Funding of Web3 firms from venture capitalists has dropped 76% in the second quarter this year as compared to the same quarter in 2022, revealed.
Web3 firms raised just over $1.8 billion in the second quarter of 2023 as compared to $7.5 billion during the same period last year.
In the first half of 2023, Web3 startups raised $3.3 billion, a 78% drop from $16 billion in the first half of 2022.
Only $720 million was raised by ten new crypto venture capital (VC) funds in the second quarter of this year.
Crunchbase took cryptocurrency and blockchain-based startups to constitute the industry.
The data confirms that startups have not found much relief from the crypto winter that hit the industry last year after a slew of major firms collapsed.
US-Based Startups Raised Most Funds
The United States-based Web3 startups led in the number of deals completed and the amount of money raised this year.
US-based companies accounted for 45 percent of all crypto VC funding in Q2 2023, followed by the UK with 7.7 percent, Singapore with 5.7 percent, and South Korea with 5.4 percent.
US-based companies also took the lead in terms of deals completed with 43 percent, followed by Singapore and the UK with 7.5 percent each, and South Korea with 3.1 percent.
The Crunchbase report also mentioned the sectors within the Web3 industry that attracted the most venture capital.
Trading, exchange, investing, and lending crypto-based startups raised the highest amount, adding up to $473 million, accounting for 20 percent of the deployed capital.
On the other hand, Web3, , gaming, , and metaverse startups raised $442 million, accounting for 19% of all venture capital invested in the second quarter.
Crypto protocol was among the top as it raised $120 million backed by Andreessen Horowitz (a16z), Christie’s and others earlier this year.
Venture Capitalists Turn To AI Startups
While crypto startups failed to generate interest among venture capital firms, artificial-intelligence (AI) startups continue to witness exponential growth.
AI-based startups secured $25 billion in funding in the first half of 2023.
OpenAI CEO Sam Altman’s crypto project raised $115 million in a Series C round in May 2023 led by Blockchain Capital. The controversial project integrates AI and crypto to provide people with a global entity.
Runway, a developer of AI-enabled tools for video creation, raised $141 million in series C funding round last month.
US-based Captions, AI-powered creative studio startup, raised $25 million in a June Series B round led by Kleiner Perkins.