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Why Raising Capital Is Becoming a Challenge for Crypto Startups

Press Releases Crypto News BeInCrypto Why Raising Capital Is Becoming a Challenge for Crypto Startups

The cryptocurrency industry faces a stark reality. Raising capital is increasingly becoming an uphill battle. Venture capital investments in crypto-related endeavors are significantly declining.

As highlighted in a recent report, just eight venture capital funds focused on crypto had raised a combined $500 million globally as of May 16, 2023. This marks a 90% drop in funds to receive financial backing compared to the previous year. So, what is causing this crunch in crypto financing, and how is it reshaping the industry?

Venture Capitalists Funding Declines

Maarten Bloemers, co-founder of GET Protocol, provides a candid perspective on the declining sum of venture capitalists investing in crypto and blockchain startups.

“VCs are currently occupied with the challenge of sustaining their existing portfolio companies, which leaves them with limited capital to allocate towards new investments,” Bloemers told BeInCrypto.

Bloemers’ insights point to an unnerving situation. Due to the current adoption curve, venture capitalists might encounter difficulties finding limited partners for new Web3 funds, potentially quelling growth opportunities for the crypto industry in expanding adoption.

Over the past year, various crypto venture capital firms’ assets under management (AUM) have experienced significant declines. For instance, Multicoin’s AUM plummeted from an initial figure of approximately $8.9 billion to a much lower $1.4 billion by the end of 2022.

Similarly, Paradigm saw its AUM decrease from a substantial $13 billion to an estimated $8.7 billion during the same timeframe, according to data from Newcomer.

While AUM may not be the definitive metric for assessing a firm’s prosperity and can vary due to factors unrelated to the fund’s performance, it remains a Go to Source to See Full Article
Author: Bary Rahma

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