Venture Capitalists’ Eyes Still Glued on DeFi Start-Ups in 2023

Amid the crypto winter, we see venture capitalists (VC) still monitoring decentralized finance (DeFi) developments. Major VC firms see the crypto industry as they focus on DeFi.

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Last year’s infamous Celsius and FTX bankruptcy headlines drove VCs’ interest in DeFi even more. In 2020, the growth of DeFi surged. As per records, the Total Value Locked (TVL), a DeFi transaction value measure – grew 14x in 2020. And in 2021, TVL quadrupled to a total value of $112.07 billion at its highest.

The FTX and Celsius stuff – and all the other failures – might be creating renewed interest in productizing DeFi in a way that’s easier to access by both institutions and individuals. Because DeFi is not super easy to access
said Coinfund’s Managing Partner David Pakman in an interview with CoinDesk.

Institutional DeFi boomed as well. Financial services firms such as BlackRock and Citigroup investing more than $1 billion each in DeFi platforms. Eventually, with more institutional clients jumping into crypto, these firms will eventually offer more services to support their clients.

On the other hand, “Big Tech” company Google Cloud hosted Defining DeFi hackathon last 2022 with Moralis Web3 in support of the future of DeFi. There is no slowing down in DeFi development either. In fact, TechCrunch’s survey revealed about 20% to 50% of crypto pitches looking for funding are DeFi-focused projects. The VC companies surveyed are Framework Ventures, New Form Capital, and Pantera Capital.

Venture Capitalists to Practice Due Diligence in 2023

The crypto market downturn’s gravity pulled crypto investment to its lowest in two years by the end of 2022. Based on Galaxy Digital’s report, investments into crypto startups sum up to about $3 billion, 400 deals short compared to Q4 in 2022 – the lowest for both since Q4 2020.

Despite the decline in deals, Decrypt revealed that Web3 and DeFi projects were still the most significant areas for investment in emerging tech, beating out fintech and biotech. Moreover, the global decentralized finance market is expected to reach $231 billion by 2030.

However, Alex Thorn, Head of Research for Galaxy Digital expressed,“startups will need to build on fundamentals, taming operational expenses and driving revenue in 2023.” As part of the predictions reported on The Block’s research, investors will practice due diligence more this year — with a lot of emphasis on product market focus.

Also, 2023 will be a year for more innovations in DeFi. As per explodingtopics.com, a reputed trend research tool reveals UniSwap, DYdX, Rocketpool, and AAVE as part of the top 19 DeFi startups people are anticipating for in 2023.

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Antonella Martin

Antonella is a cryptocurrency and news writer who travels the world, finding inspiration in diverse cultures. She cherishes moments sitting on the beach, watching sunsets. Through her writing, Antonella explores the dynamic realm of cryptocurrency and delivers insightful news. Her work encapsulates both the excitement of finance and the serenity of nature's beauty.