Crypto Venture Capital Sees Modest Rebound in Q2 2024

According to Galaxy Digital, the crypto venture capital market showed signs of recovery in Q2 2024, with total investments rising to $3.2 billion, up from $2.5 billion in Q1. However, the number of deals dropped slightly from 603 to 577.

Deal Count & Capital Invested

Venture capitalists invested $3.194 billion into crypto and blockchain-focused companies across 577 deals in Q2, marking a 28% increase in capital invested quarter-over-quarter (QoQ). Despite this, the deal count saw a 4% decline QoQ.

Capital Invested & Bitcoin Price

The historical correlation between Bitcoin's price and venture capital investment has weakened. Bitcoin has risen significantly since January 2023, yet venture capital activity has not kept pace. Factors such as Bitcoin ETFs and regulatory challenges have contributed to this divergence.

VC Investment by Stage

In Q2 2024, 78% of venture capital was allocated to early-stage companies, while later-stage companies received 20%. Larger generalist venture capital firms have reduced their activities in the sector, making it challenging for later-stage startups to secure funding.

Valuation & Deal Size

Median pre-money valuations for VC-backed crypto companies surged to $37 million in Q2 2024, nearly doubling from $19 million in Q1. Median deal sizes also saw a slight increase to $3.2 million.

Investment by Category

The “Web3/NFT/DAO/Metaverse/Gaming” category attracted the most capital, raising $758 million, led by significant deals from Farcaster and Zentry. Infrastructure, Trading, and Layer 1 companies followed, accounting for 15%, 12%, and 12% of the total capital invested, respectively.

Deal Count by Category

Web3 led in deal count with 19%, driven by decentralized social media and gaming-related deals. The infrastructure category came second, followed by Trading and DeFi-related companies.

Investment by Geographic Location

Over 40% of all deals involved companies headquartered in the United States, which also attracted 53% of the total VC capital invested. The United Kingdom, Singapore, UAE, and Hong Kong followed.

Investment by Cohort

Most deals and capital raised in Q2 2024 involved companies founded between 2021 and 2023, indicating a strong interest in newer startups.

Key Takeaways

• The crypto venture capital sentiment is improving, although it remains below the 2021-2022 levels. With Bitcoin and Ethereum rising approximately 50% year-to-date, capital invested rose 28% QoQ.

• Web3 and Layer 1 sectors saw significant investments, with notable deals from Farcaster and Monad.

• Median valuations have spiked to levels not seen since Q4 2021, driven by increased competition among investors.

• Bitcoin Layer 2 projects continue to attract substantial investments, with a 174% QoQ increase in capital raised.

• Early-stage deals dominated the quarter, capturing nearly 80% of the investment capital.

• The United States continues to lead in both deal count and capital invested, although regulatory challenges could impact its dominance.