In Q3 2024, the crypto sector saw a “steep decline” in funding, with a 31.1% QoQ drop in deal value to $1.7 billion as well as a substantial 25.3% decrease in deal count to 392 deals. This, according to a report from PitchBook.
PitchBook noted that although the decline was a “surprise” due to the strong momentum crypto venture funding experienced over the past couple of quarters, they mostly attribute the pullback in investments to various macroeconomic factors.
PitchBook further stated in its research report that infrastructure startups continued to lead the way in funding during the quarter, with some of the largest rounds “raised by modular Layer 1 platform Celestia ($100 million late-stage round), IP-specific Layer 1 platform Story Protocol ($80 million Series B), and risk management developer Chaos Labs ($55 million Series A).”
PitchBook further revealed in its report that decentralized AI startups also have seen strong VC funding during the quarter, “including Sentient, which raised a $85 million seed round, and CeTi, which raised a $60 million early-stage round.”
Compared with full-year 2023, valuations for the first three quarters of 2024 were “up across all stages.”
The PitchBook report added that “median pre-money valuation for the seed stage was at $18.5 million; the early stage at $60.8 million; and the late stage at $60.0 million, representing increases of 55.8%, 154.8%, and 26.3%, respectively, from full-year 2023.”
These numbers indicate that investment rounds have “become highly competitive at all stages, and this trend is on par with the broader venture market.”
PitchBook also mentioned that Deal sizes for the earlier stages “reflected the valuation trends, but for late stage, there was a divergence. Median figures registered at $3.0 million for the seed stage, $4.8 million for the early stage, and $6.0 million for the late stage, representing increases of 36.4% and 33.3%, and a decrease of 6.2%, respectively, from full-year 2023.”
The increased valuation but “smaller median check sizes for late-stage crypto startups suggest that founders are selling smaller portions of their equity than last year.”
On the exits front, Q3 saw a total of 20 VC exits. Notable exits during the quarter include “the acquisition of crypto exchange BitOasis by exchange CoinDCX.”
PitchBook said they expect there to be “more consolidation within crypto exchanges. Decentralized ID platform Disco.xyz was acquired by another ID platform, Privado ID (previously Polygon ID).”
Lastly, decentralized web3 development platform Bware Labs was “acquired by centralized web3 development platform Alchemy.”
These deals highlight increased “horizonal consolidation across the entire crypto ecosystem.”
PitchBook expect more consolidation “among crypto exchanges, custodians, and infrastructure providers as the market matures and smaller players seek strategic exits.”