Web3 Funding Stabilises After Struggling in 2023

Large funding rounds are not as common in the Web3 space as they used to be, the latest report from Crunchbase confirms. 

Key Takeaways

Venture funding for Web3 startups declined in 2023 but somewhat recovered in the second quarter of 2024, with crypto startups raising about $2 billion in funding, data from Crunchbase shows.  

The Q2 funding level is only slightly higher than the $1.8 billion it had raised in the previous quarter. This changed from the previous year when Web3’s quarterly venture funding totals declined from $2.3 billion in Q1 of 2023 to only $1.4 billion in Q4, according to the report. The total number of deals also declined alongside the decrease in funding. Deal activity was at its highest in Q1 2023 with 681 deals but reduced to around 284 by the end of the year.  

Although the funding amounts increased in the latest quarter, the overall number of deals has not picked up, and there were only 291 financing rounds in Q2 of 2024.  Crunchbase reported that while the total deal value improved slightly in Q2 of 2024, the number of deals remained lower than in the previous quarters.   

Not only are Web3 venture funding rounds still rare, but they are also relatively small when they do happen. Crunchbase further reports that only seven rounds were raised at $50 million or above in the Q2 of 2024.  

A large proportion of the market recovery goes to a single transaction: Paradigm’s leading of the latest funding round of $225 million raised by New York-based Monad Labs, a new layer-1 blockchain that aims to compete with networks such as Solana and others.  

Other significant transactions from Q2 include the $150 million Series A raised by Farcaster from Paradigm, with a post-money valuation of $1 billion; Berachain’s $100 million raise from BH Digital and Framework Ventures, and Auradine’s $80 million round from investors, including Mayfield Fund and Celesta Capital.  

“There is a market dislocation starting to happen where many crypto VC funds are on the final 25% of deployment and so will need more money in next six months, but LP’s want distributions first,” Bozman said on an X post. “But VCs need the market to come back before they can make distributions.”      

This slow pace of deal-making is mainly due to the limited partners (LPs); the venture fund investors who are still expecting returns from previous deals while VCs are limiting the amount of capital they deploy.