Funding rounds are slower, but Paradigm and a16z continue to expand their influence among crypto projects. The two funds are on track to close $1B in deals in the year to date.
VC funding is still shaping the crypto landscape, with the biggest influence coming from Paradigm and Andreessen Horowitz, also known as a16z. The funds not only bring new projects to maturation, but can influence some of the existing ones through voting.
Investments do not equal endorsement, yet the two funds also participate in a long list of relatively small projects. VC backing brings faster development to projects, but also holds the risk of insider selling.
As of September 24, the two funds achieved more than $856M in backing, with an overlapping focus in the area of developer tools. Paradigm’s focus also includes the Base and Zora ecosystems, while a16z covers crypto social media, lending, and marketplace projects.
Crypto funding exceeded $5B in the first half of the year, with the third quarter on track to exceed $2B in funding rounds. More conservative estimates see funding at $3.2B, depending on metrics. VC funding continues despite the slowdown in IDO and other forms of token placements.
The prevalent type of VC deal was a seed round or a Series A funding. Additionally, more than $360M went to undisclosed rounds in the past month.
VC funding continues to flow into several major narratives, but in 2024, a shift happened toward infrastructure and tool creation, away from NFT projects and games.
Funds focus on under five major deals in 2024
The total achievement of Paradigm and a16z hinged on several top deals. Eigen Layer, Espresso Systems, and Story Protocol were among the top deals for a16z, making up $208M in total investments. The deals exceeded the usual Andreessen Horowitz rounds with a range of $3M to $10M. The fund makes up in deal count, with a running total of 179 funding rounds closed.
Andreessen Horowitz has also turned into the most influential backer of Eigen Layer, after its $100M round. Previous funding for the project raised a total of $64.5M from all other backers. The potential of a16z may extend into DAO voting. The fund has held significant weight in other projects, including Uniswap.
Paradigm’s portfolio also held several top deals, most notably Monad and Farcaster, for a total of $375M. Second-tier deals under $100M included Axiom, Babylon, and Conduit. Paradigm achieved an average of $10M to $20M per round, though skewing toward larger backing deals.
Robot Ventures and Polychain are catching up
More inflows are coming from high-profile funds like Robot Ventures and Polychain Capital. The two funds closed more than $860M in deals so far. The latest round from Robot Ventures set aside another $100M for Celestia (TIA).
Both funds specialize in $3M – $10M rounds. Unlike other funds, Robot Ventures accelerated its activity in August, leading up to the recent high-profile round for Celestia. The Celestia round is held by Bain Capital, and Robot Ventures is one of the backers. Polychain Capital and Robot Ventures are also among the most active in entering the seed round stage.
Global crypto funding activity is also asymmetrical, with most funding and recipients originating from the USA. More than 2,900 projects based in the USA received funding in the past year, competing with the entire region of Europe and Asia.
VC funds are in the red with their investments
A large selection of leading VC funds are in the red based on their recent investments. After the market shifted following the March peak, Polychain Capital is down by 84% on its investments.
To compensate for the loss, Celestia (TIA) is among the most successful investments. The projects, now trading at $6.20, offer extremely low prices to early VC backers.
Celestia shared some of its early entrance tokens with Bain Capital, Robot Ventures, and also had a Series B round with Polychain Capital. Some of the early rounds sold TIA tokens to private backers at $0.01.
However, the presence of VC means TIA may be pressured after its latest token unlock. In 36 days, TIA will increase its circulating supply by more than 84%.
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