What Bear Market? Crypto Startups Received $10.7B From VCs in 2023

Despite the bear market in the cryptocurrency sector, venture capitalists (VCs) poured significant money into crypto and blockchain startups in 2023.

$10.7B in Funding 

According to The Block, these Startups have received a staggering $10.7 billion from VCs this year. 

However, the money received represents a 68% drop from the $33.3 billion received in 2022.

“The significant drop in crypto funding in 2023 was largely expected given the macroeconomic environment, regulatory uncertainty, and the scars left by recent major crypto failures. This funding winter served as a healthy and necessary correction, enabling the industry to take stock and refocus on critical priorities,” said Abhishek Saxena, principal lead at Polygon Ventures.

Third-Highest Year in Terms of Funding 

Despite the drop in funding year-over-year (YoY), 2023’s total investment outperformed previous bear markets. Approximately $6.4 billion was poured into startups in 2019-2020

With the $10.7 billion investment, 2023 ranks as the third-highest year in terms of the total amount collectively raised by startups. 2022 remains the largest year for crypto VC funding to date.

Per the report, a large portion of the investments occurred during the year’s first half, with a major decline in the remaining half. In exception, November experienced an uptick in funding.

Although, there was also a decline in the number of deals in 2023. According to the report, 1,819 deals occurred this year, representing a 32% drop from 2022, which saw 2,671 deals. However, the number of deals in 2023 was consistently higher than monthly deals in 2020 and close to the number of deals in 2021.

“As for investment distribution by stage, the majority of funding in 2023 flowed towards pre-seed, seed, and pre-Series A startups, while mid and late-stage startups experienced lower activity, echoing the trend observed in 2022,” The report stated. 

Meanwhile, in different corners of the sector, NFT/gaming, infrastructure, and web3 were the most popular areas for investment in 2023, based on the number of deals done. Other categories, like data, trading, and enterprise, saw fewer deals and less investment.