In venture capital, the cryptocurrency business has raised $100 billion since 2014; Coinbase Ventures has led 443 of these investments.
TakeAway Points:
- Since 2014, $100 billion in venture capital has been invested in cryptocurrency firms, with Coinbase Ventures leading the way with 443 deals.
- The industry has witnessed large blow-ups, including as FTX and BlockFi, despite noteworthy exits like Coinbase’s $86 billion IPO.
- Potential IPOs and a general market rally align with the recent surge in cryptocurrency venture funding, which reached $2.5 billion in Q1 2023.
Funding Milestones for Crypto Ventures
The crypto industry has amassed approximately $100 billion in venture funding since its inception, with a recent surge in investments coinciding with a rally in Bitcoin and other major tokens.
Data from DeFiLlama indicates that the sector’s fundraising total stands at $101 billion since 2014, while The Block Research reports over $95 billion in cumulative investment starting from 2017. This influx of capital has been a significant driver of the industry’s growth, though the results for investors have been mixed.
Paul Veradittakit, managing partner at Pantera Capital, noted that traditional exits such as landmark acquisitions and public listings have taken longer than expected. The notable exception is Coinbase Global Inc.’s $86 billion direct listing on the Nasdaq in 2021. However, exits have generally been scarce, limited to a few trade sales.
The industry has also seen significant setbacks, such as the collapse of FTX and BlockFi, which have caused major investors like Tiger Global Management LLC and Temasek Holdings Pte to retreat from the sector.
Returns on Tokens and Investment Plan
Despite the challenges, tokens issued by startups have provided some relief. These tokens, often purchased by venture capitalists as part of early-stage funding agreements, are typically listed on crypto exchanges and can offer short-term returns. Ray Hindi, CEO of L1 Digital, pointed out that institutional backers who lost money on crypto bets often did so because they invested in equity rather than tokens. “That was the wrong investment,” he said.
Tokens, while volatile, can be sold relatively quickly, sometimes cutting the return cycle for venture investors from 5-10 years to as little as two years, according to Richard Galvin, co-founder of Digital Asset Capital Management. Kinjal Shah, general partner at Blockchain Capital, maintains a more traditional approach, focusing on long-term venture-style returns over five to ten years.
Negotiation and Market Structure
Coinbase Ventures leads the crypto venture investment landscape with 443 investments, accounting for roughly 4% of all deals since 2017. Animoca Brands Corp. and Outlier Ventures Ltd. follow in second and third places, respectively.
According to PitchBook data, crypto venture investment rose to $2.5 billion in the first quarter of this year, up from a recent low of $1.9 billion in the fourth quarter of 2023. This uptick in investment has brought back billion-dollar valuations for startups like Farcaster, Berachain, and Hidden Road Partners.
The rise in investments has paralleled a broader crypto rally, including Bitcoin reaching a record high of $73,798 in March. Although the climb has stalled, some analysts anticipate renewed momentum and a wave of crypto-related initial public offerings.
Matthew Kennedy, senior market strategist at Renaissance Capital, suggested that as many as 15 crypto firms could go public. Additionally, mergers and acquisitions activity in the Bitcoin mining sector has increased, with companies like Core Scientific Inc. and Bitfarms Ltd. receiving takeover bids.
