May 11, 2022 - Economy & Business

Crypto startup funding boomed in Q1 despite ongoing market slide

Illustration: Aïda Amer/Axios

The crypto market has been in a downward trajectory since November, but venture investors — and the crypto companies they've backed in Q1 — do not seem to have gotten the memo, per new data from CB Insights.

Why it matters: With the sharp market dive in recent days, expect numbers to look different going forward.

The big picture: Crypto and blockchain companies globally raised a record amount of venture funding this past quarter, largely driven by a number of mega deals ($100 million and above) and investors' recently replenished coffers.

By the numbers: Companies raised $9.2 billion in venture capital globally in Q1 across 461 deals, while U.S. venture deals hit $5.8 billion or 63% of global funding.

  • There were 28 mega deals, a record quarter, up from 17 in Q4 and 18 in Q3.
  • There are now 62 unicorns (private companies valued at $1 billion and over), with 14 new ones from this quarter, the same number of new entrants as Q4. The U.S. remains the land of crypto unicorns as the home to 40 of them.

Between the lines: Average and median deal size remained flat compared to the previous quarter — and while median deal size was down in Asia, it hit record highs in the U.S. and Europe.

  • Mid and late-stage median deal sizes also fell year-over-year, while early-stage deal size increased slightly to $4 million.

Zooming in: Despite NFTs largely dominating headlines last year, DeFi was this quarter's winner, adding four new unicorn startups.

  • With $2.1 billion invested across 71 deals, DeFi startup funding is on pace for a record year. Q1's dollars invested have already surpassed prior quarters.
  • Average and median deal sizes for DeFi startups are also at all-time highs, and mid-stage deals are growing as a share of overall deal activity, suggesting the category is starting to mature.
  • Meanwhile, NFT startups saw deal activity and deal size remain flat from Q4, and startups in the custody and wallet, and exchange and broker categories saw mostly declines in investment activity.

Yes, but: Exit activity was in line with the broader market, with a sharp decline in M&A, IPOs, and SPAC deals.

  • M&A hit its lowest activity level since Q3 2020 with nine deals this past quarter, with the rest also declining.

What we're watching: How the rest of the year pans out. Crypto VCs have a lot of fresh dry powder and an unusually strong belief that downturns yield some of the best startups, but they're not immune from the larger uncertainties.

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