2021 has proven to be the year of crypto startups as many of them have managed to raise record funding rounds, seeing investment from several Venture Capital firms and Hedge Funds. Multiple crypto startups have managed to gain Unicorn status after their latest funding round.
Crypto startups have managed to raise hundreds of millions of dollars this year and several firms have gone public as well. While the rising demand for crypto-related services has played a key part as global crypto users grew to 221 million by June, but PwC, a global professional service firm suggests there is more to it than just demand.
Henri Arslanian, the crypto head of the PwC group said that the growing interest of large hedge funds and VC firms have booted out smaller players. Even if small family businesses and Boutique firms want to participate, they are often overshadowed by large VC firms who eventually raise the investment price by multi-folds. He explained,
“Let’s say they’re looking at a deal and they believe it’s worth $10 million, and you’re seeing large VCs come in and put a bid in for a higher valuation,” he said. “This is happening a lot with very early-stage companies, say, $5 million to $20 million — the prices are being inflated.”
Arslanian also believed the lack of regulatory clarity also prevents small players from investing in the crypto startups, as the majority of them are in a nascent stage. He explained,
“If your minimum ticket size is around $50 million, there aren’t that many companies that have that status yet,” he said. “If you’re a large pension fund and you decided to make a crypto allocation, there are no more than two dozen companies around the world that are investable, looking for capital and could absorb $100 million.”
Crypto Startups Have Raised Over $3 Billion in Past 2-3 Months
Crypto startups have raised nearly $3 billion over the past couple of months, it is the same amount crypto firms attracted throughout 2020.
FTX crypto exchange recently closed the biggest funding round in crypto history with $900 million in funding. Fireblocks another crypto startup closed a $310 million funding round last week at a $2 billion valuation. Earlier, this year the likes of BlockFi and Blockchain.com raised over $300 million while crypto analytic firm Chainalysis closed a $100 million funding round at $4 billion valuations.
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