Crypto Startup Funding on the Rise

According to data from PitchBook, venture capital funding for crypto startups reached $2.4 billion in the first quarter of 2024. This marks a significant increase for the second consecutive quarter, driven by expectations of lower interest rates and the launch of the first U.S. bitcoin spot ETF.

Funding was distributed across 518 deals, reflecting a 40.3% rise from the previous quarter. This growth is noteworthy, especially when contrasted with the global venture capital investments, which hit a near five-year low during the same period.

Historical Context and Market Recovery

Despite a decline from the $10 billion peak in the first quarter of 2022, investor confidence in digital asset startups has been buoyed by recent market developments. The U.S. regulatory approval of spot bitcoin ETFs by financial giants BlackRock and Fidelity has significantly legitimized the asset class, propelling bitcoin to a record high of $73,803 in March.

PitchBook analyst Robert Le emphasized the impact of market recovery and increased institutional adoption on venture capital funding. “The recovery in publicly traded tokens and continued rise in institutional adoption will drive increased VC funding,” he stated.

Leading Sectors and Notable Deals

Startups focusing on infrastructure for crypto and blockchain technology attracted the most investment this quarter. The largest deal was made by decentralized cloud platform Together AI, which raised $106 million in an early-stage round led by Salesforce Ventures, valuing the company at $1.1 billion.

Investment rounds, particularly at the early stages, have become highly competitive. “Early-stage deals are earning higher valuations than late-stage deals, but we will see if this trend holds in the coming quarters,” noted Le.

Future Outlook: Mergers and Acquisitions

Although exits remain low, Le predicts an uptick in mergers later this year, especially among crypto exchanges, custodians, and infrastructure providers as the market continues to mature.

In summary, the crypto venture capital landscape is experiencing a notable resurgence, driven by regulatory advancements and growing institutional interest. As the market evolves, continued investment and consolidation are expected to shape the industry’s future.