2021 is a crucial year for the Web3 field. It has gradually become a potential industry from a nascent network form.
In the past year, we have seen a large amount of talent and capital flow into the Web3 ecosystem, large-scale innovations have appeared in the underlying decentralized technology stack, and consumer-oriented applications have emerged. These applications are subverting currency, finance and even The Internet itself.
Web3 broadly refers to the form of the Internet owned by its builders, users and creators. Through the use of tokens and decentralized technology, it aims to subvert centralized intermediaries. Cryptocurrency, DeFi, and NFT are the first applications to find product and market fit and gain consumer adoption.
However, the large-scale application of Web 3 technology has just begun. Cryptocurrency is still owned by a small number of people who are less than 10% of the world’s population. The decentralized financial system currently has about 100 billion US dollars in assets, but it is still a small drop compared to the traditional financial system. Web 3 applications have reached tens of millions of users, but they are still pale and pale in comparison with the billions of users who use Web 2 applications.
As Soundwise’s Tascha recently stated, the experience of the first two waves of exponential technology, the Internet, and mobile technology shows that once the underlying technology reaches 1 billion users, mass market applications begin to gain major traction. In comparison, there are currently only 180 million Ethereum addresses. As a representative of Web3 applications, according to the current growth rate, it will take 5 years to reach 1 billion users.
We may be in the early stages of the biggest technological innovation since the advent of the Internet, providing venture capital with one of the most asymmetrical upward opportunities in recent years.
Relevant high-level metrics for the market in 2021:
- In 2021, venture capital firms deployed more than $30 billion in funds to cryptocurrency startups worldwide
- There are more than 65 cryptocurrency unicorn companies, of which more than 40 were created in 2021. Nearly 50 cryptocurrency startups have raised more than $100 million in 2021
- The total market value of cryptocurrencies exceeds 300 million U.S. dollars
Venture capital landscape
In 2021, venture capital firms made big bets on cryptocurrency startups. As of the end of November, about 30 billion U.S. dollars were invested globally and 1,278 transactions were completed (according to Pitchbook data). In 2021, blockchain-related startups will raise an average of 20 million U.S. dollars a day, and the average seed financing will rise from 1.5 million U.S. dollars in 2020 to 3.3 million U.S. dollars.
We are seeing large-scale venture capital funds focusing on cryptocurrencies being raised. a16z raised a $2.2 billion cryptocurrency fund in June. Paradigm raised a $2.5 billion cryptocurrency fund in October. In addition, large-scale and long-established funds such as Tiger and Sequoia have always avoided cryptocurrencies and are actively entering the market through late-stage equity investments.
As more and more institutional capital flows into the Web3 ecosystem, valuations are expected to be elevated and competition among venture capital funds will intensify. As the competition for capital allocation becomes more and more fierce, the differentiation of different vertical fields, such as stage (early and late), region (west and east), added value (tokenomics, governance, developer access, liquidity, etc.) will become The key to the fund.
Startup company layout
The increasing frequency of financing in the later stages has enabled at least 65 startups in the cryptocurrency/blockchain field to reach a valuation of more than $1 billion, and more than 40 companies will reach unicorn status in 2021.
In 2021, nearly 50 cryptocurrency startups have raised more than $100 million in funding. Historically, the valuation of cryptocurrencies and blockchain financing have been dominated by exchanges, financial technology companies, and institutional service platforms. This is still the case this year, with FTX, Celsius, Gemini and Fireblocks being some of the most important financing projects.
At the same time, we have also seen increasing attention to consumer applications, as evidenced by the large-scale financing of Sorare, Moonpay, Forte and Dapper Labs. They are all focused on incorporating the next 1 billion users into the digital asset ecosystem.
Where should we go? The Web3 ecosystem is currently a melting pot of talent (developers and entrepreneurs) and capital (venture investment companies and institutions). Combined with a new technology primitive (blockchain/cryptocurrency), you have all the elements needed for innovation and value creation explosion. With the maturity of decentralized technologies and applications, and the emergence of backing forces such as the adoption of metadata, mainstream consumers will inevitably adopt Web3.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/forbes-magazine-overview-of-web3-venture-capital-market-activities-in-2021/
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