Venture Capital Trends in the Blockchain Industry: Q2 2022 Analysis
In our latest report, we dive into the venture capital (VC) trends and deals from the second quarter of 2022 in the blockchain industry. Our analysis reveals both positive and negative signals for investors.
The Numbers Can Lie
At first glance, it appears that VC investment in the blockchain space remained flat, with a total dollar value of individual deals standing at $14.67 billion in Q2, just barely over Q1’s $14.66 billion. However, this figure can be misleading, as the slump in traditional finance (TradFi) markets has had a significant impact on the crypto markets.
Market Pressure and Risk Aversion
The risk-on to risk-off change has led to a downward market pressure that has affected various sectors of the crypto sphere. The collapse of Terra’s stablecoin has further exacerbated this situation, causing a considerable decline in overall market capitalization. In response, venture capital firms have taken a step back, approaching projects with more caution and potentially allocating less capital to reduce their risk exposure.
Deal Activity and Average Deal Value
Despite these challenges, the number of individual deals in the blockchain industry increased by over 100 compared to the previous quarter, reaching 620+. However, the average value of each deal decreased by over 16% to $26.8 million, indicating a more risk-averse behavior on the part of VC and investment firms.
Web3 Becomes the Sector of Most Interest for VCs
In Q2, Web3 surpassed decentralized finance (DeFi) as the sector of most interest for VC capital inflows, accounting for around 42% of all individual deals. This trend was highlighted further when analyzing the most active investors, who made around 42% of all deal activity for Q2, down from 65% in Q1.
Seven out of the top ten most active VCs chose Web3 as their sector of choice, driven by the push for companies to pursue becoming part of the overall concept of the Metaverse. In our next report, we will break down the Web3 sector into its different parts to see where VC interest is headed in this space.
Metaverse Investment Takes the Lead
The top ten deals saw a massive $2 billion deal with Epic Games to expand into combining sports experiences and the crypto-metaverse. The Metaverse and Web3 were running themes in these large deals, along with Sam Bankman-Fried, CEO of FTX exchange, becoming somewhat of a ‘lender of last resort’ providing funds for firms like BlockFi.
Animoca Brands Ahead in the M&A Game
Mergers & acquisitions (M&A) can provide great strategic opportunities for companies, especially during times of turmoil. Animoca Brands seems to take these strategic opportunities seriously, acquiring three companies in the GameFi space and others in education and marketing.
Two big names were also involved in acquisitions — eBay acquired Known Origin, a nonfungible token (NFT) marketplace, to expand its product offerings to customers. Algorand and Hivemind acquired Napster to promote the music NFT market and improve access for consumers and music creators.
Conclusion
Our analysis reveals both positive and negative signals for investors in the blockchain space. While VC investment remained flat, the number of individual deals increased, indicating a continued interest in this sector. Web3 has emerged as the sector of most interest for VCs, driven by the push for companies to pursue becoming part of the overall concept of the Metaverse.
About Cointelegraph Research
Cointelegraph Research is a leading provider of market research and analysis on the blockchain and cryptocurrency space. Our team consists of experienced economists, business analysts, and experts in emerging technologies. We provide comprehensive reports on various topics related to crypto and blockchain, including investment trends, regulatory updates, and industry insights.
Disclaimer
This article is for information purposes only and represents neither investment advice nor an investment analysis nor an invitation to buy or sell financial instruments. Specifically, the document does not serve as a substitute for individual investment or other advice.
Quarterly Interviews with VC Firms and Crypto/Blockchain Projects
We are excited to announce that Keychain Ventures will be partnering with Cointelegraph Research to present quarterly interviews with VC firms and crypto/blockchain projects that have recently gone through a funding round. These interviews will provide unique insights into investment practices from all parties.
About the Author
Michael Tabone is a senior economist at Cointelegraph Research, with an extensive background in economics, business, finance, cryptocurrency, blockchain technology, and emerging technologies. He is also a Ph.D. candidate working on his dissertation focused on the theory and application of decentralized autonomous organizations (DAOs).
Keychain Ventures
Keychain Ventures is a crypto investment firm that engages in investing different funds in the blockchain space.
This report provides an analysis of the venture capital trends in the blockchain industry for Q2 2022, highlighting both positive and negative signals for investors. Our research team will continue to monitor market developments and provide regular updates on this space.
