Crypto VCs are in rebound mode: Galaxy
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Venture capital activity in crypto is a comeback story, s l o w l y gathering steam after the 2022-2023 slump.
Why it matters: The crypto VC market continued to rebound in the second quarter even though bitcoin's performance wasn't as strong.
- That's according to Galaxy Research, citing founders and investors saying April to June was a more active fundraising environment than prior quarters.
Between the lines: "Allocators may be preparing to return in earnest due to the resurgence of liquid crypto," Galaxy Research's Alex Thorn and Gabe Parker wrote in their report, saying that could lead to greater VC activity in the second half of the year.
Flashback: Early-stage startups got a larger piece of the pie than later-stage ones, with 78% of second-quarter capital allocated to the former and 20% to the latter.
- Early-stage venture funds still have cash to deploy, while larger, more generalist VCs have left the sector or downsized investments of that ilk.
What we're watching: Crypto firm valuations spiked in the second quarter, or 94% from the prior, reaching the highest levels since the fourth quarter of 2021.
- "Despite no significant increase in investment capital, founders have leveraged interest and competition among the existing investor base," the report said.
Yes, but: Median valuation data was as of July 1, meaning it can be adjusted as more Q2 deals are reported, they added.
Zoom in: Companies in the web3, NFT, DAO, metaverse and gaming categories raised the largest share of capital in the second quarter, or roughly $758 million.
- Decentralized social media network Farcaster's $150 million raise, and gaming guild Zentry's (aka GuildFi) $140 million round, were the largest in that bucket.
- Investments in infrastructure, trading and layer 1 firms followed, with those three buckets getting roughly the same 12% to 15% of capital invested in the second quarter.
Our thought bubble: Crypto's turnaround in crypto equity and token investments is visible too, per our Fintech Pro colleagues, though still second to AI.
