DeFi and Web3 Startups Attract $3B in Funding in Third Quarter

Fundraising is Down 24% But Decentralized Sector Holding Its Own in Harsh Year

No surprise, DeFi and web3 fundraising has taken a hit in a year roiled by a bear market and a series of crypto scandals. Yet what is eye opening is how much investment continues to flow into the burgeoning sector. 

In the third quarter, venture capitalists and other investors plowed almost $3B into DeFi, NFTs, and metaverse startups, according to CB Insights, an investment data provider. While that’s a 24% drop from the second quarter, it’s still more than the $2.7B investors placed in the decentralized sector in the same period last year. 

Improvement

Moreover, funding for blockchain ventures in general is on pace to hit a record $29B in 2022, a 10% improvement from last year, CB Insights said. 

Still, don’t pop the corks just yet. In November, the failure of FTX, the No. 2 crypto exchange worldwide, walloped confidence in the entire blockchain sector. With $1B raised last month, funding for DeFi is only one-seventh the level it reached in November of 2021, the zenith of DeFi investing, according to DeFi Llama data. 

DeFi Ignas, a popular crypto analyst, shared a chart showing close correlation between the price of Bitcoin and monthly fundraising totals from the second half of 2020 onwards.

The analyst said that Web3 projects executed 65 funding rounds in November, less than half the number in November 2021. 

In any event, DeFi and web3 startups have received more than $23B in funding since the first quarter of 2021, according to CB Insights. And Ben Lakoff, host of the Crypto Mondays podcast, shared data showing that VC funding in general has fallen to its lowest level since the first half of 2020, according to CB Insights.

In that light, web3 and DeFi funding is actually looking pretty good.