Web3 Weekly: Q4 Numbers Off To Not-So-Hot Start

This is a weekly feature that will look back at the week that was in crypto, blockchain and Web3, and offer insights and analysis. Check out last week’s here.

Last week we covered how Web3 funding in the third quarter was not immune to the venture capital pullback the entire startup industry is seeing right now.

For those hoping for a strong fourth-quarter bounceback, there may be more bad news.

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While not all the numbers are in for the first month of the quarter, funding to Web3 VC-backed companies failed to hit even $1 billion in October, coming in just under $900 million, per Crunchbase data.

That follows a third quarter that only saw slightly more than $3.3 billion roll into startups in the space. That’s a 50% decrease from the previous quarter and the lowest total since just about $1 billion went to startups in Q4 2020.

It’s also significantly off the high of nearly $9.3 billion invested in Q4 last year.

There was some hope the fourth quarter would be strong after September ended as the best month since June for Web3 funding, with VC-backed startups raising nearly $1.6 billion, according to Crunchbase data.

As stated in the Q3 wrapup, investors have seemed optimistic that a small fourth-quarter comeback was possible as startups now realize a new reality has set in — including for valuations.

However, October was certainly slow. The biggest round of the month in the Web3 universe was Uniswap Labs — the company behind the Uniswap Protocol exchange — raising a $165 million Series B led by Polychain Capital at a reported $1.66 billion valuation. Cryptobank Mineplex was the only other startup to raise a nine-figure round in the month.

None of this is to say the fourth quarter won’t pick back up. There are two months to go. But with the holidays set to hit — a usually slow time for dealmaking — a weak October may mean the decline in funding will continue into the new year.

In other news

It’s not just funding numbers that are down. Venture capital firm Andreessen Horowitz, one of the early movers into the crypto and blockchain market, apparently has watched its portfolio value in the space plummet.

The Wall Street Journal reported last week the firm’s flagship cryptocurrency fund lost 40% in value in the first half of the year, according to people familiar with the matter. You can read more here.

Illustration: Dom Guzman