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    HomenewsCrypto Startups in the U.S. Lead in Venture Capital Funding

    Crypto Startups in the U.S. Lead in Venture Capital Funding

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    Despite regulatory hurdles, U.S. crypto startups lead in venture capital funding, absorbing 45% of total investment in Q2 2023.

    Crypto firms based in the United States are receiving a big chunk of all the venture capital (VC) funding directed towards the crypto industry. In fact, they’re not just leading, they’re dominating. Despite an atmosphere of heightened regulation, U.S. crypto firms are showing their mettle, pulling in almost half of all capital investments in the sector. A recent report sheds light on this.

    Galaxy Digital, a crypto investment company, published this insightful report on July 14. It underscored that American crypto startups are not only leading in terms of the capital raised but also in the number of deals signed. They’ve successfully completed more than 43% of all deals and have absorbed over 45% of the VC funding invested in the crypto market.

    On a global scale, the U.K. and Singapore come next, securing 7.7% and 5.7% of the capital investment respectively. The United States, however, stands head and shoulders above the rest, emphasizing its robust position in the crypto startup scene.

    Crypto Industry’s Funding Trends: The Full Picture

    While U.S. firms lead in attracting funding, there’s a dip in the total capital that’s being invested in blockchain and crypto startups. This dip has been steady over the previous quarters. During Q2 2023, a mere $720 million was raised by ten new VC funds in the crypto space. This figure is a stark contrast to the funding levels at the beginning of the COVID-19 pandemic in Q3 2020. In fact, the total money raised over the past three quarters is less than the amount raised in Q2 last year alone.

    While the Web3 category companies are ahead in the number of deals, firms in the trading category are getting more funding. This shows the confidence investors have in trading platforms, despite their fewer number of deals.

    Analyzing data provided by Pitchbook, the study laid out significant trends, including a continuing slump in crypto venture capital (VC) investment and declining valuations.

    The amount of capital invested by venture capitalists in crypto and blockchain startups continued to decline, with the total investment sum reaching a new cycle low of $2.32 billion in Q2 2023. It represents the lowest investment amount since Q4 2020 and a marked decrease from the peak investment of $13 billion in Q1 2022.

    Capital Invested in Crypto.
    Capital Invested in Crypto. Source: Galaxy Research

    Interestingly, despite the slump in capital investment, the deal count increased marginally in Q2, with 456 deals completed against 439 in Q1 2023. The slight rise was primarily due to an increase in Series A deals. The majority of the funding went into early-stage deals (pre-seed, seed, and Series A), which accounted for 73% of the total investment. The remaining 27% was invested in later-stage deals.

    More Insights

    The report also pointed out a decline in valuations across the crypto landscape, with the median pre-money valuation of a crypto VC deal in Q2 2023 dropping to $17.93 million. This figure represents the lowest valuation since Q1 2021.

    Breaking down the venture capital investment by category, startups in the trading, exchange, investing, and lending space raised the most capital in Q2 2023, pulling in $473 million or 20% of the total capital. Coming in close second were startups in the Web3, NFTs, gaming, DAOs, and Metaverse sectors, which raised $442 million, representing 19% of total VC investment for the quarter.

    Finally, the report suggests that companies building in the broad Web3 category dominated the deal count, while companies in the trading category raised the most capital, a trend continuing from the last quarter. It thus reveals the dynamic landscape of the crypto startup ecosystem and the significant influence of market conditions on investment trends.

    The Regulatory Landscape and Its Impact

    The funding scene is playing out amidst the U.S. Securities and Exchange Commission’s (SEC) increased scrutiny of U.S. crypto firms. A recent case that gained attention was between the SEC and Ripple Labs. In a significant ruling on July 13, the judge declared that XRP, Ripple Lab’s cryptocurrency, is not a security when traded on digital asset exchanges. This was a big win for Ripple Labs and has positive implications for the U.S. crypto industry.

    Ripple’s CEO, Brad Garlinghouse, has criticized the SEC’s approach to the crypto industry. He feels that it could stifle innovation and growth in the U.S. crypto market. Despite such challenges, the fact remains that U.S. crypto startups are still securing the lion’s share of VC funding. This resilient performance is a testament to the vibrant potential of the U.S. crypto market.

    The post Crypto Startups in the U.S. Lead in Venture Capital Funding appeared first on Crypto Academy.

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