- Web3 funding is declining, shows report.
- Mainstream companies like Meta are some of the largest investors in metaverse-based projects.
While Web3 may not be mainstream, yet, it is nothing less than mainstream in the crypto industry and Non Fungible Tokens (NFTs) are proof of that. But the crypto winter the investors witnessed in 2022 slowed that initial investment push in the industry that began in 2021. A recent report by Crunchbase, a business data aggregator, shows that funding to the startups in this sector has declined.
Is Web3 losing its charm?
According to the report, funding has gone down from $9.2 Billion in fourth quarter of 2021 to $2.4 Billion in the corresponding quarter of 2022. Moreover, the number of funding deals has plummeted from 677 in the first quarter last year to 327 in the last quarter. On an year-on-year basis, 2022 saw 1986 deals in contrast to 2074 in 2021.
Consensys, the company behind MetaMask, raised $450 Million in a funding round led by ParaFi capital in March last year. Yuga Labs, creators of the Bored Ape Yacht Club and the upcoming Otherside metaverse, raised the same amount as Consensys, in a separate funding round led by a16z.
Circle Internet Financial, the company behind USDC stablecoin, raised $400 Million during a private equity round led by BlackRock, Marshall Wace, Fin Capital and more. Furthermore, 2022 saw only 25 funding rounds which is much less than the three dozen held in 2021.
Does this fall in investment indicate that the push for Web3 was not institutional, and a mere bubble? These figures certainly suggest that. While Web3 has not even entered mainstream usage, it appears like it is already losing its charm. However, several organizations are investing in R & D with the aim of introducing Web3 in traditional industries.
While Web3 and metaverse are different, they are built for the same purpose – to create a user owned virtual world. Micrisoft, Meta, Nvidia and more are heavily engaged in activities associated with this sector. Meta CEO Mark Zuckerberg envisages a robust digital economy; Nvidia has developed a platform where developers can collaborate to create metaverse projects.
This report is a positive signal for these companies which have invested big money in Web3 as they can leverage their positions to become the leading players in a potential market. However, it is unlikely that they will attract users to try out the platforms or whatever the company offers considering the cold market.
Web3 is being developed by the Silicon Valley companies, but its future is closely linked with the crypto industry, because it’s the crypto enthusiasts who are more likely to lead the adoption of new technology that’s based on Web3, before others. Speaking of crypto, it looks like the crypto sector started to recover – Bitcoin recently surpassed the $21,000 mark and Ethereum crossed $1,500. Metaverse tokens too received a blow in 2022, yet, managed to hold a better position in contrast with other virtual currencies in the market.
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