Web3 Investments in a Bear Market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Abstract: The Web3 market has encountered a cold winter, but the builders are still continuing to cultivate and deploy. Which tracks are still hot? What projects have the top funds invested in in the bear market? A&T Capital counted the financing data of the cryptocurrency market from 2022.5.1 to 2022.8.13, and summarized the financing situation in the primary market, the trend of Alpha & Beta projects, and the main investment preferences of some leading institutions.

  Table of contents

  • Primary Market Data Financing Overview
  • Alpha & Beta Project Trend Summary
  • The main investment preferences of some leading institutions
  • Investment summary

foreword

We start by defining the investment directions our research involves.

  • Layer 1 includes scaling solutions for data layer, network layer, consensus layer and incentive layer. Typical examples include Avalanche, Solana, etc.
  • Layer 2 includes – contract layer projects, typical examples include Perpetual protocol, Scaling, etc.
  • There are 21 different industry labels involved in the application layer project, of which the following need to be specified:

    Web Builder: Indicates web3 network, blockchain building services, and distinguishes it from infrastructure

    Legal: Indicates compliance services

    Environment: Indicates ESG-related services

01 Overview of Crypto Primary Market Financing

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Based on the above statistics, from 2022.5.1 to 2022.8.13, the application layer is the most favored by the Web3 industry capital , and the most invested projects have appeared: 87% of the funds flow into the application layer, and 94% of the financing projects are also in the application layer.

1.1 Layer 1

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

  • PoW accounts for a very small proportion, and its financing amount is less than 1% of the total financing amount: it can be seen that there are many problems in PoW (excessive energy consumption, inefficiency in large-scale use scenarios, and PoW’s high hardware cost and competitive environment) , which brings the characteristics of capital-intensiveness to the mining industry and gives birth to the trend of centralization), so capital prefers models other than PoW.
  • PoS has the best financing performance in layer 1, accounting for about 50% of the total amount, significantly surpassing other categories. In terms of financing, the market is particularly optimistic about PoS Layer1. Compared with PoW, PoS has lower energy consumption, higher scalability and transaction throughput.
  • PoP (a hybrid model of PoW and PoS): the amount of financing obtained accounts for 22% of the total

    . PoS is not a perfect solution, a hybrid mechanism combines the benefits of PoW and PoS

    . Avoid 1. Centralization 2. Security risk 3. MEV risk 4. DoS risk caused by PoS protocol

    . Avoids the high energy consumption and low performance of PoW

  • PoA obtains about 25% of the financing amount. Mode can guarantee speed and high performance without sacrificing security. Different from the way blockchain traditionally works, but provides an emerging blockchain solution that may be well suited for private blockchain applications

1.2 Layer 2

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Overall, Scaling Protocols and DeFi Protocols have better funding performance.

  • Scaling Protocols

    . Scaling Protocols: Investment institutions have increased their bets on the overall track of scaling protocols

    . The market’s demand for expansion solutions has become stronger due to higher gas fee / TPS / latency

  • Defi Protocols

    . The Defi Protocols track has high overall attention (34%)

    . 66% of the projects are in the direction of cross-chain agreement (DEX cross-chain aggregation agreement), but the performance is not outstanding in terms of financing amount, accounting for only 11.5% of the total financing amount

    . Among Defi Protocols, infrastructure financing accounted for 56%, and stablecoin lending protocol financing accounted for 32%

    . Aptos is industry alpha and is considered an outlier. Removing Aptos from Defi Protocols reduces the proportion of funding amount of Defi Protocols to 19%, indicating that the attention of the Defi track is on a cooling trend. In comparison, the proportion of the Scaling Protocols track has reached the overwhelming majority (73%), which is the most popular trend in the market.

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

  • Oracle

    Very few projects have received financing from Oracle, accounting for 1% of the total L2 financing amount. The reason may be that 1) the concept of Oracle is not innovative; 2) the use of Oracle is limited by the industry and requires real-life data (ie insurance/real estate), and most of today’s hot tracks ie GameFi and NFT do not need Oracle

  • game

    Compared with other tracks such as Defi, GameFi has higher requirements on transaction speed and gas fee. General Layer 2 provides a potential scaling solution, but a protocol specifically created for GameFi appears in the project narrative covered by this research. This may indicate that GameFi-type applications have specific needs that cannot be perfectly solved by the general Layer 2. This direction is worth continuing research.

1.3 Application

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

As can be seen from the above figure, China exchanges and financial technology as the financing targets accounted for 47%, and the rest were all lower than 6% , and the distribution was relatively even.

Megatrends (overall)

The top three categories of financing amount: exchanges, centralized exchanges, and financial technology.

The top three categories of financing projects: NFT, games, Metaverse.

New trends (pre-seed round – preA round)

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

As can be seen from the figure, the top three categories of seed round financing projects are games, NFTs, and Metaverse. The top three categories of seed round financing: exchanges, centralized exchanges, and security.

1.4 Summary

  • Layer 1 – With PoS and hybrid chain as the most popular trends , we can see that the hybrid chain is getting more and more attention, which indirectly proves that everyone has paid attention to the potential security problems of PoS, and is looking for solutions that can balance security and efficiency Program.
  • Layer 2 – With general scaling protocol as the main trend , the new direction includes layer 2 chain for the industry.
  • Application – The major trend and new trend are the projects that can be circulated in the secondary market in the short term as the hot trend, and a new major direction is security.

02 Alpha & Beta Trends

2-1 Alpha

First define Alpha:

Alpha Markets features transaction-driven financing. Items with Alpha properties need to appear to be clearly outperforming other items in the same Layer category. The Alpha project we are looking for in this article needs to meet the total financing more than 2 times the average financing of its track.

2-1.1 Layer1

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

As shown in the figure, alpha is not seen in Layer1.

2-1.2 Layer2

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

As shown in the figure, there is Alpha in the Seed-Angel stage in Layer2 , and Polygon is the alpha item in this stage. Others such as PreA-A, BC, C+ do not have Alpha.

2-1.3 Application Layer

  • Seed-Angel

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

  • too has

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

  • B-C & C+

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

2-2 Beta

Define Beta:

Beta market features are market-driven financing. Beta measures whether the market is bullish on an industry/technology category as a whole. Track financing with beta attributes is generally good. The lower the coefficient of variation in statistics, the lower the dispersion of track financing, which in turn reflects the beta attribute of the market. We further use the difference between the mean and the median for cross-comparison validation. Markets with low CV and a small gap between average and median are more beta-characteristic. We judge with CV < 1.5 and log(average)/log(median) < 1.05.

2-2-1. Layer 1 & Layer 2

The overall number is too small to be statistically significant. In general, Layer 1 & Layer 2 have a high financing amount and a hot track. According to the technology flow, the amount of financing is not much different.

2-2-2. Application

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

As can be seen from the above figure, from the perspective of low dispersion below CV1.5, the beta market can be roughly defined as Wallet, Gaming, Web Builder, Sports, Education, Environment, X-to-earn, Credentials and Legal. However, because the amount of data in a quarter will affect the reliability of CV, AVE-MEDIAN is used here for cross verification, as follows.

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

As can be seen from the above image, X-to-earn, Web Builder, Legal are verified betas. The specific financing data are as follows.

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

2-2-3. Summary

In the application layer, it is concluded that X-to-earn, Web Builder, and Legal have beta attributes by comparing the two methods of calculating beta.

03 Main preferences of some head agencies

3.1 Digital Currency Group

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

DCG has invested in a total of 10 projects. There is no preference on stages, there are layouts from seed to series F. The layer 2 project invested by DCG is polygon, and the other 9 projects are applications. Among the 9 applications of investment, preference is from high to low:

  • Wallet, which also includes wallets with built-in in exchange
  • Security, including code auditing, security testing
  • Analytics tools, mainly data analysis, tracking, alert

3.2 A16Z Crypto

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

A16z crypto has launched 2 application projects, both in seed rounds. Both projects are platform projects:

  • Creator platform gathers creators and helps them NFT their original works
  • The NFT pledging platform allows all players who cannot play some games due to the high threshold of nft to successfully access these games through this nft lending platform, and finally have the ownership of these NFTs after the platform completes all payments

3.3 A16Z

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

A16Z made a total of 7 shots, including 1 Layer 1 project – Aptos, and 6 application projects.

Among the 6 applications of the investment, the rounds include 2 rounds of seed and 4 rounds of series A, and the directions include:

  • 5 gaming/x-to-earn
  • 1 nft project

3.4 Tiger

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Tiger made a total of 14 shots, 1 layer1, 1 layer 2 and 12 applications. The item of Layer 1 is Aptos, and the item of Layer 2 is polygon. In the investment stage, 14 projects from seed to series D have been shot, and there is no obvious stage preference.

Among the 12 applications of investment, preference is from high to low:

  • 4 Infra projects, including staking service, DID, deployment platform
  • 4 asset management
  • 2 analytics and 2 exchange

3.5 Lightspeed

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Lightspeed made a total of 7 shots, and the 7 investment times were all application. In the investment stage, there are shots from seed to series D, and there is no preference in the stage.

Among the seven applications of investment, preference is from high to low:

  • 2 asset management
  • 2 wallets
  • 2 exchanges

3.6 A&T Capital

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

A&T Capital has a total of 14 projects, including 1 Layer1 – Mysten Labs. In terms of investment rounds, there is a clear preference for early stage, including 7 seed rounds and 2 A rounds.

Among the 13 applications of the investment, including:

  • 3 infrastructures 
  • 3 gaming/x2e
  • 2 wallets 
  • 2 DAO tools 

3.7 Paradigm

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Paradigm made a total of 4 shots, and the 4 investments were all applications. In the investment round, all 4 shots were seed rounds. Among the 4 applications invested, including nft marketplace, gaming/x2e, social, and Metaverse.

3.8 Dragonfly

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Dragonfly made a total of 12 shots, including 1 layer 2 cross chain bridge, and the other 11 were applications. In terms of investment rounds, we mainly focus on early seed rounds and growth stages. Among the 12 applications of investment, preference is from high to low:

  • 5 gaming
  • 3 asset management
  • 2 social

3.9 Sequoia

Web3 investment in a bear market: What projects have the top funds invested in in a bear market?

Sequoia has a total of 5 shots, including 1 layer 2 – starkware, and the other 4 are applications. In terms of investment rounds, there is a clear preference for late-stage projects, including an ICO round project. In the 4 applications of the investment, including:

  • 2 Metaverses
  • 1 asset management
  • 1 insurance

Summarize

In this article, we review the projects in the crypto industry that received institutional fund investment during 2022.5 – 2022.8, and summarize the following key trends:

  • From the perspective of the investment stage , funds in the market are more willing to sell very early or late-stage projects in a bear market; the exit method is mainly to enter the secondary market in the short term, and the number of investments in chain games and encrypted fund management projects can be seen to increase;
  • From the perspective of investment direction , Layer 1 is mainly based on PoS, and the attention of hybrid chain has increased significantly; Layer 2 is mainly based on general scaling, and the attention of industry-specific chain has increased; attention has increased significantly.

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