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2022 was a watershed year for crypto venture capital, as investors poured tens of billions of dollars into blockchain-focused startups despite the overwhelmingly bearish trend in asset prices. Is the VC-dominated crypto funding model good for the industry? Only time will tell.
Cointelegraph Research is still in the process of tallying all the funding figures for the year, but 2022 easily outpaced all other years in terms of total capital raised and deals completed. VC inflows were above $14 billion in each of the first two quarters before receding to just under $5 billion in the third quarter — still an impressive tally given the industry-wide contagion sparked by the sudden collapses of Celsius, Three Arrows Capital, Genesis, BlockFi and FTX, among others.
Against this backdrop, we’ve compiled a list of some of the biggest funding stories of 2022.
In March, crypto investor and Coinbase board member Katie Haun raised $1.5 billion for two Web3-focused investment funds. The newly launched Haun Ventures established a $500 million early-stage fund and a $1 billion acceleration fund to invest in “every layer of the Web3 tech stack.” In launching her new fund, Katie Haun recruited former executives from Airbnb, Coinbase and Google tech incubator Jigsaw.
Web3 has been a major focal point for venture capital over the past 12 months. Although Web3 companies are said to be working on the next version of the decentralized internet, the concept remains vague and the industry behind it is still in its infancy.
Related: Investors chase Web3 as blockchain industry builds despite bear market
In June, crypto exchange Huobi Global spun out a $1 billion investment fund focused on decentralized finance (DeFi) and Web3 projects. Dubbed Ivy Blocks, the new fund was designed to identify and invest in “promising blockchain projects” across a range of crypto sub-sectors. Specifically, Huobi Global will focus on providing “liquidity investments” to help DeFi projects get up and running.
The DeFi sector deflated with the rest of the cryptocurrency market in 2022, but unlike centralized exchanges, the sector was largely resilient to contagion.
Dapper Labs, the company behind CryptoKitties and NBA Top Shot, launched a $725 million fund to support the development of its Flow blockchain. The fund received backing from a range of investors, including Andreessen Horowitz, Spartan Group and CoinFund. In addition to supporting the development community already building on Flow, the fund is being used to lure developers from other blockchains such as Ethereum.
Although Dapper Labs has produced some of the biggest nonfungible token (NFT) collections in recent years, sales have lagged other layer-1 ecosystems due to weaker network effects and a smaller collection of decentralized applications.
Crypto VC Dragonfly Capital closed its third funding round in April, raising $650 million to surpass its two previous rounds of $100 million and $200 million. The funding initiative, which was supported by Tiger Global, Sequoia China, KKR and Invesco, was higher than the $500 million the company initially declared as part of its Form D filing with the United States Securities and Exchange Commission. Dragonfly said the funds would be used to invest in DeFi, metaverse and blockchain gaming startups.
Digital asset custody platform Fireblocks saw its valuation surge in January after closing a $550 million Series E funding round. The latest round brought Fireblocks’ cumulative funding to $799 million since 2019, as VCs continued to back institutional infrastructure solutions. Some of Fireblocks’ most prominent clients include Bank of New York Melon, Galaxy Digital and CoinShares. It also served the now defunct BlockFi and Three Arrows Capital.
Blockchain incubation and late-stage growth featured prominently in Binance Labs’ $500 million fund, which launched in June. Binance CEO Changpeng Zhao said the funds would support project founders leading Web3 adoption across the DeFi, NFT, gaming, metaverse and social sub-sectors. At the time of its launch, Binance Labs’ fund was already supporting 14 projects across the DeFi and social finance sub-sectors.
Although the NFT market peaked in 2021, VCs are banking on the continued growth of digital collectibles. In March, Bored Ape Yacht Club creator Yuga Labs closed a $450 million funding round at a valuation of $4 billion. Its backers included Andreessen Horowitz, Animoca Brands, MoonPay and, you guessed it, FTX.
Few sub-sectors mooned as hard or as fast as NFTs during the previous bull market. While this success earned Yuga Labs a sizable investment round in March, NFT-focused companies will struggle to maintain their valuations moving forward. As ConsenSys reported, NFT prices have fallen harder than many other crypto assets, possibly indicating that new use cases need to emerge to keep the industry from fading into oblivion.
Related: Fidelity plans NFT marketplace and financial services in the metaverse
Sequoia Capital India and over 40 other venture funds invested $450 million into layer-2 scaling solution Polygon. The company said it would use the funds to expand its scaling solutions to accommodate eventual mainstream adoption of Web3 applications. According to Polygon co-founder Sandeep Nailwal, Ethereum won’t provide enough scalability to support a Web3 future, even after its highly anticipated Merge took place.
Polygon’s funding round closed in February, a few months before the Terra ecosystem implosion triggered the first sector-wide contagion in crypto. Layer-2 protocols still have a bright future as the crypto sector moves past its scandal-ridden 2022 and attention shifts back to development.
With crypto contagion in full swing, Multicoin Capital in July announced it had launched a $430 million fund to support early-stage companies. The company said it would allocate between $500,000 and $25 million to crypto startups and is prepared to invest up to $100 million in larger projects. Multicoin indicated that its latest funding iniaitive would prioritize projects with “proof of physical work,” or protocols that have created real incentives for decentralization.
In April, crypto VC Framework Ventures launched “FVIII,” a $400 million fund devoted to Web3, blockchain gaming and DeFi. Half of the funding will go toward blockchain gaming projects, Framework Ventures said.
The focus on gaming may have been catalyzed by the success of Axie Infinity, a popular play-to-earn game with millions of unique users. The growth of metaverse and NFT technology could also be positive drivers for the blockchain gaming industry.
Related: Pantera plans to raise $1.25B for second blockchain fund: Report
Ava Labs, the developer of the Avalanche blockchain, raised $350 million in April at a valuation of $5.25 billion. At the time of the raise, Avalanche was one of the most popular blockchains in terms of TVL, or total value locked. Of course, that’s no longer the case after crypto and DeFi entered a deep bear market.
Avalanche’s TVL currently sits below $800 million after peaking north of $12.2 billion in December 2021, according to DeFi Llama.
In April, Tiger Global and FTX Ventures led Near Protocol’s $350 million funding round. At the time, it was one of the largest capital raisesfor any decentralized application platform. Proceeds were earmarked for supporting Near ecosystem growth, including increasing the number of regional hubs across the globe. Near ended 2022 as the 35th largest crypto project by market capitalization.
American crypto exchange Binance.US attracted notable investors, including VanEck and Circle Ventures, in raising $200 million at a pre-market valuation of $4.5 billion. Binance.US said the funding would go toward expanding its product features and operations across the United States. The company appears to have made some progress, having recently rolled out mobile payments to U.S.-based customers. The exchange also plans to acquire the assets of bankrupt crypto lender Voyager Digital for just over $1 billion.
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