An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

Excited to publish our fourth annual review of the blockchain venture capital space, last year was a particularly prosperous year for the blockchain venture space, and in the spirit of transparency in our industry, we hope to share the summary openly The data.

This report focuses solely on blockchain VC funds to understand the investable reach of institutional LPs, in line with our mission at Hutt Capital, the leading independent blockchain VC fund platform.

All data comes from Hutt Capital’s internal tracking system, showing the current size of blockchain venture capital funds.

Summary

This year has been a record year for blockchain VC funds, with 76 new blockchain VC funds launched in the past 12 months. We are currently tracking 155 blockchain venture funds, up from 79 a year ago and up 96% year-over-year.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

The blockchain venture capital space is growing rapidly, but the amount of capital held by funds is expanding even faster. These blockchain venture capital funds have $30.9 billion in committed capital in the current fund, up from $6.8 billion a year ago, an annual growth rate of 357 percent. Blockchain venture capital is no longer the cottage industry of the past few years.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

Average fund size rose 132% from a year ago, from $86 million to $199 million, indicating that existing funds are rapidly scaling up. The median fund size increased by 50%, from $50 million to $75 million, as a handful of the largest funds had a huge impact on the average numbers.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

Blockchain VC Fund Series

Among the 155 blockchain venture capital funds, there are 100 first-phase funds, 36 S funds (Secondary funds), and 19 third funds.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

Longer-lived funds have the most capital. Third funds represent 12% of the total fund but 40% of capital. 19 third funds have more than 100 first-phase funds in total.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

Over the past year, there has been no material change in the division of primary funds, secondary funds (secondary funds) and third funds, as each category has seen strong growth.

Blockchain Venture Fund Size

The size of blockchain venture funds has grown substantially over the past year, and the level of capital controlled by large funds is unprecedented.

$18.2 billion in capital, or 59% of the industry’s capital base, is controlled by just 14 funds of $500 million or more. The funds themselves have nearly three times as much capital as the entire industry a year ago.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

The industry is more fragmented than ever. The 33 funds had an average fund size of $713 million and controlled 76% of capital. The other 122 funds control the remaining 24%, with an average fund size of $60 million.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

Despite this split between large and small funds, the 122 funds with less than $200 million still control 9% more capital than the industry as a whole a year ago.

Each category has grown significantly in size from last year, except for funds under $50 million, which were able to maintain a degree of segregation thanks to the growth of many of their peers and the uptick in the market. Forty-four funds under $50 million controlled $1.1 billion, a more modest increase of 28% from the 35 funds that controlled $838 million a year ago.

As capital becomes easier to raise, we have observed the emergence of opportunity and growth funds. These are growth stage funds raised to complement existing early stage platforms, common in traditional VCs but now entering the blockchain space.

The geography of blockchain venture capital funds

North America remains the leading location for blockchain VC funds, with 68% of funds located in the region and 87% of the industry’s capital base.

An overview of the growth of the crypto venture capital field: analysis from the perspectives of fund series, scale, and region

North America is also driving the mega-fund trend, with an average fund size of $259 million, compared with $61 million in Europe and $120 million in Asia. Only one of the 14 $500 million-plus funds is outside North America.

Compared with traditional VC firms, the home geography of blockchain VC firms is less important. Many of these funds are globally focused, regardless of their location. Therefore, while not covered in this analysis, we expect underlying blockchain VC transaction data to be more global and distributed than blockchain VC fund location.

Other observations

The blockchain VC market has changed significantly over the past 12-18 months.

  • The emergence of giant funds/asset aggregators.
  • The supply of capital has prompted more competition for deals among funds.
  • High-quality blockchain VC funds have been massively oversubscribed and hard to come by.
  • DAOs and guilds are taking market share from traditional VC funds.
  • Increase in professional funds.
  • Web3 has become a trend for general-purpose VC funds, but specialty funds dominate.

Observation 1: The emergence of giant funds/asset aggregators

There is enough demand to invest in blockchain venture capital funds so that companies aspiring to raise large sums of money can do so for the first time. These players have moved upmarket with their growing fund sizes and now need to write bigger checks to big rounds to deploy their capital. This has resulted in more funds being deployed to growth stage companies and liquid tokens, whether through direct purchases or treasury transactions.

The trend to move upstream in the market has opened a gap for pre-seed funding and the seed stage that has been filled by new and existing small funds who will support founders in the earliest stages. Many larger funds (or their GPs) and industry strategists serve as LPs in new early stage funds as a way to generate vetted deal flow for their own firms.

Observation 2: Capital supply drives more competition for deals among funds

The industry’s capital base has grown by 357% in a year, and one of the effects is that competition for deals has become cutthroat. Pretty much anyone with a checkbook can get a good deal until 2021. This situation has changed. Funds are now competing fiercely based on reputation and value proposition (or willingness to pay top price in some cases), and valuations have increased as a result.

From an LP’s perspective, it is critical to understand which companies have built differentiated brands and value propositions in order to sustainably repeat historical successes. Each fund’s track record looks good, but those track records create an environment that’s hardly as competitive as it is today.

Observation 3: High-quality blockchain VC funds are massively oversubscribed and hard to get

LPs have more options than ever when it comes to investing in blockchain venture funds, but demand from LPs to invest in blockchain venture funds is clearly growing faster than the fund’s capital base. Every fund is oversubscribed. Many were turned away, and LPs were vying for investment share. Institutions are coming in with big checks, and the threshold game we saw in traditional VCs is now reappearing in the cryptocurrency space.

Observation 4: DAOs and guilds are taking market share from traditional blockchain VC funds

Venture DAOs and gaming guilds are receiving grants from early-stage venture funds, primarily pre-seed and seed. A high-quality venture DAO is an attractive source of capital, as founders have access to a diverse network of individual members who bring a variety of expertise and relationships. We saw this firsthand at Seed Club Ventures. Today, most risk DAOs are relatively small and therefore write smaller checks in very early rounds, but we believe this source of capital will grow over time.

Gaming Guilds provide blockchain gaming startups with a unique source of strategic capital that traditional venture funds are difficult to replicate. There is a growing world of gaming guilds, and these groups have been occupying space in early game equity structures. Guilds themselves often have venture capital, and a VC fund with little knowledge of the game may be happy to be exposed to a new type of game rather than trying to pick winners in a less familiar category.

Observation 5: The rise of professional funds

We believe that specialization is increasing for two main reasons. 1) The industry is too large and broad to cover everything, and different categories require unique expertise and relationships, so funds must identify where they have a competitive advantage and aim to be the best in the field; 2 ) specialization is a way for emerging funds to differentiate themselves from existing players and gain an edge, especially in younger categories like DeFi, Gaming, NFTs or DAOs where we most often see proprietary segmented funds.

Observation 6: Web3 is now a trend for general-purpose funds, but dedicated funds dominate

General-purpose venture capital firms are becoming more and more interested in Web3, and many companies assign special personnel to take charge of this area, but most companies are late to the game, and the pie that can be seized is too small, especially at this stage. You’ll see early-stage ownership structures dominated by crypto-native funds and other industry players.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/an-overview-of-the-growth-of-the-crypto-venture-capital-field-analysis-from-the-perspectives-of-fund-series-scale-and-region/
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