VC investments in crypto startups spiked just before everything went to hell – Marketingwithanoy

the first quarter was a hot time for crypto-focused startups. According to a recent dataset from CB Insights, crypto startups raised more capital in the first quarter of 2022 than ever before and set records in a host of other metrics.

If you keep a close eye on the venture capital cycle in the first quarter, this should come as no surprise. As The Exchange pointed out, the crypto startup economy — blockchain technology upstarts, trading platforms, web3 more broadly, etc. — was busy partying as the rest of the startup country succumbed to a falling stock market, limited exit. capabilities and a dramatic price overhaul in software revenue value.

The Exchange explores startups, markets and money.

Read it every morning on Marketingwithanoy+ or get The Exchange’s newsletter every Saturday.

Crypto startups mostly shrugged off that, raking in a huge number of rounds worth $100 million over the three-month period and hitting record numbers of unicorns, CB Insights reports.

The bets may be badly timed. In recent weeks, the crypto market has suffered from a number of problems, the latest of which resulted from the collapse of the so-called algorithmic stablecoin Terra and its sister token, Luna. Crypto prices have fallen sharply in recent days, which is likely hurting trading volumes as well.

The contrast between record venture capital totals in the first quarter and crypto austerity may seem ironic, perhaps even humorous if you’re the cynical type. Instead, it’s more a reflection of how even professional investors can get caught up in a moment, a frenzy of checkbooks competing for a limited number of startup bank accounts that over-bid their real value.

In fact, we found out this week that investors should have known better, at least a little. Let’s talk about data, denials and early warning signs.

Crypto’s Intoxicating Q1 Flops in Q2

In short, the numbers at the highest level of Q1 per CB Insights go like this:

  • A total investment of $9.2 billion in the first quarter of 2022, a record high that surpassed the previous record (4th quarter 2021) by approximately $400 million.
  • 461 total blockchain-focused startup deals in the first quarter of 2022, about 60 deals from the previous record (4th quarter 2021).
  • 28 rounds total worth $100 million or more in the first quarter of 2022, up from the previous record of 18 in the third quarter of 2021.
  • A total of 62 crypto-focused unicorns around the world, up from 49 in the last quarter of 2021.
  • Decentralized financial startups raised $2.1 billion in the first quarter, and NFT-focused startups $2.4 billion, both record highs.
  • Finally, Q1 2022 was the second quarter in a row in which US crypto startups brought in more than $5 billion.

hell yeahyou could say, crypto is the future so all of the above makes sense† That perspective is fine as long as your time horizon is long. For those of us interested in what’s happening in the coming years, let alone the coming quarters, the above data may indicate some kind of spike.

Why? Since we’re almost here in the middle of the second quarter of 2022, it’s hard to imagine such exuberance continuing through the rest of the current quarter. With prices for key assets falling and the NFT market taking a break from previous growth, it’s not clear where the short-term excitement of new investors will come from.

But don’t shed a tear for crypto startup backers; they had early warnings. Recall that in its Q4 2021 earnings, Coinbase said the following:

Leave a comment