Crypto VC funding experienced a sharp decline in 2023, with investments dropping by 68% compared to the previous year. In total, venture capitalists injected $10.7 billion into crypto and blockchain startups, a significant decrease from the $33.3 billion invested in 2022. The majority of these investments occurred in the first half of the year, with a dip in the second half, although there was a slight increase in funding in November.
Interestingly, there was a shift in the types of startups that received funding in 2023. The proportion of deals allocated to pre-seed, seed, and Series A startups increased, while mid and later-stage deals declined compared to the previous year. In terms of verticals, NFT/gaming, infrastructure, and web3 continued to dominate, while categories such as data, trading, and enterprise witnessed fewer deals.
It is worth noting that despite the significant drop in funding, 2023 still ranked as the third-highest year in terms of the total amount invested, although it fell far below the unprecedented levels seen in 2022. This decline in funding was largely expected due to the macroeconomic environment, regulatory uncertainty, and the aftermath of major crypto failures. However, the magnitude of the funding pullback surprised many investors and founders. It was seen as a necessary correction for the industry to reassess its priorities and adapt to the changing landscape.
Although the slowdown in 2023 was evident, the total investment still surpassed previous bear markets, with $6.4 billion invested in 2019-2020. This indicates that despite the challenges faced, there is still confidence in the long-term potential of crypto and blockchain startups.
In terms of deal count, there was also a decrease in the number of crypto VC deals in 2023 compared to the previous year. There were 1,819 deals in 2023, a 32% decrease from the 2,671 deals in 2022. Nevertheless, the number of deals in 2023 remained higher than monthly deals in 2020 and was similar to the number of deals in 2021.
Looking at investment distribution by stage, most of the funding in 2023 went to pre-seed, seed, and pre-Series A startups, while mid and late-stage startups had lower activity. This trend aligns with what was observed in 2022.
In terms of sectors and categories, NFTs and gaming continued to attract significant investment in 2023, while infrastructure and web3 also gained attention. The distribution of funds among sectors appeared to be more diverse compared to previous years.
Looking ahead, crypto VCs anticipate a surge in funding and deals in 2024, as recent price shifts and expected bullish trends in the crypto markets create more opportunities for investment.