Crypto Fintech & e-commerce Venture

Many Crypto-Corns Navigate Trying Times After FTX Fall

Illustration of unicorn wearing a Bitcoin necklace

It has been a tough go as of late for startups in the crypto space.

Everyone knows funding has plummeted in the sector, and Sam Bankman-Fried’s recent conviction brought FTX’s troubles back to the forefront.

Then, just this week, it was reported Coatue has marked down its stake in OpenSea by 90%, now valuing it at about $1.4 billion. That is a significant drop considering in January 2022, the NFT marketplace raised a $300 million Series C co-led by Coatue and Paradigm at a $13 billion valuation.

However, OpenSea is not alone in being a once high-flying crypto unicorn — or crypto-corn — that seems to have suffered during the recent FTX backlash and general market downturn for VC-backed startups.

More than 90 crypto and blockchain startups have been minted as unicorns in recent years, per Crunchbase data. While they raised money at $1 billion-plus valuations, many of those valuations have likely changed as both the venture and crypto worlds are quite different from even just 12 months ago.

While many companies do not announce valuation cuts or down rounds, in recent months many startups seem to have watched investors slice their valuations since those big-money funding rounds, gone through significant layoffs, or faced other internal strife.

Crypto-corn downs

Let’s take a look at some startups whose unicorn horns may be a bit shorter.

  • In May 2021, Figure, which offers financial services using blockchain technology, raised $200 million co-led by 10T Holdings and Morgan Creek Digital at a $3.2 billion valuation. In February, it was reported Figure was searching for investors to participate in a $100 million round and was also seeking to spin off some product lines. The company also had previously scrapped a plan to go public through a SPAC.
  • In August 2021, crypto infrastructure startup Blockstream raised $210 million at a $3.2 billion valuation. However, last December Bloomberg reported the company was seeking to raise money at a valuation of less than $1 billion — a 70% drop. In January, the company raised $125 million in convertible notes and secured financing.
  • In November 2021, crypto payments startup MoonPay raised a $555 million Series A led by Tiger Global Management and Coatue that valued the company at $3.4 billion. It was later reported several executives cashed out during that round — accounting for $150 million of that $555 million — which was just before crypto started its descent. By the end of last year, Tiger lowered its valuation of the company to $2.8 billion.
  • In December 2021, bitcoin trading and banking firm NYDIG raised $1 billion at a valuation of more than $7 billion led by WestCap. Less than a year later — in September 2022 — the company laid off about a third of its workforce — 110 people, per a story in The Wall Street Journal.
  • In March 2022, crypto exchange raised a Series D — no amount was disclosed — led by Lightspeed Venture Partners at a $14 billion valuation. Late last year reports surfaced that the company was looking to raise money at a valuation as low as $3 billion after being exposed to crypto hedge fund Three Arrows Capital, which collapsed into bankruptcy. It also was reported earlier this year the company was selling off assets.
  • In April 2022, Binance.US — the American franchise of Malta-based Binance — raised more than $200 million in a seed round at a pre-money valuation of $4.5 billion. However, both Binance and Binance.US have come under intense scrutiny from U.S. regulators. In June, the Securities and Exchange Commission filed 13 charges against crypto exchange Binance, its co-founder Changpeng Zhao, and other entities related to the exchange. That same month, Binance.US stopped dollar deposits after the SEC asked a court to freeze its assets and just last month halted withdrawal of dollars by its clients from the platform.
  • In May 2022,  crypto asset manager Babel Finance raised an $80 million Series B at a $1.9 billion valuation co-led by 10T Holdings and Jeneration Capital. However, a month later, Babel froze withdrawals and redemptions as the market declined. The company filed for moratorium protection in Singapore to allow for restructuring efforts and it has a meeting next month with creditors.
  • In September 2022, digital collectables maker Dapper Labs raised a $250 million round led by Coatue that reportedly valued the company at $7.6 billion. The company has since gone through three rounds of layoffs.

What it means

Of course, by the time some of these crypto-corns raise their next rounds, their valuations could be even higher than they were in the previous rounds in 2021-22. It is also important to note it is not just unicorns in the crypto space that are having a hard time (see Convoy). Smaller companies in the space are also undoubtedly facing valuation cuts or other issues.

However, the onslaught of valuation cuts, layoffs and liquidity crunches at some of the highest-flying crypto startups in the last year-plus is concerning and makes it clear why VCs have cut back on investment in the space even more than in other sectors — and why the minting of new unicorns has slowed significantly.

That is not to say new crypto-corns are not being created. In July, blockchain transaction software developer Flashbots raised a $60 million Series B from Paradigm at a reported value of at least $1 billion. The following month, crypto custody firm Palo Alto, California-based BitGo raised a $100 million Series C at a $1.75 billion valuation.

Nevertheless, investors seem wary and are taking a more conservative approach to the space — something that seems two to three years too late.

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Illustration: Dom Guzman

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