American money is proving to be dominant in the crypto space, as US-based startups have raised over 45% of venture capital (VC) funding in the second quarter of 2023. Despite the challenges posed by regulatory issues and a bearish market environment, American crypto companies are still experiencing growth, thanks to the substantial support from VC investors. However, it is interesting to note that the value of crypto-focused VC investments has not seen a corresponding increase in line with the surge in Bitcoin’s price in recent quarters, even though both trends exhibit a long-term correlation.
According to a report from Galaxy.com, the median pre-money valuation of a crypto VC deal dramatically dropped to $17.93 million in Q2 2023, marking the lowest level since Q1 2021. Additionally, crypto and blockchain investments totaled $2.32 billion during this period, slightly less than the previous quarter but significantly lower than the peak of $13 billion seen in Q1 2022. Despite this decrease, these numbers still represent a substantial improvement compared to quarters prior to 2021.
The overall number of completed deals also increased in Q2, with 456 deals compared to 439 in Q1 2023. The majority of investment capital was directed towards early-stage projects, with pre-seed, seed, and series A projects capturing 73% of the total funding. Notably, companies founded between 2021-2022 were the most active in securing funding during the last quarter.
It comes as no surprise that ventures closely associated with generating profits accounted for the largest portion of funding. Companies in the trading, exchange, investing, and lending category received $473 million, representing 20% of the total funding pool. Following closely behind were businesses related to Web3, NFTs, gaming, DAOs, and the Metaverse, which obtained 19% or $442 million in funding. The standout deal in terms of value was secured by the layer-2/interop company, Layer Zero, which successfully raised $120 million in a series B funding round.
The dominance of American influence in the VC web3/crypto funding space is also evident. In Q2 2023, US-based companies accounted for 45% of all crypto VC funds raised, with the UK (7.7%), Singapore (5.7%), and South Korea (5.4%) following behind. Similarly, US-based companies were responsible for 43% of all completed web3/crypto VC deals, while Singapore (7.5%), the UK (7.5%), and South Korea (3.1%) also held significant proportions in this regard.
These statistics underscore the strength and prominence of American money in driving the growth of the crypto space. Despite challenges and market fluctuations, US-based startups continue to attract substantial support from venture capitalists, leading to further expansion and innovation in the industry. As the sector advances, it will be interesting to see how this dominance may shift or evolve in the future.