Web3 Firms See Rise in VC Funding During Crypto Winter

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Venture capital (VC) funding hasn’t dried up for companies working on Web3, according to a senior analyst at data and research firm PitchBook, who revealed that Web3 companies have actually seen their funding increase during the crypto winter.

According to Robert Le, senior merger research analyst at PitchBook, venture capital funding has shifted away from centralized cryptocurrency services to decentralized platforms. The words came during an interview on CoinDesk TV, in which he said:

Web 3 is an area where investors have poured a lot more money into the past six months.

The domain includes blockchain-based technologies such as the Metaverse, play-to-earn and play-to-own games, and more. During the third quarter of the year, the outlet reports, VCs invested around $1.5 billion in Web3 ventures.

Web3 is a term first coined by Ethereum co-founder Gavin Wood as a solution to a problem felt when launching the smart contract platform: this web requires a lot of trust to operate. Since then, the term has been used to describe a trustless, more decentralized, permissionless World Wide Web that is taking power from tech giants and giving it to users in the form of ownership.

According to PtichBook, by 2027, Web3-based content platforms are expected to bring in $39 billion in revenue, compared to $3.4 billion expected to be earned by the end of this year.

Le added that there had been a move away from centralized VC services, which invested in crypto exchanges, custodial wallets and on-ramps. Those investments, he said, fell about 85% in a sharp drop but not surprising given the failure of several centralized companies this year, including Celsius Network and BlockFi.

According to the analyst, the drop in venture capital funding for centralized platforms was happening even before the collapse of FTX. Looking ahead, he said he sees 2 non-crypto investors exiting the space and predicts a drop in 2023.

You know, in the last 18 months, everyone has invested in the crypto space, whether it’s crypto native investors, hedge funds, cross funds, family offices. You are going to see a lot of non-crypto investors moving away from this zone.

Although venture capital funding is expected to continue to decline through 2023, a report from PitchBook suggests that venture capital investments could begin to rise again in the second half of next year.

The report also predicts that there will be an increase in crypto platform disclosures and the possibility of regulatory clarity in the same time frame, which could give crypto investors more confidence in the market.

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