VC Funding in Web3 Drops Tenfold Year-over-Year to only $1.7B

December 15, 1:23 pm

Web3 companies and startups have drawn a lot of attention from VC investors in the past few years, who poured billions of dollars into their projects, helping them to continue remaking the web. In 2021 and 2022 only, these companies raised more than $22bn in funding rounds, which seems unreachable this year.

According to data presented by AltIndex.com, Web3 companies raised only $1.7bn year-to-date, or nearly ten times less than last year.

Funding to VC-backed Web3 Companies Hits the Lowest Point in Years

While VC funding slowed overall in 2023, Web3 has been more affected by this dip. The economic uncertainty limited investors' appetite and pointed them to industries they know the best, with many hitting the breaks on spending in the Web3 space. The Crunchbase data show a just how shocking that drop was.

In 2021, when the Web3 funding craze started, companies and startups working in this space raised around $5.3bn in funding rounds, or thirteen times more than two years before that. Still, that was nothing compared to the VC funding in 2022 when Web3 companies raised a whopping $16.8bn, the highest value this market has ever seen.

But after a shockingly successful 2022, it seems the party has come to an end for Web3 startups and companies, as funding hit the lowest point since the early days of this market.

In the first quarter of the year, companies and startups working in this space raised $700 million, or seven times less compared to $5.2bn in the same period last year. The funding drop got even worse in the second quarter of the year. Between April and June, total VC funding in the Web3 space amounted to $400 million, or 22 times less than the $9.1bn raised in Q2 2022. Statistics show that Q3 2023 saw just as worrying a decline, with fundraising dropping sixfold to $300 million.

The VC funding activity dropped even further over the past three months, with companies raising only $200 million, three times less than in the same period a year ago.

Total Number of Investments Dropped by 40%

The numbers don't improve even when analyzing the total number of investments seen in the Web3 space this year. While there were some significant funding rounds in the first half of 2023, including $115 million worth of Series C funding round of Sam Altman's crypto project Worldcoin and $112 million raised by crypto protocol LayerZero, the total number of investments dropped deep below last year's level. The Crunchbase data show Web3 space saw 150 investments in the past twelve months or 40% less than 258 in 2022.

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