Web3 Investment Sees a Sharp Drop in Q2 2023

According to Crunchbase, in the second quarter of 2023, investment in the Web3 segment decreased by 76%. This is a sharp drop in funding levels from the previous year – Web3 startups received just $1.8 billion in venture capital funding. What’s more, the total number of transactions in this sector also fell by 51%, reaching its lowest level since the end of 2020, with just 322 transactions registered, compared to 659 the previous year.

In April-June 2023, three major investment deals took place in this area. The ABO Digital-led Swiss Islamic Coin project has raised an impressive $200 million, while the LayerZero omnichain protocol has secured $120 million in a funding round led by Sequoia. Additionally, the Worldcoin startup founded by Sam Altman has raised $115 million with funding from Blockchain Capital.

In total, venture capital funding for Web3 projects totaled $3.6 billion in the first six months of 2023, in stark contrast to the $16 billion raised during the same period the previous year. Analysts attribute this sharp decline to the withdrawal of large investors from the artificial intelligence sector, which received an impressive $25 billion in funding in the first half of 2023.

Crunchbase suggests that the Web3 sector may have bottomed out in terms of investor interest. It is worth noting that, despite the decline in venture capital funding, the overall market for cryptocurrencies, including Bitcoin and other digital assets, continues to grow. However, analysts emphasize that the current market situation is significantly different from the turbulent phase of 2021, when almost every startup seemed to have sufficient funding.

In the midst of this downturn, the venture arm of Binance recently invested in five high-performing Web3 projects during the fifth season of its incubation program in June 2023. In addition, music project Web3 Sound successfully raised $20 million in Series A funding in July, with venture fund crypto arm a16z leading the investment. As the Web3 landscape continues to evolve, startups are likely to face new challenges and opportunities to secure funding for their innovative ventures.