Crypto VC Funding Hits 2-Year Low, US Firms Still Favorite: Galaxy Research

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Venture capital (VC) investments in crypto companies continued to decline in the first quarter of 2023, but despite the current regulatory turmoil for crypto in the United States, it is still the first for the number of companies rising capital according to a new report.

April 11 report from Galaxy Research, the research arm of crypto investment firm Galaxy Digital, said the $2.4 billion invested by VCs in the first quarter of 2023 was the lowest sum invested since the last quarter of 2020. .

Venture capital investment has fallen since peaking at nearly $13 billion in the first quarter of 2022, with last quarter’s results representing a drop of more than 80% compared to the same period last year.

The report notes that data on venture capital deals is often reported later, meaning the $2.4 billion figure quoted could be revised in the future.

While capital investment has fallen since the fourth quarter of 2022, the report notes that the number of closed deals has actually increased by nearly 20% and theorizes that an apparent correlation between crypto prices and invested capital could see venture capital activity rebound after strong price increases at the end of the first quarter.

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While various statistics and anecdotal evidence suggest that crypto businesses are leaving the United States to find greener pastures – citing factors such as regulatory clarity and friendlier tax policies – Galaxy has found that US-based companies United States collected 42.8% of VC money entering crypto in Q1 2023 with the next closest being France at 19.4%.

Capital investments for crypto companies throughout the first quarter of 2023 by country. Source: Digital Galaxy

While Galaxy’s report includes investment jurisdictions since the third quarter of 2022, the US share of crypto-VC investments has fallen by only 2.8 percentage points since then.

France appears to be the big winner, with capital investment for French-based crypto firms jumping to 19.4% last quarter, from less than 5% in Q3 2022.

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