European Crypto Startups See Record VC Investment in 2022

The year 2022 was a tumultuous one for the cryptocurrency industry, with an ongoing bear market and the high-profile collapses of some of its most prominent players, such as Terra and FTX. However, despite these setbacks, venture capital (VC) investors remained steadfast in their support for crypto startups, with a new study released by European investment firm RockawayX revealing that VC investment in European crypto startups reached an all-time high of $5.7 billion in 2022.

This marks a significant increase from the previous year’s investment of $2.2 billion, indicating a strong appetite for innovation and growth in the European crypto space. Notably, decentralized finance startups saw a 120% increase in investments, reaching a total of $1.2 billion in 2022.

Viktor Fischer, the CEO of RockawayX, emphasized that the crypto market is cyclical and that startup funding activity can hold steady even during a market downturn. He pointed to the 2018 winter, when “the total digital asset market cap fell by 80%, but startup funding activity held steady.” Investments made during such periods can lead to tech and usage traction alongside “bull market” price recoveries.

Europe is home to the highest number of crypto startups globally, with 3,977 startups based in the region, according to headquarters location. However, it lags behind the United States in the number of unicorns and startups with over $1 million in funding.

Top global investors in European startups include Animoca Brands, Coinbase, Blockchain Capital, and the Digital Currency Group. In Europe, investment in startups that provide financial services made up more than half (52%) of all investments, with infrastructure and Web3 making up 32% and 16%, respectively.

Compared to 2021, investment in financial service-based startups declined by 19%, while investment in infrastructure grew by 24%. This shift in investment focus reflects a growing interest in the underlying technology and infrastructure of the crypto industry.

Europe’s rising prominence as a crypto-friendly region comes as lawmakers in the European Union (EU) finalize the Markets in Crypto-Assets (MiCA) regulations. These regulations have been delayed twice due to translation issues, as laws passed in the EU must be translated into all 24 official languages of the member states.

If passed, MiCA will provide a regulatory framework for crypto-assets, including stablecoins, and establish requirements for issuers and service providers. The final vote on the regulations is set for April 2023, and their adoption is expected to provide greater clarity and stability for the European crypto industry.

In conclusion, despite the challenges faced by the crypto industry in 2022, European crypto startups continued to attract significant VC investment. As the industry continues to evolve and mature, investment focus is shifting towards infrastructure and Web3, reflecting a growing interest in the underlying technology of the crypto ecosystem. 


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Electric Capital Raises $1B to Invest in Crypto Startups

Palo Alto-based Venture Capital firm Electric Capital announced Tuesday that it has raised $1 billion to invest in the cryptocurrency ecosystem.


According to the official post on the startup’s blog, it confirmed that the capital would be used to fund a variety of crypto networks, Web3 protocols, and blockchain-enabled businesses.

The capital was raised in 2 distinct rounds, including one $400 million pulled back in 2021 with a plan to invest this into crypto token investments. The second involved a $600 million fund earmarked to make only token-focused investments.

“We are long-term investors and partners to our founders. We have spent the last four years building software and data systems that enable us to participate in Web3 ecosystems. We use the infrastructure we have built to provide liquidity, drive key governance proposals, help teams better understand their ecosystems with our data, and more,” the startup said in a statement.

The monetary valuation of funds that will be invested in the startups it chooses to back will range from $1 million to $20 million. Unlike the majority of venture capital firms whose approach to investment is more or less passive, Electric Capital is working on the frontline, conducting research and helping its partners get the best out of their business models.

Riding on Deep Experiences as Tech Founders

The founders, Avichal Garg, 39, and software engineer Curtis Spencer 40, are both experienced investors and entrepreneurs. The duo co-founded Spool, a bookmarking startup that lets consumers save articles and videos on their phones that Meta Platforms Inc later acquired in 2012. Avichal and Spencer stayed on at Facebook until 2018, when Electric Capital was founded.

The Electric Capital team also has plans to onboard as many engineers within its ranks as possible. The belief is that the most successful businesses have the presence of software engineers at their core, particularly some of the startup’s competitors, including Paradigm and Hack VC.

The capital raised by Electric Capital comes off as a testament to how rebooted venture capital firms are in going all out with backing cryptocurrency-focused startups. Avalanche, Binance, and FTX are amongst the big players in the space that have earmarked ecosystem funds to invest in related startups with inherent potential.

Image source: Shutterstock


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