Key Takeaways
- • Venture capital investment in crypto and blockchain startups totaled $2.4bn in Q3 2024, down 20% quarter-over-quarter, across 478 deals (down 17% QoQ), according to Galaxy's quarterly report.
- • Venture capitalists have invested $8bn in crypto startups through three quarters of 2024, putting the year on track to meet or slightly exceed 2023 levels.
- • Allocator interest remains tepid: only 8 new crypto venture funds raised $140m in Q3 2024, the weakest quarter for new fund count since Q3 2020, and 2024 is on pace for the weakest annual fundraising since 2020 with 39 funds raising $1.95bn.
- • Early-stage deals captured 85% of Q3 capital, while later-stage deals took 15%, the lowest later-stage share since Q1 2020; the U.S. accounted for 56% of capital and 43.5% of deals.
- • Median crypto deal valuation was $23.8m in Q3, down from $25m in Q2, though valuations rose from their Q4 2023 trough and reached their highest levels since 2022 in Q2 and Q3.
Summary
Galaxy's Q3 2024 crypto and blockchain venture capital report describes a cool market for venture activity despite a strong run in liquid crypto assets. Bitcoin has traded in a range since March, and other major cryptocurrencies have failed to retake prior all-time highs, which Galaxy attributes to a "barbell market" in which Bitcoin leads on one end and memecoin activity drives the other. Combined with minimal interest from large allocators and generalist venture funds, this has kept the crypto VC market tepid in 2024, though crypto-native managers are leading deal activity. Galaxy notes that declining interest rates and a possibly easing regulatory environment could accelerate venture activity in Q4 2024 and Q1 2025.
In Q3, venture capitalists invested $2.4bn into crypto and blockchain startups across 478 deals, according to the report. Layer 1 projects raised the most capital at $341m, or 13.6% of the total, with the top two Layer 1 deals, Exochain and Story Protocol, accounting for $183m. Trading, exchange, investing and lending companies raised the largest category share at 18.43%, or $462.3m, led by Cryptospherex ($200m) and Figure Markets ($73.3m). Crypto AI services saw a fivefold quarter-over-quarter increase, with Sentient, CeTi and Sahara AI raising $85m, $60m and $43m, respectively. Web3, NFT, DAO, metaverse and gaming projects saw the largest QoQ capital decline at 39%, although they led deal count with 120 deals, driven by 48 gaming deals. Early-stage companies captured 85% of capital, and Galaxy notes that crypto-native funds may still have dry powder from earlier large raises.
Valuations have recovered from their 2023 lows. Galaxy reports that Q2 and Q3 2024 valuations reached their highest levels since 2022, tracking a broader VC rebound but with a sharper crypto recovery. The Q3 median pre-money valuation was $23m, with an average deal size of $3.5m. By geography, U.S.-headquartered companies drew 56% of capital and 43.5% of deals, followed by the United Kingdom (11% of capital), Singapore (7% of capital, 8.7% of deals) and Hong Kong (4% of capital).
Fundraising remains the weakest part of the cycle. Galaxy attributes allocator reluctance to the macro environment and the crypto market turmoil of 2022 and 2023. Only 8 new funds raised $140m in Q3, and the median ($40m) and average ($67m) fund sizes for 2024 are the lowest since Galaxy began tracking in 2017. Galaxy suggests that spot Bitcoin ETFs may be drawing institutional exposure that might otherwise have gone to venture, and that later-stage companies may depend on a potential easing of U.S. regulation after the Nov. 5 presidential election to access public markets.
In Q3, venture capitalists invested $2.4bn into crypto and blockchain startups across 478 deals, according to the report. Layer 1 projects raised the most capital at $341m, or 13.6% of the total, with the top two Layer 1 deals, Exochain and Story Protocol, accounting for $183m. Trading, exchange, investing and lending companies raised the largest category share at 18.43%, or $462.3m, led by Cryptospherex ($200m) and Figure Markets ($73.3m). Crypto AI services saw a fivefold quarter-over-quarter increase, with Sentient, CeTi and Sahara AI raising $85m, $60m and $43m, respectively. Web3, NFT, DAO, metaverse and gaming projects saw the largest QoQ capital decline at 39%, although they led deal count with 120 deals, driven by 48 gaming deals. Early-stage companies captured 85% of capital, and Galaxy notes that crypto-native funds may still have dry powder from earlier large raises.
Valuations have recovered from their 2023 lows. Galaxy reports that Q2 and Q3 2024 valuations reached their highest levels since 2022, tracking a broader VC rebound but with a sharper crypto recovery. The Q3 median pre-money valuation was $23m, with an average deal size of $3.5m. By geography, U.S.-headquartered companies drew 56% of capital and 43.5% of deals, followed by the United Kingdom (11% of capital), Singapore (7% of capital, 8.7% of deals) and Hong Kong (4% of capital).
Fundraising remains the weakest part of the cycle. Galaxy attributes allocator reluctance to the macro environment and the crypto market turmoil of 2022 and 2023. Only 8 new funds raised $140m in Q3, and the median ($40m) and average ($67m) fund sizes for 2024 are the lowest since Galaxy began tracking in 2017. Galaxy suggests that spot Bitcoin ETFs may be drawing institutional exposure that might otherwise have gone to venture, and that later-stage companies may depend on a potential easing of U.S. regulation after the Nov. 5 presidential election to access public markets.
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