Venture crypto investing down 75%, but ‘native-VCs’ continue staying course
Cryptocurrency investments by venture capitalists (VCs) fell by 75% in the fourth quarter of 2022 compared to the same period last year, according to the report. bloomberg.
The dramatic plunge in activity has been sparked by common VC technology firms that have seen their risk appetite for digital asset investments decline amid the many recent scandals that have plagued the industry.
But crypto-focused VCs have stayed on course, driven by the belief that there is more that blockchain technology can offer.
Crypto VC Sticks
Reporter Hannah Miller said investors’ willingness to invest in risky industries has changed dramatically. Part of the reason for this boils down to the split between general VCs and crypto-focused VCs, with the former having largely withdrawn recently.
“We had a lot of very established and well-known venture capitalists. They are known to invest in a wide range of technology companies. They got into crypto and backed companies like FTX. And now those generalist VCs are starting to pull back.”
“Crypto-native” VCs have remained loyal to the cause as they continue to invest billions of dollars despite scandals and a general slump in price volatility.
Miller said there are still people who see potential in blockchain technology. While the FTX scandal hit hard across the board, Miller noted that he acknowledges that it’s not representative of the industry as a whole.
“People are still looking at blockchain use cases. They believe the potential of this technology is not fully realized.”
change of tack
Two years ago, at the peak of mania and extremely high valuations, VC firms were doing everything they could to secure the bag. In some cases, this meant skipping proper due diligence.
“Venture capitalists suffer from fear of missing out (FOMO) and may have been willing to set aside some typical due diligence practices.”
But now, in the wake of the wake-up call triggered by the recent scandal, Miller said the FOMO mindset has been reset, leading to a more cautious and cautious investment approach.
The chain reaction of this is a dramatic slowdown in the pace of completed trades.
