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DeFi, Web3 Draw Top VC Eyeballs Amid Downtrend in Capital Flow Featured

The decentralized finance (DeFi) and Web3 spaces have attracted a lot of attention from top-15 VC institutions, but broader trends indicate an overall slowdown in venture capital coming from the biggest funds, per a new report from Pitchbook.

The report, Pitchbook’s Emerging Tech Indicator (ETI), shows investment in emerging tech from those top firms dipped for the third quarter in a row, and is down 52% dating back to Q4 2021, which saw a record $9.8 billion in flows over 275 deals. Conversely, the median size of the deals those firms did make, at least with respect to early-stage investments, hit a record $28 million.  

Further, generally speaking, Q3 2022 showed a fairly significant downtrend in crypto investing compared to Q1 2021, which saw a peak of more than $2.3 billion in activity. “It’s possible that growing regulatory risk, depressed cryptocurrency prices, and the broader macroeconomic environment have contributed to this relative slowdown,” according to Pitchbook. “While the strength of investment in this category suggests sustained interest from ETI investors, the recent failure of cryptocurrency trading platform FTX and the subsequent contagion across the industry is likely to have a negative impact on future investment levels”

As such, DeFi and Web3 took in $879 million in funding from top-15 firms, which did pace other sectors, with biotech and fintech following behind. In contrast, notes the Pitchbook analysis, insurtech and mobility startups “gained little traction.”

“The [ETI] provides a quarterly review of seed and early-stage investment activity involving a limited subset of the world’s most successful VC firms that account for roughly 10% of total VC investment,” reads the report. “The analysis provides a unique perspective into the types of technologies top investors view as the most promising, while also tracking how aggressively they are making capital allocation decisions.”

From Twitter

Fintech News Africa @FintechNewsAF

"IFC Launches New Platform to Bolster Venture Capital Ecosystems in Africa, Middle East, Central Asia, and Pakistan. https://fintechnews.ae/14300/fintech/ifc-launches-new-platform-to-bolster-venture-capital-ecosystems-in-africa-middle-east-central-asia-and-pakistan/… #fintech #venturecapital #ecosystem"

In sum, ETI investment measured in the report showed $4.7 billion in capital flow across more than 150 Q3 2022 deals; this represents a 32% drop over Q2. Additionally, large-scale deals, or those set at $100 million or more, were above historical quarterly averages, but down from all time highs set in Q4 2021.

From Twitter 

LatinasInBusiness @LatinasinBizus

"Ashley Aydin says, 'We need Latinas in VC' Raw Principal at VamosVentures, a venture capital fund investing in Latino and diverse founding teams in the earliest stages across Health & Wellness, FinTech, Future of Work, and Sustainability. https://conta.cc/3Ulpk2y"

“The largest deal consisted of a $350 million early-stage round for Flow, the Adam Neumann-founded startup focused on rental apartment,” notes the report.

The next largest ones were:

  • Mysten Labs: $300 million Series B
  • Aptos Labs: $200 million Series A
  • AtoB: $155 million Series B
  • Drata: $128 million Series B

According to Mysten Labs, it aims to find a way to allow creators and other individuals to take “unprecedented ownership” of content and data using Web3 technology, as the “tools to get there don't exist yet.” To that end, it hopes to make Web3 “secure, reliable and ready for mass adoption.”

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