The current economic downturn and the looming recession here in the United States have caused global funding to startups to fall by 23% in the second quarter of 2011 from the first, to $108.5 billion, according to data from CB Insights. The impact is even greater for web3 startups. The crypto bear market and soft sales in the NFT market also led to a slowdown in the funding of crypto and web3 companies.
According to an analysis by BanklessTimes.com, web3 startup funding has seen a 92.7%decline since the last quarter of 2021. In the fourth quarter of 2021, web3 startups raised a total of $9.8 billion through various funding rounds. However, in the third quarter of this year, that number dropped to just $ 719.7 million.
In a statement, BanklessTimes CEO Jonathan Merry says,” The web3 startup ecosystem is in the early stages of development, and valuations are still being determined. Investors are becoming more cautious and are holding back on investments until they see more progress from these startups.”
One of the main reasons for this decline may be the bearish turn that the crypto market has taken since the beginning of the year. The price of Bitcoin, which is often seen as an indicator of the health of the crypto market, has dropped by more than 50% since January. This has made it difficult for web3 startups to raise money through initial coin offerings (ICOs) and other forms of cryptocurrency-based fundraising.
Web3 startups face many challenges when it comes to fundraising. However, there have been some bright spots at the end of July. One of the most notable success stories is Unstoppable Domains, a blockchain startup that provides users with censorship-resistant domain names.
Unstoppable Domains announced it achieved unicorn status after raising $65 million in a Series B funding round led by Pantera Capital with participation from several angel investors. With this latest round of funding, Unstoppable Domains plans to expand its team and continue to build its censorship-resistant domain name system.
With the bearish turn of the crypto market and increasing regulatory scrutiny, it will be interesting to see how web3 startup funding trends develop over the rest of the year. If the crypto market can rebound and regulatory clarity is achieved, we may see more web3 startups attracting investment.
However, if the current trends continue, web3 startups will need to find ways to adapt to the changing market conditions if they want to survive. You can read the full report and statistics here.