A sobering new report from Crunchbase found that Web3 funding from venture capital (VC) funds has plunged 76% in the second quarter when compared to the same period a year ago, according to a recent report. The first half of 2023 saw Web3 startups raise just $3.6 billion, a 78% drop from the $16 billion raised in the first half of 2022.
Crypto-related funding has been hit particularly hard, with Crunchbase reporting an 18% drop across all sectors in the second quarter of 2023. Meanwhile, artificial-intelligence (AI) startups have become the new shiny object for investors, seeing $25 billion in funding in the first half of 2023.
Despite the overall decline in funding, some Web3 startups have seen success. Sam Altman’s crypto project Worldcoin raised $115 million in a Series C round in May 2023, while crypto protocol LayerZero raised $120 million backed by Andreessen Horowitz (a16z), Christie’s and others.
OpenAI, ARK Invest, Animoca Brands, and Binance Labs remain optimistic about Web3, with a16z noting the strength of the sector in its second annual State of Crypto report. Binance Labs is particularly interested in funding companies that bridge the transition between Web2 and Web3, especially in gaming.