As the cryptocurrency market struggles to recover, venture capital companies and crypto investment departments are betting weekly on Web3 startups with blockchain-focused fund announcements.
In May, the largest crypto fund of $4.5 billion was announced by Andreessen Horowitz (a16z), a leading Web3 VC firm. The firm said its fourth crypto fund would target Web3 startups at every stage. With this new fund, a16z’s crypto fund portfolio has grown to $7.6 billion.
Explaining its decision to launch the fund, a16z said that they believe that the golden age of Web3 is around the corner, pointing to programmable blockchain advances and dApps with tens of millions of users. Additionally, the Web3 industry has been attracting top talent, with some jumping from Web2 platforms. A16z’s $4.5 billion crypto fund came shortly after its $600 million gaming fund, which plans to invest in blockchain games.
“Games will play a pivotal role in defining how we socialize, play, and work over the next century,” said Andreessen Horowitz.
Besides a16z, other VC companies that have launched blockchain-focused funds include NGC Ventures, which launched a $100 million fund to focus on early-stage investment opportunities in DeFi, blockchain-based gaming, NFTs, and the metaverse (as well as Sfermion, which is raising $100 million to invest in NFTs designed for blockchain games).
But not only VC firms raise capital in web3. Blockchain companies and cryptocurrency exchanges are also launching funds. For instance, NFT Blockchain Flow recently launched a $725 million Ecosystem Fund backed by Web3 VC firms, focusing on support for gaming, infrastructure, decentralized finance, content, and creators across Flow’s ecosystem. Meanwhile, KuCoin Ventures has invested in blockchain game publisher Joyride as part of its newly launched $100 million Creators Fund.
It’s no surprise that many of these Web3 funds are looking to invest in blockchain games—the hottest Web3 sector at the moment. According to investment bank Drake Star Partners, Q1 2022 saw 128 blockchain game companies raise $1.2 billion, a third of all game startup funding, with the largest rounds raised by Animoca Brands.
DappRadar reported that VCs have poured over $2.5 billion into blockchain games and metaverse projects in Q1. According to a joint report by DappRadar and Blockchain Games Alliance, 52% of blockchain activity comes from blockchain game dApps.
Over the last month, several Web3 and blockchain gaming startups have received funding from various VC firms. These include N3TWORK Studios, MetaKing Studios, Saga, Azra, FreshCut, Metatheory, Jadu, and Kryptomon, among others.
Evidently, VCs remain bullish on Web3 as they capitalize on the crypto market downturn for a chance at a higher return on investment when the market recovers. Soona Amhaz, the general partner at Volt Capital, even said that this is the time to double down on investments as the VC firm seeks to invest in founders building products that crypto can disrupt.
Echoing her sentiment, Roger Lim, NGC Ventures’ general partner, said: “Despite the systematic market slowdown globally, we continue to see the emergence of high-potential projects that are set to shape the next era of Web3.”
Not so far, Web3 VC firm Fabric Ventures announced the final close of its $140 million fund alongside the first close of its $100 million new Growth Fund. In contrast, Binance Labs announced that it had raised $500 million with external backing for its debut venture capital fund to invest in Web3 companies.
Conclusion:
Web3 has recently been receiving more attention from investors, with companies in the space reaching billion-dollar evaluations along with the want of people to have control and ownership of their personal data and the ability to exchange services with no central authority.
As more developers build decentralized applications and crypto becomes mainstream, everyone can expect this space to grow rapidly- even more so than it has in recent times as users, companies, and investors realize the power of Web3.
