VCs Not Interested in Blockchain Anymore as Funding Almost Stopped

The second half of 2022 brought a visible slump in investments from VCs (venture capitalists) across all significant blockchain industry sectors, according to the newest report published by Cointelegraph Research.

Although the value of funding raised for the entire year was greater than $5 billion, which was higher than in 2021, there was a significant slowdown between June and December. Specifically, in the last three months of the year, funding came in at only $2.3 billion and dropped to $660 million in December.

Blockchain Investments Down in H2 2022

The report categorizes the blockchain industry into five main sectors: centralized finance (CeFi), decentralized finance (DeFi), infrastructure, Web3 and nonfungible tokens (NFTs). In the first half of the year, funding tallied at $30 billion, which is almost as much as the entire year of 2021.

When it looked like the record-breaking figure would be doubled, the crypto winter and the collapse of more crypto-oriented businesses made VCs less keen to invest their funds. As a result, the total amount raised in H2 2022 was $7.23 billion, slipping progressively more each month, as shown in the chart below.

Web3 Was the Most Active Part of the Blockchain Industry

The number of transactions in the fourth quarter fell to 182, and only five exceeded $100 million. Within this group, investments in the Web3 sector, which includes Metaverse and GameFi, proved to be the most popular. In contrast, the least common were investments in NFTs and CeFi.

Throughout 2022, the Web3 sector accounted for 616 deals, while CeFi accounted for only 201. Interestingly, the value of funding was the same at $9.2 billion for both. Also, the average transaction for Web3 was valued at $15.4 million, while in CeFi, it was estimated at $45.6 million.

DeFi attracted $3.1 billion in 299 deals and NFTs $3 billion in 243 sales. The infrastructure sector proved to be the most profitable; of the 295 financing deals completed, companies managed to raise almost $12 billion in capital, which is an average of $40.1 million per deal.

The data was confirmed in a separate report by Crunchbase. It showed that funding for Web3 startups fell by almost $7 billion in Q4 2022, from $9.3 billion to $2.4 billion. Despite the drastic descent in the latter part of the year, the entire year of 2022 turned out to be quite positive for Web3 companies.

Watch the recent FMLS22 panel discuss back-office technology in the fintech business.

Fintech Funding Falls Along with Blockchain Investments

It is not only blockchain startups and young companies that have suffered in 2022, but also the broader financial technology (fintech) sector. According to Innovative Finance, global support for the fintech sector has shrunk to $95 billion, or by 30%. The number of completed transactions fell by almost 1,000 to 5,263.

The UK fintech industry was more resilient to adverse conditions. In the UK, the value of funding lessened by only 5% to $10.2 billion.

"London's fintech industry has consistently proven itself to be both robust and ambitious in the face of economic challenges. As businesses brace for a turbulent 2023, fintech firms can play a vital role. Our industry can and will bounce back quickly, driving growth, job creation and enabling businesses to reach their full potential," Khalid Talukder, the Co-Founder of DKK Partners, said.