In 2022, Web3 startups raised around $16 billion in the first half of the year, but this year’s fundraises have come to only $3.6 billion — a 78 per cent decline

A new report from Crunchbase found that Web3 funding from venture capital (VC) funds has slumped 76 per cent in Q2 when compared to the same period a year ago.

In 2022, Web3 startups raised around $16 billion in the first half of the year, but this year’s fundraises have come to only $3.6 billion — a 78 per cent decline.

Web3 was explained by Crunchbase as cryptocurrency and blockchain startups, which have been hit hard by the current crypto winter. While venture capital funding has slowed in general, with Crunchbase reporting an 18 per cent decline across all sectors in Q2 of 2023, crypto-related funding has had a much sharper drop. In the meantime, artificial intelligence startups have become the new attraction for investors, seeing $25 billion in funding in H1 2023.

There were still some notable funding rounds in H1 2023. Sam Altman, Chief Executive Officer of OpenAI, saw success with his crypto project Worldcoin, which received $115 million in a Series C round in May this year led by Blockchain Capital. Another firm, crypto protocol LayerZero, raised $120 million backed by Andreessen Horowitz (a16z), Christie’s and others.

Even as funding levels off, many leading companies stay positive on Web3’s future, with a16z underscoring the resilience of the sector in its second annual “State of Crypto” report, which observed Web3 gaming particularly as showing strength.

In June, the company was part of a $37 million round backing Mythical Games together with ARK Invest and Animoca Brands. Mythical Games had just announced their NFL Rivals app had exceeded 1 million downloads shortly before the fundraising announcement.

Binance Labs, the VC arm of the crypto exchange, is likewise still hopeful about Web3, and noted an interest in funding firms that fill the gap between Web2 and Web3, particularly in gaming.