Xillion Research Labs: August Fundraising Report
The Web3 market is currently experiencing a bearish phase. In August 2023, Web3 companies raised $312 million, which is a significant drop from the $1.5 billion raised in August 2022. Fundraising has dropped by almost five times in just one year. Moreover, August is the second worst month in 2023, only in June fundraising activity was around the same numbers.
Usually, during the bearish market, many VCs slow down their investment activities and focus on their existing companies, which is what most VCs are doing now as well. However, some active VCs are still investing in Web3 projects. Let's take a closer look at the breakdown of the August fundraising activities.
Here are the numbers:
- Total amount raised by Web3 companies: $312,000,000
- Number of deals: 51
- Most popular category: DeFi (17 deals)
- Most active VC: Binance Labs (8 deals)
- Largest round: BitGo Series C ($100,000,000)
Fundraising Activity in 2023
To compare, that’s how fundraising activity in 2022 looks compared to 2023
In 2023, fundraising has been steadily decreasing since February, with the summer months being particularly slow. Compared to March, April and May, the fundraising activity in June, July, and August is almost two times lower.
There are several reasons for this decline. Firstly, the macro economy is weak, and many experts believe that we are currently in a global economic recession. This overall economic uncertainty affects investor sentiment and their willingness to participate in fundraising.
Additionally, in the Web3 space, there is no clear trend emerging. Previous fundraising peaks were associated with specific categories such as Infrastructure in 2017-2018, DeFi in 2020, NFTs and Gaming/Metaverse in 2021-2022, and AI in 2023. However, at present, there is no new dominant trend driving the market. AI, which was expected to be a significant driver, has failed to sustain momentum.
Another factor contributing to the decline is that many venture capitalists (VCs) have already allocated all the capital they previously raised. This means they don’t have fresh capital from Limited Partners (LPs) to invest. As a result, there has been an 82% drop in the number of VCs participating in deals in 2023 compared to 2022.
Despite the challenging market conditions, Binance Labs continues to allocate its capital. In August 2023, they emerged as the most active investor, participating in 8 deals, which accounts for 16% of the total deals made during that month. Their level of dominance in VC investments is quite high considering the overall market conditions.
What projects Binance Labs has invested in August?
As we all know, the VC market in general, and especially the crypto VC market is super dependent on large players' deals. Often if Tier-1 companies invest somewhere with a listing on a Tier-1 exchange, huge hype and therefore significant buy-side demand are almost there at least at the first several days /weeks. Still, most of those projects fail, but some become unicorns.
But, there’s a real gold hand among Tier-1 VCs - Binance Labs. Binance is quite undoubtedly the most dominant market player, and when they make any investment in any crypto startup, it creates a significant possibility that they will get them listed, and they will somehow let their audience know about those projects which will lead them to create a significant buy-side demand.
Does it mean that if you follow Binance Labs investments you will make a profit? Not really. Nothing is guaranteed and they also make mistakes as any VC in the industry. Should you check where they invest and what projects they believe to find some opportunities early on? Definitely yes. So, let’s review the projects they have funded for the first 20 days of August 2023.
- Helio - Strategic
A Liquid staking platform, which was quite a popular narrative recently. Helio has raised $10MM during this round. They build on top of the BNB chain, so it seems like they are quite in the Binance ecosystem. - AltLayer - Strategic
An elastic and versatile scaling protocol for Web3. - KiloEx - Strategic
Decentralized perp exchange. - ZkPass - Seed
Privacy-preserving protocol for private data verification. - Kinza - Strategic
Lending protocol on BNB Chain with ve-Real-Yield tokenomics. - Sleepless AI - Strategic
An AI blockchain-based virtual companion game. It utilizes AIGC and LLMs to create story-based gameplay and evolving interactions with characters. Binance hasn’t missed the AI hype as well and has made a deal with an AI blockchain-based virtual companion game. - Delphinus Lab - Unknown
Developers of zkWASM Hub, a zkWASM-based application rollup platform. - Pendle Finance - Strategic
AAM and Yield farming platform.
Conclusion
Fundraising activity in August was quite low, especially on early stages, BitGo’s Series C is almost 30% of the total funds raised which indicates a low interest from institutional investors for early-stage projects. But, as we all know, the crypto situation could easily change if the market shows some signs of improvement. So stay tuned, and keep reading our analytics to be up to date!
About us
Xillion.one - a Web3 Tokenized Incubator that provides every XIL token holder with free tokens of every project it incubates.
We build projects from scratch and create synergy between them. We combine the VC and PE approach to building companies by growing their value and managing investor capital. We simultaneously operate as investors and founders to amplify the results.
