Despite many cryptocurrencies being on the rise compared to the end of last year, the overall market is still not far below its all-time highs. As a result, fundraising in the third quarter of 2023 dropped to its lowest level in three years.
According to blockchain intelligence company Messari, the funds raised by crypto companies in the period totaled just under $2.1 billion in 297 deals. This is the lowest amount since the fourth quarter of 2020 and represents a 36% decrease compared to the previous quarter.
In its “State of Crypto Fundraising” report, Messari noted that initial funding (first round) accounted for $488 million of the total raised.
“The trends show a significant shift from later stage projects to early stage projects in the past three years,” said Messari.
Early-stage cryptocurrency businesses increased their share from 37% in the fourth quarter of 2020 to 48% in the third quarter of 2023. Meanwhile, later-stage businesses decreased their share from 8% in the fourth quarter of 2020 to 1.4% in the third quarter of 2023. This strategic positioning in a bearish market is indicative, according to Messari.
Distribution of the funding followed a similar pattern to the past 12 months, according to Messari. Infrastructure in blockchain, DeFi, and cryptocurrency gaming have consistently been the most well-funded sectors during this period. The services sector, such as marketing, incubation, security, and legal services, was the only other sector with over $100 million in funding in the past 12 months.
In the third quarter, funding was relatively evenly distributed among the sectors, with blockchain infrastructure representing the largest share at 18%.
Meanwhile, the DeFi sector led in terms of the number of funded businesses, with 67. DeFi projects raised $210 million in total, with an average business size of $3 million. Binance Labs was an active investor in the DeFi sector, with seven deals during the quarter.
Lastly, the cryptocurrency gaming sector had another strong quarter, with nearly $250 million invested in the sector across 33 deals. The largest deal in the gaming sector was a $54 million Series A agreement for Futuroverso, a platform combining the worlds of AI and the metaverse.
The infrastructure sector accounted for the majority of the funding during the third quarter, despite only having 21 deals. Scaling solutions contributed to 43% of the capital raised by the sector, representing a continued shift from smart contract platforms to scalability solutions, according to Messari.
Finally, Messari pointed out that 54% of active cryptocurrency investors in the third quarter were based in the United States. This percentage is in line with the quarterly average of the past four years (55%).
“Despite project founders slowly leaving the United States in favor of more regulated jurisdictions, the United States is still home to the majority of accredited crypto investors,” concluded Messari.