VC investments in crypto companies in the last decade

Venture capital is always looking for innovative markets with high potential. The share of blockchain and crypto is well represented in this market. Invezz analyzed investments over the last ten years.

With venture capital, investors generally make investments in smaller startups with the aim of generating big returns. However, the risks of such investments are substantial, which is why they are called venture capitalists.

Although only a month has passed since the start of the new year, the cryptocurrency space has already seen some massive rounds of funding.

On January 5, OpenSea, the leading NFT marketplace, raised $300 million in Series C financing, bringing its valuation to more than $13 billion. Hedge fund sponsors such as Paradigm and Coatue led the investment. The hegemon in the non-fungible token universe promised to distribute the funds to achieve four goals: accelerate product development; improve customer support policies; invest in the NFT ecosystem and hire more people.

Shortly after, prominent crypto investor Katie Haun revealed plans to raise as much as $900 million for a few digital asset investment funds. This development could mark a significant debut for her venture capital firm since she recently left Andreessen Horowitz (a16z).

Subsequently, US cryptocurrency exchange FTX set up a $2 billion venture fund to invest in specific blockchain projects. The entire amount of the funding came from the company founder and CEO Sam Bankman-Fried.

YoY increase in VC investments in crypto companies between 2012 – 2021

The value of venture capital invested by strategic and financial investors in crypto and blockchain companies has reached its all-time high.

According to Pitchbook, at the end of last year (2021), the amount of venture capital invested so far stood at 30 billion dollars. In comparison, in previous years the total invested amount was $6,5 billion in 2020 and $3.9 billion in 2019, compared to $100 million a decade before in 2022.

Invezz spoke with Altan Tutar, an analyst in the Web3 team at global venture capital firm Antler. “Indeed, by looking at this graph, the bitcoin price has increased by 350,298%, while VC investments into crypto / web3 companies have surged only by 29,900%. We are looking at 10x growth in the bitcoin price compared to VC crypto / web3 investments. This signals that even if we followed a similar trend by increasing our investments into the space, we have failed to follow the development that crypto markets have seen over the last decade. “ 

Which companies are investing the most? – Top  Blockchain and Crypto Investors by Deal Count

1. Digital Currency Group

With 197 deals, this New York venture capitalist group invested the most amongst blockchain and crypto investors. The company’s main focus is the digital currency market in an effort to help develop a more adequate financial system. One of their most noteworthy investments was their acquisition of CoinDesk in 2016. 

2. NGC Ventures

The Singapore-based company has 133 VC investments in its portfolio at the time of writing. The blockchain organization, founded in 2017, invested in a variety of industries, with Fan Controlled Football Overview being their latest addition.

3. Coinbase Ventures

Coinbase Ventures made their first investment with Compound Labs, back in 2018. Since then, the Californian company has made 133 deals including their most recent acquisition of Folks Finance, a consumer finance start-up.

4. Pantera Capital

As the first US-based institutional asset manager with an exclusive focus on blockchain, Pantera Capital has made 130 investment deals across the industry with Ancient8 and Arcade being the latest additions to their portfolio.

How does the size of these investments into crypto and blockchain compare to the VC investments in other industries?

“Back in January, I wrote a blog post detailing the landscape of web3 unicorns. I found 60 web3 / crypto unicorns that have received roughly $27.3 billion in funding. I did quick research into all the unicorns at the end of January. I was able to find 1,808 unicorns that have received $1.4 trillion in funding. 

This leaves us with roughly 3% of unicorns in the VC landscape being web3 / crypto companies, signaling a tremendous opportunity for VCs to create more valuable companies that solve real issues within the intersection of traditional industries like real estate and web3 / crypto. The average funding that a web3 / crypto unicorn receives is $450 million, while the average funding for a generic unicorn is $750 million; concludes Tutar.”

What we expect can to see in 2022 in terms of VC investments

Tutar says: “2022 will be an interesting year for web3 / crypto and VC investments in general. With Federal Central Reserve (FED) expressing its interest in quantitative tightening (increasing interest rates), we saw that crypto markets lost value roughly 50-60% in a week at the third week of January, while public markets also suffered a significant loss. This was one of the few times we saw a direct link between crypto and public markets.

If we see a bear market this year, I am very bullish on the companies we would create within the next year with the help of VC investments. I am optimistic to see more investments pumped into web3 / crypto. As a talent investor, I believe that web3 / crypto has attracted the most talented individuals working on problems that could help many tired of the centralized, traditional systems. 

I am very confident that the gap between the average funding a web3 unicorn has received versus other unicorns will decrease significantly as crypto is very young. After all, bitcoin is just ten years old today.”

Driving forces in increasing VC investments“Talent flocking into web3 / crypto has been one of the most significant driving forces in increasing VC investments into the space. Reddit’s ex-founder Alexis Ohanian is reportedly working on decentralized social media. Twitch’s ex-founder Justin Kan founded a niche NFT marketplace for gaming crypto assets. As VCs seeing previous, experienced entrepreneurs migrating to the space with the young, ambitious talent being the drivers of the cryptomarkets, we see a significant opportunity in creating value in the web3 / crypto marketplaces,” says Tutar.

Exciting times for the retail sector

Tutar is very excited for the next wave of web3 / crypto innovations that would open the door for retail investors to come into the space as the risks in the system are reduced with total value locked in web3 / crypto markets. 

“The only way this wave could happen is through decentralized finance (DeFi), a copy of the financial system achieved through blockchains rather than banks. A great example in the Antler portfolio for this innovation would be Struct Finance, which builds the next generation structured products, not in the traditional finance realm, but more in the decentralized finance world.”

Reasons to invest in venture capital over other assetsTutar: “Looking at the numbers of how the bitcoin price grew over time versus VC investments, many could easily argue that betting money on crypto markets and ignoring the rest of the web3 would yield higher returns. However, just looking at the historical trends, we cannot simply argue that crypto markets will continue to return at the same rate as before. 

I am convinced that crypto markets would return good returns over the next ten years, but VC has a better bet of returning higher while creating many opportunities and jobs. It won’t just make you wealthier, but also help builders become more affluent in the space. I am very bullish on web3 / crypt0 startups, as they are working on problems that could help millions of people from underdeveloped countries join in value creation and benefit in ways that were never possible before.”