Galaxy Digital Q2 Crypto Venture Capital Report: The rebound is still continuing, but there is still a gap with the previous bull market
Written by Alex Thorn and Gabe Parker, Research Analysts at Galaxy Digital
Compiled by: Yangz, Techub News
Compared to the first quarter, Bitcoin and liquiditycryptocurrency的强劲表现，第二季度的市场略有降温，但与去年同期相比仍有显著增长。第一季度出现的加密货币风投反弹趋势似乎仍在持续。第二季度行业创始人和投资者们的表现意味着融资环境较前几个季度已更为活跃。只是，截至 7 月 1 日，数据表现略逊于市场普遍情绪。
The number of industry VC deals in the second quarter fell slightly from 603 in the first quarter to 577 in the second quarter, while investment capital increased from $2.5 billion in the first quarter to $3.2 billion in the second quarter. The median deal size increased slightly from $3 million to $3.2 million, but the median pre-money valuation increased from $19 million to $37 million, close to the historical high. These data show that despite the lack of available investment capital compared to the previous peak, the recovery of the cryptocurrency market in the past few quarters has brought fierce competition and triggered their FOMO.
Number of transactions and investment capital
In the second quarter of 2024, venture capital investment in cryptocurrencies andBlockchainThe company invested $3.194 billion (up 28% from the previous month) in 577 transactions (down 4% from the previous month).
Investment Capital and Bitcoin Price
The multi-year correlation between Bitcoin price and capital invested in crypto startups has broken. Bitcoin has risen sharply since January 2023, while venture capital activity has not kept pace. While Bitcoin has risen sharply this year and invested capital has also risen, it is still far below the level when Bitcoin broke through $60,000 in 2021-2022. Crypto native catalysts such as Bitcoin ETFs and emerging areas such as restaking, modularization, Bitcoin L2), as well as pressure from crypto startup bankruptcies and regulatory challenges, coupled with macroeconomic headwinds (interest rates), led to this stark divergence. Now, with the recovery of liquid cryptocurrencies, VCs are preparing to return, and VC activity will increase in the second half of this year.
Stages of venture capital investment
In the second quarter of 2024, 78% of funds were allocated to early-stage companies and 20% to late-stage companies. While early-stage VC funds focused on cryptocurrencies are active and have reserves left over from 2021 and 2022, large integrated VC firms appear to have exited the industry or significantly scaled back their activities, making it more difficult for late-stage startups to raise funds.
In terms of deal volume, the share of Pre-Seed deals has slightly decreased, but is still higher than in the previous market cycle.
Valuation and deal size
Valuations of venture-backed crypto companies fell sharply in 2023, falling in Q4 to the lowest median pre-money valuation since Q4 2020. However, in Q1 2024, valuations of venture-backed crypto companies began to rebound, soaring to $37 million in Q2 (up 94% quarter-over-quarter), the highest level since Q4 2021. It is important to note that reporting delays and the lack of public valuation data will cause the above data to fluctuate significantly as more data becomes available. We strive to provide this information promptly after the end of the quarter, so the data may be revised, but this peak is still a signal. In addition, the median deal size rose slightly quarter-over-quarter (+7%) to $3.2 million, which is basically the same as the past five quarters. The increase in valuations is due to improved market sentiment; despite the lack of significant increase in investment capital, founders have captured the interest and competition of the existing investor base.
Investment Type
In the second quarter of 2024, "Web3/NFT/DAOCryptocurrency companies and projects in the "/Metaverse/Games" category raised $758 million in total crypto VC funding, the largest share of all categories (24%). The two largest deals in this category were Farcaster and Zentry, which raised $150 million and $140 million, respectively.
Following closely behind are companies/projects related to infrastructure, transactions, and L1, accounting for 15%, 12%, and 12%, respectively. It is worth noting that the market share of investment capital in the L1 category increased by more than 6 times, as Monad and Berachain raised $225 million and $100 million, respectively. In addition, Bitcoin L2 Raised $94.6 million in Q2 2024, up 174% from the previous quarter ($34.7 million in Q1).
Transaction volume breakdown by category
In terms of transaction volume, "Web3/NFT/DAOThe "/ Metaverse / Games" category leads the pack with 191 TP3T, thanks in large part to an increase in decentralized social media and gaming-related deals. While the number of funding rounds for crypto startups related to restaking declined in Q2 2024, the Infrastructure category ranked second in terms of deals, accounting for 151 TP3T this quarter.
Closely following are cryptocurrency companies/projects related to trading and DeFi, accounting for 11% and 9% of the total number of completed transactions in the second quarter of 2024, respectively.
Stages and categories of venture capital
Breaking down investment capital and deal count by stage and category provides a clearer picture of what types of companies are raising funding in each category. In Q2 2024, the vast majority of funding in the Web3, L1, and Infrastructure categories went to early-stage companies and projects, while venture capital in the Deals category went more to companies in later stages of funding.
By studying the share of capital invested in each category at each stage, we can gain insight into the maturity of each category of investable capital.
The number of deals tells a similar story, with a significant portion of completed deals in almost all categories involving early-stage companies and projects.
By examining the share of deals completed at each stage within each category, we can gain insight into the various stages within each investable category.
Investment by Geography
In terms of investment volume, more than 40% of venture capital went to companies headquartered in the United States in the second quarter of 2024. The United Kingdom accounted for 10%, Singapore accounted for 8.7%, the United Arab Emirates accounted for 3.13%, and Hong Kong accounted for 2.78%.
InvestmentXiaobai NavigationIn terms of total investment, companies headquartered in the United States attracted 53% of venture capital, an increase of 23.5% month-on-month. The United Kingdom accounted for 12.78%, Singapore accounted for 4.6%, and the United Arab Emirates accounted for 4.39%.
Investing by Group
The vast majority of venture capital in the second quarter of 2024 went to companies founded between 2021 and 2023.
Summarize
Crypto venture capital sentiment continues to improve, but levels remain significantly lower than the 2021-2022 bull run. With Bitcoin and Ethereum up about 50% this year, investment capital increased by 28% month-on-month, while the number of deals remained roughly flat. If this growth rate continues until the end of the year, 2024 will rank third in investment capital and deal count, behind only 2021 and 2022.
Investments in the Web3 and L1 categories were notable. The Web3 category led the way with a total of approximately $750 million, driven by Farcaster ($150 million) and Zentry ($140 million). L1 ranked fourth with $371 million, driven by Monad ($225 million) and Berachain ($100 million) deals.
The median valuation of venture-backed cryptocurrency companies has soared to the highest level since the fourth quarter of 2021 (the peak of the previous bull market). Affected by the 2022 bear market and adverse macroeconomic factors, most general venture capital firms are still on the sidelines, while venture capital firms focusing on cryptocurrencies are in an increasingly competitive environment, providing project founders with more bargaining chips. It should be noted that the median is based on available data as of July 1, and as more transaction information in the second quarter increases, the median may be updated and may be adjusted downward.
比特币 L2 继续获得大量投资，相关公司和项目共筹集 9460 万美元，环比增长 174%。投资者们对比特币生态将出现更多可组合区块空间、吸引 DeFi 和 NFT 等模式回归生态的热情依然高涨。我们的内部研究表明，至少有 65 个项目自称是「比特币 L2」。
Early-stage deals dominated the second quarter, receiving nearly 80% of investment capital, with Pre-Seed deals accounting for 13% of all deals. The continued focus on early-stage deals bodes well for the long-term health of the broader cryptocurrency ecosystem. While some late-stage companies struggle to raise capital, entrepreneurs are finding investors willing to invest in new and innovative ideas.
The United States continues to dominate the cryptocurrency startup ecosystem. While the United States maintains a clear lead in transactions and capital, regulatory headwinds may force more companies to move to other countries and regions. If the United States wants to remain a center of technological and financial innovation in the long term, policymakers need to be aware of how their actions or inactions will affect cryptocurrencies andBlockchainEcology.
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