Blockchain Venture Capital Funding Down Over 43% in July: Report

Usually a lagging indicator of the health of the sector, the explosion of venture funding in the blockchain sector in 2021 and the first half of 2022 appears to be cooling after seven consecutive growth sectors. According to Cointelegraph Research, inflows into the blockchain venture capital market have fallen by 43% month-on-month in July 2022.

The Web3 sector, including GameFi and Metaverse, continues to command the lion’s share of investor interest. But the decline in capital inflows should be seen in context, as the figures are close to the same period in 2021 when the crypto market was in a bull run.

Capital inflows plunge sharply in July

Even the most bullish Bitcoin maximalists seem resigned to the grim reality of a cold long winter, as cryptocurrency prices crawl along with occasional bounces, at best. VCs are not immune to negative sentiment, confirming that crypto’s recent downturn is beginning to show in private funding. As revealed in the recently published Q2 Venture Capital Report by Cointelegraph Research, the average deal value in the venture capital industry has fallen by 16% to $26.8 million in Q2, and the crypto VC train of 2021-2022 is likely to run out.

Cointelegraph Research Terminal VC database data containing extensive details on deals, M&A activity, investors, crypto companies, funds and more outlines that in July, the total number of deals fell by 26% month-on-month, with average deal values. continues its downward trend.

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Total capital funding fell 43% in July to $1.98 billion from June’s $3.5 billion. It’s easy to view these numbers negatively, but compared to 2021, the VC market appears to be in a much healthier state. Total capital infusion through 2021 was $30.5 billion for the blockchain space. In July, 2022’s total inflow exceeded this figure with $31.3 billion in investments this year despite difficult macroeconomic conditions that saw the crypto market see some bankruptcies and controversies such as the Terra collapse in May.

Web3 has the greatest investor interest

VCs changed their investment strategy in Q2, favoring Web3 over decentralized finance (DeFi). This trend continued in July, with Web3 companies accounting for 44% of investments and 55% (78) of the 141 closed deals. Capital interest in DeFi continues to wane, with the sector accounting for 27% of total funding and just 17% of total deals completed in July. Additionally, GameFi took 20% of the 78 deals closed, and Metaverse companies accounted for 17%.

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For a full analysis of the blockchain VC sector in July, check out the recently launched monthly “Investor Insights” report from Cointelegraph Research. The research team breaks down the past month’s most important market-moving events and the most critical data across the various sectors of the industry, including venture capital.

July fundraising bonanza

July’s fundraising numbers strike a different tone than the sharp decline in VC deals completed with five companies securing over $100 million in funding. Total fundraising in July was $15.4 billion, representing a 61% increase from June’s $9.5 billion raised. Having backed several crypto and blockchain-related firms in the past, Sequoia Capital China alone raised $9 billion in July, showing bullish investor interest in the Chinese market despite China’s crackdown on tech companies.

VC funding has already passed 2021

Investor interest is shifting to Web3, with uncertainty in the DeFi space affecting investor sentiment. The decline in the crypto market and an uncertain macroeconomic landscape are affecting private funding, but the outlook remains positive. With month-on-month declines in total funding, deals and deal values, VC market inflows remain on par with Q2 2021, when the market was in a bull run.