According to Crunchbase statistics, venture capitalist financing for Web3 companies decreased significantly by 76% in the second quarter of 2023 compared to the same time in 2022. In Q2 2023, Web3 startups raised little over $1.8 billion, which is a significant decrease from the $7.5 billion raised in the same quarter the year before. In the first half of 2023, the negative trend persisted, with Web3 companies raising a total of $3.3 billion, a 78% decrease from the astounding $16 billion raised in H1 2022.
Ten new cryptocurrency venture capital (VC) firms raised $720 million in total in Q2 2023, which indicates a drop in investor enthusiasm from earlier quarters. Cryptocurrency and blockchain-based companies were seen by Crunchbase as being a component of the Web3 sector, which faced difficulties after the crypto winter that hit the market last year and resulted in the failure of numerous significant businesses.
The majority of Web3 companies this year were American-based, both in terms of the volume of money received and the number of closed agreements. In Q2 2023, US-based businesses received 45% of all the cryptocurrency venture capital financing, followed by businesses in the UK with 7.7%, Singapore with 5.7%, and South Korea with 5.4%. Similar to the number of completed agreements, US-based businesses led with 43%, followed by Singapore, the UK, and South Korea, each with 7.5%.
Trading, exchange, investment, and lending firms based on cryptocurrencies garnered the greatest venture capital financing within the Web3 sector, raising $473 million, or 20% of the deployed capital, and accounting for these startups’ funding needs. A total of $442 million was invested in Web3, NFTs, gaming, DAOs, and metaverse firms in Q2 2023, or 19% of all venture capital investments.
While Web3 entrepreneurs had trouble getting venture capital firms’ attention, the artificial intelligence (AI) market kept expanding significantly. Startups focused on AI had a significant uptick, raising $25 billion in investment in H1 2023. Examples include Runway, a provider of AI-enabled tools for film production, which obtained $141 million in series C investment, and OpenAI’s cryptocurrency project, Worldcoin, which received $115 million in a Series C round of funding. Additionally, in a June Series B investment that was primarily driven by Kleiner Perkins, the US-based firm Captions, an AI-powered creative studio, received $25 million.
The divergent financing patterns of Web3 and AI businesses underscore the shifting nature of venture capital investments in cutting-edge technologies, with AI continuing to attract significant attention and funding in contrast to the recent struggles of the Web3 sector.