Crypto startups see a $2.5B boost in Q1, signaling a slow but steady recovery

Galaxy reported on May 3 that crypto businesses raised around $2.5 billion in the first quarter, up 29% from the previous quarter.

Deal volume rose 68% to 603 during this time, marking the first increase in financing and transaction volume in three quarters.

Galaxy said investment rose “modest” when the crypto market recovered. The bitcoin surge has not attracted as much venture funding as in the past.

The business attributed this slowdown to high lending rates, the 2022 collapse of key crypto firms, and a dearth of established enterprises suitable for large-scale financing.

Introducing Bitcoin ETFs also affects investment flows. Investors prefer these ETFs over direct startup investments because they provide a comparable but not identical opportunity.

Three industries received most investments. Infrastructure businesses made 24% of the investments, followed by Web3 and trade enterprises with 21% and 17%, respectively.

These industries also dominated agreements, suggesting their centrality in attracting venture capital. Compared to their transaction count, DeFi firms raised less funding, indicating a tendency toward smaller investments.

Bitcoin investments were considerable but just 7% of total capital and 6% of agreements. The majority of financing went to early-stage enterprises (80%). The bulk of agreements went to these 2021–2023 businesses, indicating investor interest in new market entrants.

Galaxy observed that although crypto-focused funds continue to finance early-stage startups, bigger VC firms have either departed or cut their positions, which might hamper later-stage companies seeking major investments.

Despite economic challenges and changing investor tactics, crypto investments rose slowly throughout the quarter.