Crypto Companies Raised $2.6 Billion in Q1 2023, But There's a Catch: Report

Crypto Companies Raised $2.6 Billion in Q1 2023, But There's a Catch: Report

A new report from global capital markets data platform PitchBook found that crypto-focused companies raised $2.6 billion across 353 investment rounds in the first quarter of 2023.

The amount raised represented a 12.2% and 11% quarter-on-quarter decline in total deals and deal value, respectively. It also represented the fourth consecutive quarter of declining investment activity, as the level of invested capital and completed deals represented the lowest levels since the fourth quarter of 2020.

Crypto startups raised $2.6 billion in the first quarter

Despite declining investment activity for the fourth quarter in a row, there was a positive outlook for the crypto space in the first quarter of 2023.

The PitchBook crypto report found that valuation trends were mixed, with seed, late and early-stage rounds at different levels in the quarter. While seed and late-stage rounds increased by 33.3% and 209%, respectively, compared to 2022, early-stage rounds fell by 16.7%.

The $2.6 billion raised by startups across 353 deals represents a year-over-year decline of 78% and 64.4%, respectively. The report shows that despite the ongoing crypto winter of 2022, venture capital firms were able to close many deals and make significant investments in the crypto space.

While PitchBook predicted that the decline could likely continue, the company mentioned some positive incidents in this area in the first quarter of 2023.

L2s continue to attract investment

Layer 2 (L2) scaling solutions continued their momentum from 2022 by attracting more investments. PitchBook cited Blockstream, a Bitcoin scaling platform, which raised a $125 million convertible note and debt round to build Bitcoin mining infrastructure. The project previously secured $163 million in a Series B funding round in August 2022.

Additionally, PitchBook mentioned Scroll, a company developing a zero-knowledge scaling solution for Ethereum Virtual Machine (zkEVM) that raised $50 million in a late-stage funding round.

Aside from scaling solutions, crypto custody services also received significant investments as demand for self-custody increased. Hardware wallet maker Ledger secured $109 million in a Series C funding round to optimize and expand its wallet production. The French hardware company behind wallets like Nano S and Nano X aims to conduct two more rounds before the end of the year.

Swiss crypto company Taurus has also raised $65 million in a Series B round led by prominent financial institutions including Credit Suisse and Deutsche Bank to improve its platform and expand internationally.