Web3 Startup Funding Closes Out 2022 With 74% Decline, But It's Not As Bad As It Seems

A recent article by Crunchbase reports a staggering decline in Web3 funding. A number of high-profile bankruptcies in the space and an overall decline in sentiment mean venture capitalists (VCs) are starting to slow the pace of funding in the space.

FTX was one of the largest crypto exchanges in the world and a major investor, backer and advocate for the Web3 space. Following its bankruptcy, and that of other large firms like Voyager Digital and Three Arrows Capital, VCs might be a bit spooked to invest.

The report notes from the fourth quarter of 2021 to the fourth quarter of 2022, there was a 74% decline in funding to VC-backed Web3 startups. While this decline is substantial, there was still a 347% increase in VC funding in the space between 2020 and 2022. That’s an increase from $4.8 billion in funding to $21.5 billion. 

To stay updated with top startup investments, sign up for Benzinga’s Startup Investing & Equity Crowdfunding Newsletter

Overall, funding for Web3 declined 26% between 2021 and 2022. While the decline is likely to continue in the short term, there are still some redeeming indicators. The drop in funding for Web3 companies is in line with the broader decline in venture capital funding and the overall stock market.

Gameflip, a blockchain startup raising funds on StartEngine, recently closed out a record year for its gaming assets and non-fungible token (NFT) marketplace. In December, it had volume surpassing $2.38 million. For reference, Gamestop’s NFT marketplace volume is sitting closer to $150,000 in the past 30 days — a respectable feat in an otherwise tumultuous market. 

The year still saw massive funding rounds — even after the collapse of FTX. Matter Labs, for example, raised $200 million roughly a week after FTX imploded. 

Like many investment sectors, this could simply be a continued decline in a poor market rather than the end of Web3.

See more on startup investing from Benzinga.

• Never Lose Your Things Again - The Startup Pouring Gasoline on the Apple AirTag
• Martin Tobias Invested in Google, DocuSign, OpenSea and Over a Dozen Other Unicorns - Here’s What Startup He Is Investing in Next and How to Invest Alongside Him