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Investors prefer ‘breakout trends’ over ‘moonshots,’ VC says

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4 months ago

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There are fewer crypto investments nowadays, according to venture capitalist Adam Cochran.

VCs often face pressure from their limited partners who are primarily focused on beating index fund returns. 

Cochran — founder of the firm CEHV — explained in a thread on X.com: “VCs have slowed investing in crypto by a lot, and [it’s] a bit of a nuanced reason: 1. Most of them have LPs that just want to beat index fund returns. 2. Over a medium term the [risk/return ration] of owning Bitcoin and ETH will easily beat index funds, and can only be beat by early stage bets.”

See below.

VCs often target high-growth startups and emerging technologies that offer substantial upside potential.

For instance, the S&P 500 index fund, a common benchmark for U.S. equities, has delivered an average annual return of approximately 15% over the last five years, according to data from curvo.eu. 

In contrast, Bitcoin (BTC) has largely outperformed index funds over the same period, garnering about 45% in average annual returns. 

Cochran — a specialist in fintech, artificial intelligence and cryptocurrency — highlighted that even though crypto investments harbor high risks, they have historically outperformed index funds over the medium term, presenting high-reward opportunities. However, he added that VC funds are usually skeptical about making such investments at the early stage due to the risk factor of digital currencies. 

The venture capitalist explained that many VCs opt to hold investments in Bitcoin and Ethereum (ETH), along with a few high-profile breakout projects, to generate fees and return capital. 

Investors prefer ‘breakout trends’ over 'moonshots' and that's a problem, VC says - 1
Crypto VC capital investment chart | Source: Galaxy Research

Per a recent study from Galaxy Research, in the first quarter of 2024, approximately 80% of venture capital funding was allocated to early-stage companies, with the remaining 20% going to later-stage firms.

Despite a decrease in interest from large generalist VC firms, which have either exited the crypto sector or significantly reduced their investments, crypto-focused early-stage venture funds have remained active. 

Many of these funds still have capital from their 2021 and 2022 fundraises, allowing promising early-stage crypto startups to secure funding. However, later-stage startups face increased difficulty in raising capital due to the reduced involvement of larger VC players.

According to Cochran, during the last market cycle, VCs were more active in investing in applications that had already gained traction, such as OpenSea, hoping to capitalize on late-stage consumer growth.

Moreover, he believes that with interest in previous trends like non-fungible tokens, or NFTs, as well as AMM forks, DeFi, and layer 2 solutions cooling down and the market awaits the next big innovation, VC firms are in a holding pattern. 

Cochran noted that while some builders continue to develop new ideas without external capital, discovering the next major trend is stalled.

This situation is exacerbated because VCs believe idle capital can earn substantial returns in money markets, discouraging early-stage investments.

He added that this period of inactivity serves as a litmus test for VC firms’ genuine commitment to the crypto industry.

Those with a deep understanding of the space can still make impactful early-stage investments. In contrast, others may only invest in later-stage opportunities, revealing a lack of true alignment with the sector.





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Avalanche Labs secures $250m investment

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1 week ago

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December 14, 2024

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Mid-December has seen a surge in crypto VC funding, headlined by Avalanche Labs’ $250 million raise.

This week marked one of the largest single investments in blockchain infrastructure this year. The period also saw significant investments across infrastructure, AI, and financial services sectors, with cumulative funding exceeding $400 million. This is close to $180 million more than last week’s fundraise.

Crypto.news collected the data from Crypto Fundraising to analyze the projects that took home the highest funds during this period.

Avalanche (Ava Labs), $250 million

  • Secured $250 million in an unknown round
  • Backed by Galaxy, Dragonfly, and other major investors
  • Avalanche has raised a total of $540.5 million so far.

Nano Labs, $36.25 million

  • Raised $36.25 million in private funding
  • Nano Labs focuses on infrastructure and storage solutions

Klickl, $25 million

  • Secured $25 million in Series A funding with $125 million FDV
  • Supported by Web3PORT and Aptos Labs
  • Klickl is building CEX and payment solutions

Exabits, $15 million

  • Raised $15 million in seed funding with $150M FDV
  • Backed by Hack VC
  • Specializing in infrastructure development

Hyperbolic, $12 million

  • Secured $12 million in Series A funding
  • Supported by Variant, Polychain Capital, and Chapter One
  • Hyperbolic has raised a total of $19 million so far.

Relai, $12 million

  • Raised $12 million in Series A funding
  • Relai is building Bitcoin (BTC) ecosystem solutions
  • Backed by Ego Death Capital and Timechain

Waterfall Protocol, $11.6 million

  • Waterfall Protocol raised $11.6 million from investors like BOLT, Alpha Token Capital.
  • The firm has raised a total of $13.6 million so far.

Notable crypto VC funding rounds under $10 million

  • MegaLabs secured $10 million through public sale
  • Kast raised $10 million in seed funding
  • Lava gathered $10 million in Series A funding
  • Commonware secured $9 million in an unknown round
  • Sphere Labs raised $5 million in strategic funding
  • Soarchain gathered $4.5 million in an unknown round
  • SmarDex secured $4.5 million in seed funding
  • Fantasy top raised $4.25 million in seed funding
  • AgriDex gathered $4 million in strategic round with $28.50M FDV
  • Neptune Protocol secured $3.9 million in seed funding
  • Spicenet raised $3.4 million in seed funding
  • Glacier Labs gathered $3.37 million in public sale with $33M FDV
  • Superform Labs secured $3 million in strategic funding
  • Terrace raised $2.5 million in public sale with $25M FDV
  • Uranium Digital secured $1.7 million in pre-seed funding
  • Mandala Chain raised $1 million in pre-seed funding
  • Wild Forest gathered $100,000 in public sale with $45M FDV

Read more about last week’s crypto VC funding data here.





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World Liberty Financial raises $30m, Partior takes home $20m

Published

3 weeks ago

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November 30, 2024

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The final week of November 2024 has seen a shift toward DeFi and financial services in the crypto funding scene, with World Liberty Financial securing a $30 million investment.

The week has enjoyed cumulative investments exceeding $90 million. This is visibly less in comparison to last week’s $125 million and the previous week’s $120 million.

Crypto.news examined data from Crypto Fundraising to identify projects that raised the most capital during this period. Here’s a breakdown:

World Liberty Financial, $30 million

  • The Donald Trump-backed startup raised $30 million from billionaire Justin Sun
  • Sun founded the Tron (TRON) blockchain
  • Sun signed on to be an adiver, focusing on DeFi and Ethereum (ETH) ecosystem development

Partior, $20 million

  • Secured $20 million in Series B funding
  • Received investment from Deutsche Bank
  • The project develops payment solutions
  • Partior raised $80 million so far.

Kernel DAO, $10 million

  • Raised $10 million in an unknown round
  • Backed by Binance Labs and 15+ investors
  • Kernel DAO is building on the BNB Chain ecosystem

Balance (E-PAL), $10 million

  • Secured $10 million in an unknown round
  • Balance develops AI-powered gaming solutions
  • The project has raised $40 million so far.

Notable crypto VC funding rounds under $5 million

  • Schuman Financial raised $7.36 million in seed funding.
  • Avant Protocol secured $6.50 million in seed funding with a $25 million FDV.
  • Talus Network gathered $5 million in a strategic round with a $150 million FDV.
  • OpenTrade raised $4 million in seed funding.
  • U2U Network secured $3.80 million in an unknown round.
  • Rarimo raised $2.50 million in an unknown round.
  • Moongate gathered $2.50 million in an unknown round.
  • Bleap secured $2.30 million in pre-seed funding with a $10 million FDV.
  • BRKT raised $1.75 million in seed funding.
  • Margarita Finance secured $1 million in pre-seed funding.
  • N3MUS raised $800,000 in pre-seed funding.
  • Pulse gathered $400,000 in an unknown round.
  • Girin Labs secured $300,000 in an unknown round.

Find out more about last week’s crypto VC funding data here.





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AI

SoftBank invest $1.5 billion to OpenAI

Published

4 weeks ago

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November 28, 2024

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OpenAI employees would be allowed to cash out their company’s share worth $1.5 billion regarding the investment agreement with SoftBank.

SoftBank, a Japanese-based multinational investment company, is financing the world’s prominent artificial intelligence (AI) enterprise OpenAI with $1.5 billion. This agreement would allow the employee to gain a profit by selling their shareholding.

Through these corporate actions, SoftBank would have a bigger stake in the company, which is something that the CEO Masayoshi Son asked for quite a long time.

OpenAI’s employees who hold the share would have spare time before the end of the year, on Dec. 24. If the employees agree, they would benefit from around $210 per share, aligned with the most recent funding.

Current and previous employees could participate in the funding, but only those who had been granted restrictions and held the share for at least two years.

OpenAI, which has been considered a non-profit organization for a decade, is denied the issue that this funding is related to the newest company’s orientations, which will move to the profit-making enterprise.

SoftBank funding for emerging technologies

According to CNBC on Nov. 27, $1.5 billion in funding for OpenAI comes from SoftBank’s Vision Fund 2.

This funding was specifically used to invest in emerging technology and companies, including Nvidia, Uber, Exscientia, Glean, Perplexity, and Poolside. Through this investment, the company based in Tokyo will expand its horizon on investing in emerging technologies like artificial intelligence.

SoftBank’s Vision Fund 2 (SVF2) was initiated in 2019 and collected an investment commitment of up to $56 billion. In 2021, funding was invested in more than 250 companies, and the majority of the funding is a new investment.

Now, the funding is focused on accelerating the use of artificial intelligence, market leaders, and companies with a value over $1 billion or who have named a unicorn.



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