When it comes to the venture capital landscape, every year and strategy is different.
Few investor segments handle calculations and rebalancing as much as high-tech investors. Nor are investors able to reap such huge profits when their big bets pay off.
On the back of the artificial intelligence boom, VCs are starting to re-enter the cryptocurrency and Web3 space.
hack VC announced Tuesday (February 20) that it has closed its $150 million Venture Fund I, which invests in early-stage Web3 opportunities, over capacity, bringing total assets under management to $425 million. did.
VC firm a16z invested $100 million in cryptocurrency startup EigenLayer on Thursday (February 22). EigenLayer will rebuild the protocol and infrastructure layer of the Ethereum network, allowing new projects building on the Ethereum blockchain to use its security for their own networks.
However, these numbers pale in scale compared to the amount of money being invested and raised to support the AI sector.
Menlo VenturesFor example, companies like IBM, which raised $1.35 billion for an AI-focused venture fund, are deploying venture funds that dwarf crypto-focused vehicles like Hack VC. I am.
A total of $27 billion was poured into AI startups in 2023.
However, crypto-native VC firms are raising funds that will need to be deployed over the next few years. And they will need to be careful and intentional about how they use that capital.
The characteristic of dry powder is that it ignites, and the crypto industry has already evaporated tens of billions of dollars of investor money during the bull market.
That’s why comparing the flow of VC money from 2024 onwards to the pre-2021 era, during the glitzy heyday of cryptocurrencies, provides a picture of a situation marred and battered by the drumbeat of failure, fraud, and explosion. Dew.
Eyes on the prize: no one wants to talk about failed ventures
9 out of 10 funded startups fail within 10 years. At the same time, observers believe that the failure rate of venture-backed startups is higher than the industry typically cites.
As such, venture capital investors appear to be focusing more on infrastructure efforts than before, across both AI and cryptocurrencies. Funding is directed less toward service providers and more in favor of building the underlying ecosystem, with a16z’s funding of EigenLayer being a prime example.
But it’s also worth uncovering where the VC sector’s biggest bets in the crypto sector have gone and whether they’ll go anywhere in the future.
FTX FTX.US, which had raised a combined $1.3 billion, collapsed in a cloud of criminal smoke and mirrors. These are the cryptocurrency industry’s biggest fundraisings and also its most visible failures.
See also: Cryptocurrency continues to serve as a case study in behavioral economics
forteis a blockchain video game company that raised $725 million in Series B, the second-largest single funding in sector history. relatively quiet past year and finally announcement It will go live in August via X, formerly known as Twitter. The company’s own news page was last updated in February 2022.
solarea fantasy sports cryptocurrency-based video game, raised $680 million in a 2021 funding round and appears to be still actively offering services update.
Two other crypto companies in the top five in terms of funding, MoonPay and YugaLabs, have been embroiled in scandals emblematic of crypto-specific failures. According to the complaint, the two companies engaged in a “massive scheme between blockchain startup Yuga Labs, a closely affiliated Hollywood talent agent (Guy O’Seary), and a front operation (MoonPay). “We’re all united for blockchain.” It aims to promote and sell a range of digital assets. ”
Representatives for Sorare, Forte, MoonPay and Yuga Labs did not immediately respond to PYMNTS’ requests for comment.
For a market that was once limitless, the cryptocurrency space has certainly found its limits. And it was quick.
Money is now moving toward AI, with observers believing that the usefulness of AI is more directly and easily understood than cryptocurrencies’ big, bold promises to create their own financial systems. There is.
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