Web3 venture capital funding plunges as AI hogs the limelight: Report
As per the latest reports, venture funding to Web3 startups has plummeted nearly 78 percent since the last year in the second quarter.
web3
Highlights
- The funding to web3 startups has greatly dropped over the last year
- Businesses related to AI have now attracted the attention of these venture capital firms
According to Crunchbase, a leading platform for company insights from early-stage startups to the Fortune 1000, the funding to web3 initiatives has greatly dropped over the last year, i.e., between June 2022 and June 2023.
The web3 projects had managed to raise funds worth $16 billion, during the first half of the previous year. However, the same was not the case this time, i.e., up until June this year, funds worth $3.6 billion have been invested by venture capital firms in the Web3 ecosystem.
The above data showcases a dip in funding by around 78 percent, says a report by Crunchbase.
It must be pointed out that the web3 ecosystem includes all those businesses and startups which are related to cryptos, Metaverse, NFTs (non-fungible tokens) as well as blockchain gaming.
Reason for a drop in funding in web3 initiatives
The report shows that numerous web3 projects majorly rely on securing external funding to launch their operations amid a lack of regularity clarity. "While seemingly all sectors are seeing a slowdown in venture capital, Web3 — defined here as cryptocurrency and blockchain startups — has been hit hardest. In fact, deal flow hit its slowest pace since the final quarter of 2020, when only 291 deals were announced for a total of $1.1 billion. Large rounds definitely played a role in the dramatic year-to-year drop Web3 funding witnessed," says the report.
It must be noted that as the digital assets sector witnesses market volatility as well as lack of regularity clarity, the focus of venture capital firms has shifted to other tech spheres. In fact, businesses related to artificial intelligence (AI) have now attracted the attention of these venture capital firms.
The report further mentions, "However, there is no denying the massive collapses of large crypto exchanges — we all know the names — and recent regulatory actions in the US likely have shaken some investors from looking into the digital asset space. Will those investors come back, or will current investors invite more? The numbers certainly aren't trending that way. Now investors seem very wary of putting money into anything — except, of course, AI.”
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