Key Takeaways
- • Crypto VC invested $2.49bn across 603 deals in Q1 2024, up 29% and 68% QoQ respectively, the first rise in both capital and deal count in three quarters, according to Galaxy's research report.
- • Infrastructure led capital allocation at 24% of total crypto VC dollars, driven by EigenLayer's $100m fundraise, while Web3 led deal count at 24%, largely on gaming-related deals.
- • Roughly 80% of Q1 capital went to early-stage companies, as early-stage crypto funds with dry powder from 2021-2022 fundraises remained active while many large generalist VC firms exited or reduced exposure.
- • Median valuations rebounded in Q1 2024 while median deal size held flat, indicating founders raised comparable capital with less dilution than in Q4 2023.
- • Crypto VC fundraising remains difficult: total capital allocated to crypto funds declined QoQ even as at least 22 new funds were announced, with average fund size at $108m and median at $65m.
Summary
Galaxy's Q1 2024 research report finds that crypto and blockchain venture capital activity recovered modestly in the first quarter of 2024, even as the broader venture data lagged the sharp rise in liquid crypto markets. Venture capitalists invested $2.49bn into crypto and blockchain companies across 603 deals, representing increases of 29% and 68% quarter over quarter. Galaxy notes this was the first rise in both capital invested and deal count after three consecutive quarters of decline, though it cautions that sustained QoQ growth would be needed to confirm that Q4 2023 marked the bottom.
The report highlights a notable divergence between venture investment and Bitcoin prices. Historically, VC activity has correlated with BTC prices, but that relationship broke down over the past year, with activity remaining well below the levels seen when Bitcoin last traded above $60k. Galaxy attributes this to crypto-native catalysts such as spot Bitcoin ETFs, restaking, modularity and Bitcoin Layer 2 development, offset by macro headwinds including elevated interest rates. Futures markets have reduced expected 2024 rate cuts to one or two from roughly seven anticipated in January.
By category, Infrastructure drew the largest share of capital at 24%, followed by Web3 at 21% and Trading at 17%. Web3 led deal count at 24%, driven by gaming activity. Geographically, U.S.-headquartered companies accounted for 37.3% of deals and 42.9% of capital, followed by Singapore, the United Kingdom and Hong Kong. Galaxy also identifies Bitcoin Layer 2 projects as a concentrated area of interest, following the rise of Ordinals, BRC-20 and Runes.
Valuations rebounded in Q1 even as median deal size held steady, suggesting founders raised with less dilution after the lowest median pre-money valuation since Q4 2020 in Q4 2023. Fundraising for crypto venture funds remains challenging. Total capital allocated to crypto VC funds declined quarter over quarter even as at least 22 new funds were announced, and traditional allocators made up a small share of new fund commitments. Galaxy expects the venture market to loosen if liquid crypto prices and adoption continue to grow and large venture funds succeed in raising substantial capital.
The report highlights a notable divergence between venture investment and Bitcoin prices. Historically, VC activity has correlated with BTC prices, but that relationship broke down over the past year, with activity remaining well below the levels seen when Bitcoin last traded above $60k. Galaxy attributes this to crypto-native catalysts such as spot Bitcoin ETFs, restaking, modularity and Bitcoin Layer 2 development, offset by macro headwinds including elevated interest rates. Futures markets have reduced expected 2024 rate cuts to one or two from roughly seven anticipated in January.
By category, Infrastructure drew the largest share of capital at 24%, followed by Web3 at 21% and Trading at 17%. Web3 led deal count at 24%, driven by gaming activity. Geographically, U.S.-headquartered companies accounted for 37.3% of deals and 42.9% of capital, followed by Singapore, the United Kingdom and Hong Kong. Galaxy also identifies Bitcoin Layer 2 projects as a concentrated area of interest, following the rise of Ordinals, BRC-20 and Runes.
Valuations rebounded in Q1 even as median deal size held steady, suggesting founders raised with less dilution after the lowest median pre-money valuation since Q4 2020 in Q4 2023. Fundraising for crypto venture funds remains challenging. Total capital allocated to crypto VC funds declined quarter over quarter even as at least 22 new funds were announced, and traditional allocators made up a small share of new fund commitments. Galaxy expects the venture market to loosen if liquid crypto prices and adoption continue to grow and large venture funds succeed in raising substantial capital.
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