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Web3 Funding Plunges 76% in Q2, Reflecting Crypto Winter Impact: Report

Updated: Jul 20, 2023


Web3 funding dropped 76% in Q2
Source: Unsplash

A new report from Crunchbase has revealed a sobering decline in Web3 funding from venture capital (VC) funds during the second quarter of this year. The report highlights a staggering 76% drop in Web3 funding compared to the same period a year ago, indicating the significant impact of the ongoing crypto winter on cryptocurrency and blockchain startups.


Furthermore, when comparing the first half of 2023 to the corresponding period in 2022, Web3 startups witnessed a significant 78% decrease in fundraising, with only $3.6 billion raised compared to the previous year's impressive $16 billion.


Web3 Funding Struggles During the Crypto Winter


Defined by Crunchbase as cryptocurrency and blockchain startups, Web3 has faced considerable challenges due to the prolonged crypto winter. While overall VC funding has experienced an 18% decline across all sectors during Q2 of 2023, the decline in funding for crypto-related projects has been far more severe. Investors have shifted their focus towards other emerging technologies, with artificial intelligence (AI) startups securing a substantial $25 billion in funding during the first half of 2023.


Notable Funding Rounds Despite the Downturn


Despite the overall decline in Web3 funding, several significant funding rounds have taken place in the first half of 2023. Worldcoin, a crypto project led by Sam Altman, CEO of OpenAI, successfully secured $115 million in a Series C round in May 2023, with Blockchain Capital as the lead investor. Another notable funding achievement was seen by LayerZero, a crypto protocol, which raised an impressive $120 million backed by Andreessen Horowitz (a16z), Christie's, and other prominent investors.


Prominent Firms Maintain Optimism


While funding levels have plateaued, numerous prominent firms continue to express optimism about the future of Web3. In its second annual "State of Crypto" report, a16z emphasized the strength of the sector, particularly highlighting the robustness of Web3 gaming. The report also highlighted the firm's participation in a $37 million funding round for Mythical Games alongside ARK Invest and Animoca Brands.


Mythical Games recently celebrated surpassing one million downloads of their NFL Rivals app, further emphasizing the potential of the Web3 gaming sector. Binance Labs, the VC arm of the popular crypto exchange, also remains positive about Web3's future and expresses interest in funding companies that facilitate the transition from Web2 to Web3, especially within the gaming industry.

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