Crypto startup funding falls to lowest level in almost two years

livemint.com:

Crypto startups are facing a harrowing time attracting private financiers after the collapse of digital-asset exchange FTX. Venture capital investment in the industry plunged to its lowest level in almost two years during the fourth quarter of 2022, according to data from research firm PitchBook.

Overall, VC firms invested $2.3 billion in crypto startups during the quarter, a 75% drop from the same period the previous year, according to PitchBook. Venture capitalists had already begun slowing their investment activity, but the implosion of FTX in November prompted them to pull back even further, said Robert Le, a crypto analyst at the research firm. 

“Investors are trying to see what’s going to happen next and there isn’t a rush to deploy capital," Le said in an interview. 

The pullback is a departure from the ardor for crypto at the beginning of 2022. FTX had raised $400 million at a $32 billion valuation last January, while VC firms like Andreessen Horowitz, Haun Ventures and Electric Capital raised billions of dollars to back crypto companies. Enthusiasm for the industry led to a record $26.7 billion being invested in blockchain startups last year, most of which came in the first quarter, according to PitchBook. That number represented a slight increase compared to 2021.

FTX’s implosion was certainly the last straw for some VCs. Setbacks, such as the bankruptcy of crypto lender Celsius Network in July, had already given them pause, according to Alex Thorn, head of firmwide research at crypto financial services provider Galaxy Digital. The collapse of the TerraUSD stablecoin and the shutdown of disgraced crypto hedge fund Three Arrows Capital, both of which pushed the prices of digital assets lower, further spooked