Given the contagion and chaos we’ve witnessed since the sudden collapse of Sam Bankman-Fried’s crypto exchange FTX, you might think the entire crypto industry has gone bankrupt. But still, even in the freezing cold of the cryptocurrency winter, some venture capitalists (VCs) continue to pour money into altcoin projects. Here are the details…
Altcoin projects attract millions of dollars
Analysts at Pitchbook revealed that crypto venture capital investment in 2022 outweighs both fintech and biotech. He reported that cryptos attracted $6.5 billion in the last 12 months and $879 million in the last quarter. For example, last week, a $4.75 million sales round was completed for a project called Earn Alliance. $70 million was raised for Ramp Network.
$15 million for Roboto Games, $3.1 million for NFT game Burn Ghost and another $72 million for market maker Keyrock. Animoca Brands has looming plans for a $2 billion metaverse fund, while crypto derivatives exchange Matrixport, led by former Bitcoin mining tycoon Jihan Wu, is looking forward to a $100 million round at a valuation of $1.5 billion.
Decentralized altcoin projects attract attention
Experts say it’s easy to understand why venture capital firms continue to take these risks. VCs are like sharks. So they have to keep floating by investing or they will die even in a bear market. But why do they continue to invest their wealth in things that are currently relatively “failed”?
Just last month, Kyle Samani’s firm, Multicoin Capital, froze its assets due to exposure to FTX. Some of the funders, such as Babel Finance, Three ArrowsCapital, and FTX’s venture arm, caused explosions. Meanwhile, star-studded companies like Blockstream write their valuations in order of magnitude. The $1.5 billion valuation Matrixport is seeking looks rather modest compared to the $32 billion valuation managed by its once-deceased rival.
VC firms are now more cautious
All this had an obvious effect. Most VC firms and projects say they are much more cautious about investments than they used to be. According to journalist Ben Munster, Coinbase said funding has become a pretty tight area. Meanwhile, Animoca Brands CEO Yat Siu said that “some deals may not make as much sense as a few months ago due to market conditions or changes in valuations.”
According to Munster’s various interviews, Ramp Network business leader Paulina Joskow stated that some projects are failing to meet the increasing requirements. She said she heard some deals fail at the last minute. He added that many projects don’t expect anything bigger than the B Series before the VC taps shut down. Kevin de Patoul, CEO of market maker Keyrock, said he’s recognizing the importance of “due diligence”. This is completely trivial in many other industries, but a groundbreaking change in crypto.
But eight-digit numbers and very high valuations are still circulating. Most of these come from the usual suspects. According to the journalist, these are well-capitalized firms that know when to liquidate and how to manage risk. Pioneers include the likes of Ripple, Coinbase Ventures, Paradigm, Polychain Capital, Pantera, and Andreessen Horowitz. Firms from the Web3 industry such as Animoca Brands, which recently raised $2 billion in funds, have joined them.
Those who did not invest in FTX survived
According to Munster, the reason these companies survived is probably because they were not exposed to FTX. Investing in the stock market, Paradigm has managed to stay away from FTX’s FTT. But experience is also important. Animoca’s Siu said his company learned a lot by enduring the “much cooler and more prohibitive environments” of the 2017-2019 bear market. It’s also interesting to see where the “post-bubble” crypto is going now without the hype. Since the collapse of FTX, a centralized exchange, many venture capitalists have focused on the decentralized space.
Chris Perkins of venture capital firm Coinfund said that multiple disasters in 2022 only confirm his longstanding vigilance against hyper-centralized crypto companies. He attributes his company’s continued survival to avoiding these projects.
It is true that some projects that receive funding are critical “infrastructure” projects. For example, peer-to-peer Bitcoin lending protocol F Interest has raised $1.5 million. Fleek, which hosts decentralized digital content, raised $25 million. As we reported at Kriptokoin.com, there are many decentralized projects that are raising money after the FTX crisis. The idea is that decentralized technology is more transparent and less liable to financial scams of the sort that knocked out FTX. Currently, the top 10 decentralized projects by market capitalization are as follows:
27340
