Markets may be looking better for venture funds and startups seeking capital, but money remains tighter than the last bull cycle, industry experts told Cointelegraph.
Investors are looking for compelling stories and strong metrics before investing in 2024. According to Carlos Pereira, partner at BitKraft Ventures, funds have been paying more attention to liquid or pre-launch opportunities in startups:
“Which means that capital is not plentiful for venture capital deals and we expect some divergence between the public and private markets.”
A divergence between these markets means that investor interest may be moving in different directions. While public markets (made up of stocks, bonds and securities) could continue to attract investment, private markets, such as venture capital funds, could see a reduction in available financing.
BitKraft, for example, raised $220.6 million for its second token fund in 2023, falling short of its $240 million goal, according to Securities and Exchange Commission filings. The capital is expected to go into the information technology and gaming sectors.
“Web3 games have been a strong segment in the Q4 2023 recovery with positive launch activity, both recently and expected in 2024,” Pereira commented, adding that the gaming industry represents a $330 billion market. Dollars.
However, there may still be a number of additional challenges ahead for startups, especially early-stage companies. Adam Struck, founder of venture capital firm Struck Capital, explains that funds tend to look for businesses with proven models ready to grow in the coming months.
“I believe the Series A and growth stage fundraising markets will continue to thaw, as startup leaders have become increasingly rational in building their companies after the frenzy of 2021.”
Struck also predicts a positive year for the gaming industry as well as the decentralized finance space as more institutional capital is projected to flow on-chain. “I expect Web3 gaming to explode as dozens of innovative games with seamless blockchain integrations are launched,” he said.
“With rate cuts looming and more real-world assets moving on-chain, I expect the total value locked in DeFi to grow substantially this year.”
DefiLlama data reveals that at least $5.7 billion in capital was allocated to crypto companies in 2023.
One of the crypto startups that received funding last year is Lolli. The company offers shoppers Bitcoin and cash back rewards through retailers like Ulta Beauty, Groupon, and Booking.com. Bitkraft Ventures led an $8 million Series B round in the startup, along with backers such as Serena Williams’ Serena Ventures.
Lolli CEO Alex Adelman believes startups can still thrive in the current environment. “The decline in the cryptocurrency market over the last year has, in some ways, helped differentiate companies that have sustainable business models from those that do not.”
For startups seeking financing, Adelman advises avoiding excessive or overly expensive financing. “Many startups will raise an excessive amount of capital when markets are strong, simply because there is money available,” he noted, adding that:
“While more capital may seem like a good thing right now, raising too much can lead to unsustainable spending habits, future rounds of declines, working with investors who are not aligned with the company’s vision, and diluting the shares of key stakeholders” .
Adelman recommends that new companies created in 2024 be strategic to “contribute only the amount of money they need to achieve their next phase of growth.”
