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Cryptocurrency News Articles
Crypto Winter-Era Seed Startups Mostly Persist Despite Tumult and Crisis
Oct 01, 2024 at 11:30 pm
But fundraising difficulties and product-market-fit issues may imperil their future, according to a report from Lattice VC.
Despite the turmoil and crises of crypto's "winter" era, the majority of early-stage startups that announced seed rounds in 2022 have managed to persist, a new report from Lattice VC has revealed.
Over 80% of these teams are still building today, even as they face challenges in fundraising and achieving product-market fit.
VCs deployed over $5 billion into 1,200 teams that announced their seed rounds in 2022, 2.5 times more capital than in 2021.
"Because of the massive influx of capital for 2022, there was just a natural expectation" of a higher fail rate, said Mike Zajko, co-founder at Lattice. "The prediction hasn't really come to fruition."
Eigen Labs led the class of 2022 with its invention of restaking, a narrative that continues to anchor many incoming startups in Ethereum and beyond.
However, such success is not representative of the whole: Only 1% of teams found product-market fit, and just 12% of the teams have raised follow-on rounds.
That reality bodes ill for teams that continue to hope for a home run, especially in an era of less exuberance and retail inflows. At some point, their runways may run out.
"Teams have been able to stretch it to try to get to the other side," Zajko said.
2022-era startups saw notably fewer token launches than teams of 2021, according to Lattice: 15% in 2022 compared to 2021.
This may be explained by teams missing the “bull market window,” said Zajko, as well as centralized exchanges becoming “choosier” about which assets to list.
Platform appears to be as important as product, if not more so: Teams that launched on NEAR, Flow and StarkNet – three ecosystems that raised nine-figure sums in 2021 and 2022 – have completely failed to raise follow-ons, the report said.
Crypto’s gaming sub-sector provides a useful explainer case: In 2022, that pack raised $700 million from venture firms betting on crypto-powered video games as the lucrative future.
That hasn't happened yet. The big ideas of crypto gaming – NFTs and the metaverse – are mostly afterthoughts in 2024 despite dominating media and investor attention in 2022.
"Whatever the hot trend is during that year is not likely to be what people are talking about or excited about 1-2 years later," said Zajko.
Meanwhile, the two big trends of this year – AI and decentralized physical infrastructure (DePIN) – saw little cap table action in 2022. In two years the market will get a better sense of whether the 2024 narratives have more staying power than those of 2022.
EDITED BY
Danny Nelson
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