Web3 dominates the venture capital interest in the blockchain industry in the second quarter of 2022
Cointelegraph Research provides an analysis of all agreements and trends from venture capital (VC) in the blockchain industry during the second quarter of 2022.
When you look at the total amount that was invested in the crypto industry in the second quarter, it will tell one story. However, a deeper dive into the data tells a different story. From a high level, $ 14.67 billion invested in Q2 is roughly flat with $ 14.66 invested in Q1. But the bulk of this investment was in April, before the last two months of a sharp decline in global markets, which led even the most bullish crypto investor to admit that the bear market has arrived.
The good news is that even though this happened, funds like Andreessen Horowitz (a16z) closed a $ 4.5 billion crypto fund, and investment continued to flow into various sectors of the crypto industry.
Download the full report here, complete with charts and infographics.
Cointelegraph Research Terminal has a VC database that contains comprehensive details on agreements, mergers and acquisitions, investors, crypto companies, funds and more. Using this database, Cointelegraph Research analyzes the figures to find the important trends in the industry. The report is just an overview of the highlights from the last quarter – not everything fits in the 12-page quarterly report.
The numbers can lie
The total dollar value of individual agreements in the blockchain industry remained flat at $ 14.67 billion in the second quarter, just over $ 14.66 billion in the first quarter. This may point to an inaccurate conclusion that there is no change in VC investment trends, and everything is on a massive exponential growth curve.
The decline in traditional financial markets (TradFi) has been a headwind for the crypto markets. The change between risk and risk has had a surprising impact on different sectors of the cryptosphere. This downward market pressure was only exacerbated by the collapse of Terra’s stablecoin, which significantly reduced the overall market value. Macroeconomic forces have influenced venture capital firms to take a small step back and approach projects with more caution and probably less capital allocation to reduce risk exposure in case they support a bad project.
The number of individual agreements in the blockchain industry was over 620, up one hundred more than in the previous quarter. However, the average value of each deal fell by more than 16% to $ 26.8 million, which may indicate more risk-taking behavior from VC and investment firms. So even though the data shows signs of a decline in the inflow of investments in the crypto area, interest in helping to build the next generation of blockchain and crypto products still appears to be strong.
Web3 will be the sector of greatest interest to VCs
Of all the major sectors in the blockchain industry in decentralized finance (DeFi), centralized finance (CeFi), blockchain infrastructure, Web3 and non-fungible tokens (NFT), DeFi was basically always the king of VC capital injection. All this changed in Q2, when Web3 received around 42% of all individual agreements, leaving DeFi at a long second of 16%. This trend was further highlighted when analyzing the most active investors, who accounted for around 42% of all contractual activity in the second quarter, down from 65% in the first quarter.
Seven of the ten most active VCs chose Web3 as their preferred investment sector. The pressure for active involvement of companies to pursue to become part of Metaverse’s overall concept is the driving force behind this new trend. In the next report, the Cointelegraph Research team will break down the Web3 sector into the different parts to see where VC interest is heading in space.
Metaverse investments take the lead
The top ten deals were lower than in the previous quarter, but also had a huge $ 2 billion deal with Epic Games to expand to combine sports experiences and the crypto-meta-verse. Metaverse and Web3 were a recurring theme in these big deals, as was the CEO of the FTX exchange, Sam Bankman-Fried, who became something of a “lender of last resort” and gave funds to companies like BlockFi, which became negative affected by the recent downturn in the market.
Animoca Brands at the forefront of the M&A game
Mergers and acquisitions (M&A) can provide great strategic opportunities for companies, especially in times of unrest. Animoca Brands seems to be taking these strategic opportunities seriously, buying three companies in the GameFi area and others in education and marketing.
Two big names were also involved in the acquisitions – eBay and Napster. eBay acquired Known Origin – a non-fungible token (NFT) marketplace to help expand its product offering to customers. Algorand and Hivemind acquired Napster to promote the music NFT market to improve access for consumers and music creators.
The report subtracts Cointelegraph Research Terminals’ expansive database along with analysis from Michael Tabone, a senior economist at Cointelegraph Research. Michael has an extensive background in economics, business, finance, cryptocurrency, blockchain technology and works with new technologies. In addition to working for Cointelegraph Research, Michael holds a Ph.D. candidate working on his dissertation, which is focused on the theory and application of decentralized autonomous organizations, or DAOs.
Keychain Ventures is a crypto-investment company that is engaged in investing various funds in the blockchain area. Keychain Ventures, together with Cointelegraph Research, will present quarterly interviews with VC companies as well as crypto / blockchain projects that have recently undergone a round of funding. These interviews will open up different views on investment practices from all parties.
This article is for informational purposes only and does not represent an investment advice or an investment analysis or an invitation to buy or sell financial instruments. Specifically, the document does not serve as a substitute for individual investments or other advice.
