The State of Crypto Venture (H1 2023)


Anyone close to the crypto startup ecosystem would likely agree that 2023 has been a year of recalibration. The once steady stream of funding, which flowed abundantly into an endless stream of play to earn games and Uniswap clones, has become far more measured.

We looked at fundraising data from Messari for the first half of the year (along with past data) to clearly understand the extent and implications of this shift.


Not surprisingly allocation towards crypto VC has been incredibly volatile , 2020 began modestly, with about $1.1B in funding across 47 deals in the first quarter. Fast forward to Q1 22, and the industry saw a staggering $13.6B being poured into 543 deals. Yet only a year later in Q1 23, funding dropped to $2.2B over 248 deals. It's tempting to see this as a setback, but even with the decline, funding in 2023 is still more than twice what it was at this time in 2020. Its also worth mentioning that this trend is not unique to crypto. Outside of recent AI mania, the broader VC market has followed a similar pattern which you can see in this Crunchbase report.

Early stage rounds have always dominated crypto venture, but late stage rounds have dried up almost entirely. There were only 9 Series B or later deals done in H1 this year - down from over 60 in the same period last year.  A likely reason is due to the decline in liquid token valuations. Late stage valuations become challenging to justify when public comps are trading near the same price without any lockup. 

It would stand to reason that early stage valuations would be similarly affected by the broader market.  But as a likely result of the flight to quality we discussed in an earlier piece this year, the typical early stage round is actually larger than the same period last year. This isn’t a perfect proxy for valuation but given how closely the two are related, it provides helpful context. 


Web3 continues to be the most active category in terms of volume of deals made - this category is primarily made up by Gaming. Infra continues to dominate in terms of dollars though. 

The sharpest trend is the massive dropoff for the CeFi category. It has fallen off a cliff - a clear fallout from the FTX debacle. NFT related fundraising has also dried up almost entirely.

Deal Breakdown

It's interesting to see that 9/10 of the largest rounds through the first half of the year were infra related - though the subcategories are quite diverse.

There are quite a few repeat investors within this group, mostly names you’d expect - a16z, Blockchain Capital, Bain Capital Crypto, 10T Fund, Morgan Creek Digital, and Polychain Capital. 

Gaming was the most popular subcategory with twice the number of deals as the next closest as well as nearly $200M funding received. This isn’t surprising given that many view gaming as the most promising vertical for mass adoption.

Lots of money is still going towards solving custody friction, Lending/Borrowing raised a surprising $145.1M but  Unchained Capital (mentioned above) makes up almost half of this. Similar for Interoperability. Layer Zero accounted for the vast majority of the $166.5M that went towards interoperability.


The crypto venture landscape is clearly down from where it was from 2021 through the first half of 2022. However, its also the case that much of the funding was being allocated loosely and to categories and companies that didn’t make sense - this happens in every bull market.

In many ways, the 2023 climate is healthier. In an ideal world, funds and talent would consolidate around the best ideas/companies. The data shows that this is beginning to take place - at least in terms of funding.

As a firm, we are very excited about the opportunities we are seeing in the market. We think this is an excellent time to be allocating to crypto. If you are working on an interesting new company, please reach out to:

About Us

Stratos is an early-stage venture firm that backs transformative blockchain companies. We apply our deep research expertise to make convicted bets on top founders at the earliest stages.

We have backed numerous top companies in the space — most often as a lead investor. Our investments include Fuel Labs, Space and Time, Dymension, Subspace, and many more. Our team brings together a wide range of experience in venture capital, entrepreneurship and technology.

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