In a notable shift from the previous quarter, venture capital (VC) funding in the cryptocurrency sector experienced a modest rise in total investment value during Q2 2024, even as the number of deals saw a significant decline.
According to the latest PitchBook report, startups in the crypto space secured a total of $2.7 billion across 503 deals. The good news is that it represents a 2.5% increase in invested capital compared to Q1 2024, but there's been a 12.5% drop in deal volume.
The report highlights a growing trend toward larger deal sizes, as investors continue to show confidence in the crypto market despite ongoing regulatory challenges and market volatility.
"The increasing deal value yet lower deal count suggests that deal sizes increased overall during the quarter," the report notes.
Compared to Q1 2024, the shift in investment dynamics is evident.
While the previous quarter saw a higher volume of deals, the focus in Q2 seems to have shifted toward quality and scale, with larger investments being concentrated in fewer companies.
"With positive investor sentiment returning to crypto and barring any major market downturns, we expect the volume and pace of investments to continue increasing throughout the year," the report adds, hinting at a potentially strong second half of 2024.
Infrastructure startups led the way in securing funding, with the largest rounds going to Monad, a parallelization Layer 1 platform, which raised $225.0 million in a Series A round; DeFi-specific L1 Berachain, which raised $100 million in Series B; and Bitcoin restaking platform Babylon, which raised $70 million in an early-stage round.
Additionally, blockchain-based social media platform Farcaster raised $150.0 million in a Series A round, marking a $1.0 billion post-money valuation.
The report also provided insights into the broader venture market, highlighting that while valuations were up for seed and early-stage investments, they were down for late-stage rounds.
Specifically, the median pre-money valuation for seed-stage companies rose by 97.0% from full-year 2023 to $23.0 million, and early-stage valuations surged by 166.0% to $63.8 million.
In contrast, late-stage valuations declined by 36.0% to $40.8 million, reflecting a more cautious approach by investors at later stages of company growth.
Edited by Stacy Elliott.