Last year was impressive for blockchain startups, as research from CB Insights found that venture capital funding reached new heights during every qua
Last year was impressive for blockchain startups, as research from CB Insights found that venture capital funding reached new heights during every quarter of 2021. According to CB Insights’ “State Of Blockchain 2021” report, $25.2 billion worth of venture capital funding went to global blockchain startups last year, demonstrating a 713% increase from $3.1 billion in 2020.
The report also found that the United States led the greatest amount of funding deals in Q4 of last year, generating $6.26 billion for 157 deals. The document notes that global growth was driven by increasing consumer and institutional demand for crypto-related products and services.
VC funding focused on crypto adoption
Chris Bendtsen, a senior analyst at CB Insights, told Cointelegraph that CB Insights’ report contains data aggregated from private marketing funding from over 3,000 blockchain and crypto companies that the firm regularly tracks. Bendtsen further explained that while the title of the report references blockchain, this serves as an overarching category that includes cryptocurrency, nonfungible tokens (NFT), enterprise blockchain and decentralized finance (DeFi). Bendtsen pointed out that the majority of VC funding mentioned throughout the report was allocated to crypto-focused startups. The report states:
“Over $100M mega-rounds (worth $100m+) were the driving force behind blockchain’s record funding year. The 59 mega-rounds in 2021 accounted for just 5% of total deals but 60% of total funding. The biggest mega-round deals went to crypto exchanges, brokerages, NFTs, gaming, and payments.”
According to the report, $1 out of every $4 worth of funding went to crypto exchanges and brokerages, which also equates to a quarter of all global blockchain funding in 2021. Bendtsen remarked that while the biggest deals went to major crypto exchanges such as FTX — which ranked as the second-largest equity deal for brokerages and exchanges in Q4 of 2021 — funding for country-specific exchanges has also been on the rise.
For instance, CoinSwitch Kuber, one of the largest crypto trading platforms in India, ranked No. 4 for top equality deals for brokerages and exchanges in Q4 of 2021, generating over $260 million in its recent Series C funding round. “Based on these findings, it’s become evident that we are seeing the globalization of crypto, as more country-specific exchanges are raising impressive rounds,” said Bendtsen.
Bendtsen further pointed out that global VC funding for crypto custody and wallet providers reached $6.3 billion last year. “Toward the beginning of 2021, a lot of funding was going to consumer-driven exchanges, but there was a shift later in the year that saw major funding rounds go to crypto custody providers and custodians,” he remarked.
For example, the New York Digital Investment Group (NYDIG) ranked as the top equity deal in Q4 of 2021 under the category of custody and wallet providers. In December 2021, the institution specializing in Bitcoin (BTC) financial services secured a $1-billion equity investment led by WestCap Group. Fireblocks, the digital asset custody platform, ranked directly under NYDIG with its $550-million raise from Sequoia Capital.
Michael Shaulov, CEO of Fireblocks, told Cointelegraph that he believes investors are paying more attention to custody and wallet providers because this has been the biggest barrier to entry for institutional participation. “Having a direct custody solution and technologies that can plug and play into the crypto capital markets is a game-changer for businesses and individuals alike,” he said.
“Our investors see us as the picks and shovels of the crypto industry. This includes everything from direct custody wallets and settlement networks to compliance integrations with Chainalysis and Elliptic, along with access to staking providers.”
In regard to the company’s latest funding round, Shaulov said that Fireblocks plans to expand its offerings to include securing high-value transactions around DeFi and NFTs. This is important, especially now as the number of scams and fraudulent activities within the DeFi and NFT sectors has increased.
Although criminal activity within the NFT space has started to quickly unfold, the CB Insights report found that funding allocated to NFT startups grew by a margin of 130 times. In 2020, NFT startups generated $37 million in VC funding, which reached $4.8 billion in 2021. “Gaming, marketplaces, and infrastructure are the top 3 NFT categories driving the funding craze,” the report highlighted.
Animoca Brands, which ranked as the No. 1 investor by company count in Q4 of 2021 according to CB Insights, made at least 49 investments in blockchain projects last year. Yat Siu, co-founder and executive chairman of Animoca Brands, told Cointelegraph that NFT and blockchain gaming overall were major drivers of the growth in funding last year:
“We have always believed that NFTs, and in particular gaming, are key to…
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