Crypto Is Bad, But VCs Keep Pumping Money

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Crypto.com

December 25, 2022 – (New York) Given the contagion and chaos we’ve witnessed since crypto exchange Sam Bankman-Frieds FTX had a sudden multi-billion dollar coronary, you might be tempted to conclude that the entire crypto industry is heading for the big Chapter 11 bankruptcy filing in the sky, and no one in their right mind could believe it yet.

And yet, even in the freezing cold of Crypto Winter, venture capital continues to pour in for some lucky builders.

Pitchbook analysts report that crypto-VC investments in 2022 (a brutal year across all technologies) outpaced those in fintech and biotech, bringing in $6.5 billion in the past 12 months, of which 879 million in the last quarter.

Just take a look at the last week or so lackluster press releases from the crypto industry. You will see a round of $4.75 million for a thing called Earn Alliance. A $70 million raise for a thing called Ramp Network. Another $15 million for Roboto Games, $3.1 million for the NFT Burn Ghost game and a dizzying $72 million for market maker Keyrock. There are even dizzying plans for a $2 billion metaverse fund by Animoca Brands, while crypto derivatives exchange Matrixport, run by former bitcoin mining kingpin Jihan Wu, is aiming for a $2 billion boost. $100 million for a $1.5 billion valuation.

It’s easy to see why venture capitalists continue to take these risks. VCs are like sharks, they have to keep swimming investing in crap (sorry, decentralized tech) or they will die, even in a bear market. But why do they keep putting their wealth into stuff that just keeps failing?

Everywhere you look, the industry seems to be booming. Last month, Multicoin Capital, Kyle Samanis, a previously high-flying and exuberant firm, had its assets frozen due to its exposure to FTX. Some of the biggest backers in the space, like Babel Finance, Three Arrows Capital, and FTX’s own venture capital arm, have caused some of the biggest blowouts. Meanwhile, star-studded companies like Blockstream are writing their valuations in orders of magnitude, and the $1.5 billion valuation sought by Matrixport looks positively modest compared to the $32 billion valuation once commanded by its competitor today. now deceased.

All this caused an obvious paralyzing effect. All the venture capitalists and all the projects that I have spoken to say that they are much more cautious than before when it comes to investments. A Coinbase spokesperson carefully noted that funding has tightened.

Meanwhile, Animoca Brands CEO Yat Siu cryptically told me that some deals might not make as much sense as a few months ago due to market circumstances or changes. in valuations.

Ramp Network’s business manager, Paulina Joskow, told me she’s heard of a number of projects not meeting the raise requirements, as well as a number of failed deals at the last minute. Many projects, she added, are expecting nothing bigger than a B-series before the VC taps close. Kevin de Patoul, CEO of market maker Keyrock, said he noticed a new emphasis on due diligence that is quite commonplace in most other industries, but something of a revolutionary change in crypto.

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