypto landscape, large-scale funding rounds of $100 million have become rare, indicating a shift away from the era of extensive projects. Market leaders like VanEck have taken a different approach, creating avenues for testing and investing in up-and-coming projects through smaller funding rounds. Balancing the selection of projects has become crucial for crypto VC funding, as hype has led to substantial rounds being raised by startups with limited user bases.
The hype surrounding Layer 2 (L2) solutions was one of the major funding narratives, although not all chains were able to attract substantial traffic and liquidity. Successful apps and movements emerged with minimal funding but gained traction through platforms like the Telegram chat app and social media channels.