Crypto startups generate decent, but volatile revenue, with high operational costs due to specialized talent and decentralized infrastructure. Current market conditions challenge sustainable revenue, leading many to rely on bootstrapping or venture capital. The key question is whether these startups can succeed without VC funding and whether a better solution benefits both VCs and users.

VC financing has played a huge role in developing traditional industries like biotechnology and technology. The majority of big tech companies received backing from VCs in the early stages. Today, plenty of VCs focus on funding crypto and blockchain startups. Their activities have, however, sparked some controversy. While VC funding, credibility, and expertise are good for emerging crypto projects, there is a possibility for distorted market dynamics, centralization, and inflated valuation.

Despite January’s decline of fundraising activity and raised amounts, there is no reason to believe that the uptrend has ended. There were few startups raising large rounds in January, so while the number of startups was up slightly, the amount of money raised was down. Bitcoin ecosystem, blockchain interoperability and data analysis are in the focus of venture funds. According to our expectations, 2024 should be a moderately active year for venture funds.

The fundraising activity has rebounded from a three-year low, driven by an increase in cryptocurrency prices and a decrease in the fear of a recession in the USA. The anticipation of a spot Bitcoin ETF approval has reignited interest among venture capitalists and the broader public in the crypto market. As a consequence, venture capitalists (VCs) have become actively involved in investing in the crypto market.

For more insights and a detailed analysis of October's investment trends, we invite you to read our new Crypto Fundraising Recap.