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The World of Crypto VCs


An analysis of the Crypto and Blockchain VCs ecosystem, from the 2022 perform to new trends and challenges


Venture capital firms have historically played an important role in funding the development and growth of new technologies and companies. However, the crypto space presents a number of unique challenges for VCs.

The Challenges:

One of the biggest challenges facing VCs in the crypto space is the high level of volatility and uncertainty. Cryptocurrency prices can be extremely volatile, and the value of a given cryptocurrency can change dramatically in a short period of time. This makes it difficult for VCs to value investments and assess the risk-reward trade-off. In addition, the regulatory environment for cryptocurrencies is still developing, and it is not yet clear how governments around the world will treat them. This uncertainty can make it difficult for VCs to predict the future of the crypto space and make informed investment decisions.

Another challenge facing VCs in the crypto space is the lack of mature and established companies. The crypto space is still relatively new and many of the companies operating in it are start-ups with unproven track records. This means that VCs have to take on more risk when investing in these companies, as they have less information to go on when assessing their potential for success.

A related challenge is the current lack of liquidity in the crypto space. The trading volume of many cryptocurrencies is still relatively low, which can make it difficult for VCs to exit their investments. This can make it harder for VCs to generate returns on their investments and can also limit the amount of capital they are willing to invest in the space.

Despite these challenges, there is still a lot of interest in the crypto space among VCs. Some VC firms are even specifically focusing on investing in crypto companies. Due to the high potential of the technology, many are willing to take on the high level of risk that comes with investing in crypto projects.

Overall, the crypto space presents a number of unique challenges for VCs. However, for those willing to take on the high level of risk, there is also the potential for high returns. As the crypto market matures, the challenges faced by VCs will likely become more manageable, making it easier for them to invest in the space and supporting the growth of the crypto ecosystem.

In recent years, the crypto VC space has become one of the hottest areas of investment. As the blockchain space continues to grow, venture capitalists are investing large sums of money in promising startups related to the space.

Crypto VCs have become an increasingly attractive option for investors who want to get in early on the ground floor of a new industry. Many of these venture capitalists have extensive experience in the technology and finance sectors, giving them a better understanding of the risks and rewards associated with investing in the space.

Crypto VCs are also playing a key role in the development of the blockchain industry. By investing in startups that are building the infrastructure of the blockchain, they are helping to create a more secure, reliable, and cost-effective future for the technology.

At the same time, crypto VCs are also helping to promote the adoption of blockchain technology in the mainstream. As more venture capitalists put their money into the space, more people become aware of the potential of blockchain and its use cases. This helps to legitimize the technology and provide more opportunities for developers and companies to create new applications.

New trends:

One of the most significant trends in the crypto VC space is the emergence of "tokenized VC funds." These are venture capital funds that are built on top of blockchain technology and use tokens to represent ownership in the fund. Tokenized VC funds allow investors to purchase tokens that represent a share in the fund and gain exposure to a diversified portfolio of investments. This provides investors with a much more transparent and liquid investment option than traditional venture capital funds.

Another trend in the crypto VC space is the emergence of "programmatic VC." This is a new type of venture capital fund that uses automated algorithms to invest in startups and projects. Programmatic VC funds are designed to be more efficient than traditional venture capital funds by using algorithms to identify promising investments and automatically deploy capital. This allows investors to capitalize on opportunities in the crypto space without having to manually assess and analyze potential investments.

The most notable area where VCs are increasingly putting money is decentralized finance (DeFi) which use blockchain to create more transparent and open financial systems. Additionally, there has been a notable increase in the number of institutional investors entering the crypto market, as well as the launch of more crypto-focused VC funds.

2022 in numbers:

In 2022, there were 1,769 public crypto VC projects, an increase of 30% from the 1,364 projects in 2021. The total funds raised in the crypto market was $37.7 billion, up 19% from the $31.6 billion raised in 2021.

Coinbase, Animoca, SHIMA, Spartan, Dragonfly, Alameda, and A16z were the

top VCs investing in crypto projects, with Coinbase leading the way with 119 investments.

In December 2022, only $670 million was funneled into crypto startups, a decrease from the $3.5 billion that Web3 companies received in the same month the previous year.

By the start of 2023, venture capitalists had invested less than expected due to the FTX crisis, with smaller amounts of money being raised by those that had managed to close deals.

How is 2023 looking for VCs:

Last year's decline has led to a noticeable shift in the attitude towards launching tokens.

A growing number of venture capitalists (VCs) are reporting that at least half of their portfolio projects are opting to hold off on token launches until their project is advanced enough to guarantee successful adoption.

Spartan Group, one of the more active investors in decentralized finance, has 108 backed projects, yet only 40% of them have listed on exchanges. This change marks a move away from launching tokens early (pre-product) solely as a marketing and adoption tool, towards waiting until the token is an intrinsic part of the project.

Appetite for token launches among founders and investors has been decreasing since the start of 2022, Pantera Capital’s early-stage token fund was down by about 71% year-to-date in September 2022. The Wall Street Journal reported that Andreessen Horowitz's flagship crypto fund fell by 40% in the first half of the year.

Thanks for reading

The Semoto Team

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