Kyle Reidhead
Over 25k subscribers
GM DOers! 😎
It’s a bear market. 🐻 Yeah, no shit Sherlock…
We’re not only feeling this in the crypto prices, but also in the lack of funding. 💰
The Q3 2023 total for crypto business funding checked in at just under $2.1 billion across 297 deals, down 36% in both categories from last quarter and down 88% from the all-time high of $17 billion back in Q1 2022.
So what’s really going on? Should you be freaking out?
Today, we’ll go over:
An overview of fundraising in crypto & web3 💸
Which sectors are attracting the most investments 👀
Which companies are still attracting funds 🤑
Shout out goes to our friends at Messari for providing the stats we’re about to share below. 🙏
But before we dive in, did you know that we’re hiring a content writer?
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As has been the case for a while, blockchain infrastructure and DeFi are the most appealing industries for investors.
This is normal because infrastructure is the base layer we all need for web3 to function.
It’s essentially the picks and shovels, aka the tools and services like wallets, exchanges, and analytics platforms, without which we couldn't use web3.
DeFi is the second most appealing investment because it is the most proven use case for blockchain due to its longevity.
However, we’re seeing some shifts right now. At the beginning of 2023, applications like games & web3 social platforms attracted more funding than infrastructure.
As the chart shows below, in February and March, the funds raised by apps surpassed $600 million, while funds raised by infrastructure projects hovered around $400 million.
While that trend was short-term, it’s clear that investors are looking for more sectors to allocate their funds.
But for now, infrastructure is still the go-to play for investors. As the chart below shows, blockchain infrastructure accounts for 18% of invested capital in Q3.
The other popular sectors, after infrastructure and DeFi, are gaming and DePIN.
DePIN is an emerging crypto trend that leverages blockchain technology to build and operate real-world physical infrastructure and hardware. The best example of this is Helium’s 5G Mobile Network which offers customers a $5/month unlimited mobile plan.
Now, a natural question arises here❓
While infrastructure is needed for applications, without successful user-facing crypto apps, infrastructure investments may not materialize.
For infrastructure to thrive, there needs to be stuff (applications) built on top of it.
We’ve shown how FriendTech generated an insane amount of revenue in a very short period of time, to the infrastructure it’s built on.
And now that we have L2s, we've reached a point where the infrastructure we've already built is ready to support adoption.
We just need people to start using web3, and for that, we need apps.
Therefore, we think that applications will be the hottest trend for the rest of the year.
We estimate 2-3 more onchain consumer apps like FriendTech will launch and achieve similar success by the end of 2023.
We already have prospects: Reignmakers, FriendTech, Illuvium, Stars Arena, PostTech, and below, we'll touch on particular applications that raised money recently.
But from a broader perspective, we can see that fundraising for onchain consumer apps is currently being largely driven by the gaming and metaverse sectors.
Blackbird Labs is providing a platform to help restaurants connect with their customers and incentivize repeat visits.
Each tap-in with the Blackbird app earns you access, rewards, perks, and $FLY loyalty points whenever you dine out.
Having raised $24 million last week, Blackbird aims to use the funds to expand their network of restaurants they work with.
Built on Lens Protocol, Phaver aims to simplify the transition to web3 social platforms, making it user-friendly for individuals to create, own, and monetize their social media profiles while retaining control over their data.
Phaver aims to to build a service that provides a web3 onboarding experience that’s similar to existing social platforms.
Also built on Lens Protocol, Orb is a mobile app that allows people to connect, interact, and make transactions onchain.
It is, in my opinion, the most user-friendly app built on Lens Protocol so far, and the app we use the most at Web3 Academy to create content on Lens.
If you want to learn more about Orb and Phaver, you’re in luck. We’ve had the founders of both companies on the podcast.
Looking at the chart below can be deceiving. It appears like we’re down bad.
But that’s not really the case. There was still a whopping $2 billion invested in this space in the last quarter, raised by 300 companies. That’s nothing to sneeze at.
I know that when you compare this to bull market numbers, it can seem small, but you should understand that the numbers we’ve seen in the 2021 bull run were ridiculous.
So if you’re a builder, keep focusing on building the best product you possibly can because if you do, funds will flow your way.
While many companies are leaving the US due to poor regulation, the majority of investors are from the US.
We may sound like a broken record, but the trend for the foreseeable future are onchain applications that utilize the power of blockchain (ownership, speculation, interoperability, composability) without any of the confusion of blockchain because it's been abstracted away.
It’s the web3 mullet: web2 in the front (email/social login) and web3 in the back.
The first example of this was FriendTech and we’ve seen an influx of new copycats popping up.
The reason this is happening is twofold:
The tech (L2s) can support these apps
They generate a lot of revenue
Therefore, builders are already at work. And I’ve got news for you. There’s a way you can capitalize on the rise of onchain consumer apps.
All you need to understand is how the value flows onchain & who benefits as these applications gain popularity.
We first explained this concept in our previous FriendTech PRO report and we’re about to do it again tomorrow.
This time, there’s another application under the microscope: Uniswap 🦄.
Here’s a sneak preview.
A full onchain report will be delivered to our PRO members, tomorrow, at 9AM EST. Wanna receive it in your inbox?
Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤️
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Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
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