Introduction
Fundraising plays a pivotal role in both crypto and traditional markets, serving as a primary method for projects to secure early-stage capital by selling equity to private investors and funds. While these opportunities often remain inaccessible to retail investors, understanding fundraising dynamics is crucial for several reasons—particularly when analyzing tokenomics and liquidity.
The crypto fundraising landscape has evolved dramatically in recent years, with new sectors and protocols attracting significant investments. This report explores trends from the past few years, with a focused deep dive into 2023.
Investment Stages Overview:
- Pre-Seed Round
- Seed Round
- Series A-E Rounds
- Strategic Round
In 2023 alone, 1,957 investors participated in approximately 641 funding rounds across 617 projects, totaling $5.58 billion. Seed rounds emerged as the most popular investment stage.
Fundraising Trends
Historical Context
Prior to the 2021 bull market, fundraising was highly concentrated among a limited pool of investors. The subsequent surge in interest—driven by bullish price trends and low interest rates—led to record-breaking capital inflows. However, 2023 marked a stark downturn, with total fundraising barely surpassing 2019-2020 levels.
Key Players
Firms like a16z, Paradigm, and Jump Crypto dominated large-scale funding activities, though their pace slowed significantly in 2023. Notably, defunct hedge fund 3AC (Three Arrows Capital) had previously led seven rounds.
Top Funded Categories:
- DeFi (29% of total funds): Major investments included Li.Fi, M^ZERO, and Radiant.
- Gaming: Remained a VC favorite despite a slowdown post-2022.
- Layer 1 Blockchains: Near, Aptos, and Solana topped the list, though newer chains like Celestia and Sei raised comparatively less.
(Note: Figures represent raised amounts, not valuations.)
2023 Fundraising Highlights
Market Shift
Investors gravitated toward seed-stage deals due to their high ROI potential. However, tighter liquidity and risk aversion made it challenging for projects to secure large sums—most raised $1M–$10M, with only a few established players exceeding $50M.
Top Fundraisers of 2023:
- LayerZero (Cross-chain infrastructure)
- Worldcoin (Privacy-focused digital identity)
- Scroll (EVM-compatible zk-Rollup)
- EigenLayer (Restaking protocol)
These projects underscore a trend: blockchain infrastructure (bridges, chains, privacy protocols) attracted the lion’s share of capital.
DeFi’s Resilience
Despite missing the "top raises" list, DeFi remained a VC magnet. Binance Labs, for instance, invested in Pendle, Radiant, and Helio.
Notable Late-2023 Investments
Layer 1 Blockchains
Sei
- Cosmos-based L1 optimizing DEXs via "Twin Turbo" consensus.
- Secured strategic funding from Circle Ventures to expand USDC integration.
Noble
- Raised $3.3M in a seed round led by Polychain Capital to enhance asset issuance in Cosmos.
Linera
- Focused on microchains for scalability; added $6M in seed funding from Borderless Capital and a16z.
Layer 2 Solutions
Blast
- Raised $20M backed by Paradigm; gained $500M+ TVL in a week via native yield mechanisms.
Fhenix
- $7M seed round for its FHE-powered L2, emphasizing confidential smart contracts.
Layer N
- $5M to build high-performance L2s for financial apps, targeting CEX-like efficiency.
DeFi Projects
Ekubo Protocol
- Received 3M UNI ($1.8M) from Uniswap DAO for Starknet-native AMM development.
Definitive
- $4.1M seed round to improve DeFi trading execution (BlockTower Capital-led).
Flashwire
- Digital bank secured $10M Series A for accessible financial services.
Key Takeaways
- 2023 saw a 50%+ drop in total fundraising vs. 2021–2022, but 2024 may rebound with bullish market signals (e.g., BTC ETF approvals).
- DeFi, L1/L2 infra, and gaming dominated funding categories.
- Seed rounds outpaced other stages—reflecting investor caution.
- RWA (Real-World Assets) funding was minimal but expected to surge in 2024.
FAQs
Q1: Why are seed rounds more popular in 2023?
A: Investors target early-stage projects for higher ROI potential amid tighter capital conditions.
Q2: Which sectors attracted the most funding?
A: DeFi (29%), followed by L1 blockchains and gaming.
Q3: What’s the outlook for 2024?
A: Anticipated growth in RWA and infrastructure funding, contingent on market recovery.