Crypto valuations 'came back to earth' in 2023, but VCs expect them to rise again in 2024


The past couple of years have proved to be a turbulent time for the crypto industry. As if a spate of big crypto institutions failing or going under wasn’t enough, the industry saw many tourist investors running for the gates as the wider macroeconomic climate worsened.

But a recent spike of interest in crypto, driven by rising Bitcoin and Ethereum prices, is rebuilding momentum, and many think that next year could be promising for crypto startups’ valuations.

Fundraising was difficult for both startups and venture capitalists in 2023, according to Lydia Chiu, VP of business development at Ava Labs. “On the startup side, we saw a correction in valuations, with fewer token offerings,” she said. “VCs also had more leverage to negotiate better terms when leading, much more so than in 2021 or 2022. We’ve seen more follow-on and down-round opportunities from teams that had raised during the bull market than new projects raising [today].”

The aftermath of 2021’s hype is still being reflected in the crypto venture landscape. “[In] 2021, [there were] outlandish valuations with a number of terrible ideas being funded by traditional Silicon Valley VC firms that joined the space at the top and had absolutely no idea what they were doing,” said Michael Anderson, co-founder of Framework Ventures. In 2022, the crypto venture capital deck “saw a complete reshuffling,” with “many tourist VCs in retreat and their weaker portfolio investments bleeding out,” he added.

The drier funding climate of 2023 only served to weed out the weaker businesses that had managed to secure capital in 2021. According to Marc Bhargava, managing director at General Catalyst, a lot of dry powder from the good days still made it to this year.

Valuations “came back down to earth,” Anderson added.

And when FTX blew up in November 2022, many funds, even those focused on web3, “slammed the brakes on new deals,” Alex Marinier, founder and general partner of New Form Capital, said.

“Anyone should’ve expected venture funding to dry up in 2023, and it did,” said Will Nuelle, general partner at Galaxy Ventures. “Funding returned to levels not seen since 2020 in the crypto and blockchain venture markets.”

“In 2023, most people seemed to finally get the message that we’re in a new market and that the investor class is thinking and behaving more rationally than before,” Anderson said.

Early-stage deals are down but not out

Flat or discounted valuations were not uncommon in 2023 for the wider tech industry, so it wasn’t a surprise that the more beleaguered crypto startups also had to suffer substantial haircuts. According to Nuelle, there has been a dispersion in valuation — competitive rounds are still receiving multiples that can “make the stomach quiver,” but a successful raise is no longer preordained, like it was 18 months ago.



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