“Cryptocurrency values experience grounding in 2023, with VC anticipation of resurgence in 2024”

Crypto valuations ‘came back to earth’ in 2023, but VCs expect them to rise again in 2024The past couple of years have proved to be a turbulent time for the crypto industry. But a recent spike of interest in crypto, driven by rising Bitcoin and Ethereum prices, is rebuilding momentum, and many think that next year could be promising for crypto startups’ valuations. Fundraising was difficult for both startups and venture capitalists in 2023, according to Lydia Chiu, VP of business development at Ava Labs. In 2022, the crypto venture capital deck “saw a complete reshuffling,” with “many tourist VCs in retreat and their weaker portfolio investments bleeding out,” he added. “Anyone should’ve expected venture funding to dry up in 2023, and it did,” said Will Nuelle, general partner at Galaxy Ventures.

The past couple of years have certainly been a whirlwind for the crypto industry. From major institutions failing to investors fleeing as the economy took a downturn, the market has been anything but stable. However, with the recent surge in interest and the steady rise of Bitcoin and Ethereum prices, there is a renewed sense of momentum in the air. Many are looking towards 2024 with optimism, predicting a rise in valuations for crypto startups.

Fundraising proved to be a challenge for both startups and venture capitalists in 2023, as Lydia Chiu, VP of business development at Ava Labs, explains. “We saw a correction in valuations on the startup side, with less token offerings,” she noted. “VCs also had more bargaining power when leading deals, unlike in the past two years. We’ve seen more follow-on and down-round opportunities for teams that raised during the bull market rather than new projects raising now.”

The aftermath of 2021’s hype can still be felt in the crypto venture landscape, as Michael Anderson, co-founder of Framework Ventures, points out. “There were outlandish valuations and a number of questionable ideas being funded by traditional Silicon Valley firms who jumped into the space without a true understanding,” he stated. 2022 saw a complete restructuring, with many “tourist” VCs pulling back and weaker investments struggling.

The dry spell of 2023 only served to weed out the weaker businesses that had managed to secure funding during the previous high. According to Marc Bhargava, managing director at General Catalyst, there was still plenty of “dry powder” left over from the good days.

Anderson adds, “Valuations came back down to earth.”

The explosion of FTX in November 2022 caused many funds, even those focused on web3, to put a pause on new deals. “It was expected that venture funding would dry up in 2023, and it did,” said Alex Marinier, founder and general partner of New Form Capital.

“Most people finally seemed to understand that we’re in a new market and that investors are thinking and acting more rationally,” says Anderson.

While early-stage deals saw a decrease, they were not completely out, as Will Nuelle, general partner at Galaxy Ventures, explains. “Discounted or flat valuations were common in the wider tech industry, so it was no surprise that struggling crypto startups had to take significant cuts,” he said. However, Nuelle notes that there is a dispersion in valuations, with competitive deals still receiving substantial multiples, but successful raises are no longer a guarantee as they were 18 months ago.

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Ava Patel

Ava Patel is a cultural critic and commentator with a focus on literature and the arts. She is known for her thought-provoking essays and reviews, and has a talent for bringing new and diverse voices to the forefront of the cultural conversation.

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