Web3 funding plummets to lowest level since 2020

As deal flow continues to slow in the web3 space, funding to VC-backed startups has hit its lowest point since the space was just emerging.

Venture funding dropped 82 per cent year or year, from $9.1bn in Q1 of 2022 to just $1.7bn in Q1 of this year, according to Crunchbase data.

This also marks a 30 per cent decline from Q4 of 2022, and the lowest quarter since Q4 of 2020 ($1.1bn).

The total number of deals has similarly dropped to lows not seen since Q4 of 2020.

Just 333 deals were completed in the first quarter of this year, down from 369 at the end of last year and a steep drop off from the highs of 500 in Q1 of 2022.

Here Web3 is defined as startups in the crypto or blockchain sectors, or both, and both of those sectors saw their lowest dip in years, reflected in deals completed and overall funding, as well as in major rounds.

In Q1 of 2022, VC-backed startups saw 29 rounds of more than $100m — including raises of more than $400m from the likes of ConsenSys, Polygon and FTX.

Comparatively, in Q1 of 2023, there were just two rounds reaching the $100m mark — Vancouver-based Blockstream, which raised $125m and French crypto hardware startup Ledger, which raised $108m.

The decline in web3 funding is symptomatic of wider funding slowdowns, with venture funding down in almost every sector.

With web3 being a relatively new player in the space, it makes sense that investors are gravitating towards familiar territory in uncertain times, and in the wake of the collapse of FTX last year and a slew of other crypto scandals.