Forward the Original Title: Crypto VC Deal Flow | 2024 Data Insights

For the past 2+ years, I have been helping VCs source deal flow and startups to fundraise. I have been formally building out my database on VCs and startups fundraising since the beginning of 2023. Initially it was a personal management tool; in-depth analysis was not necessary as real-time interaction with startups and VCs already gave me a good sense of the market.

However, with more than 1000 startup reviewed over the course of 2024, I feel I have collected a meaningful amount of data - and with Notion getting a recent upgrade on data visualisation through charts, what better way to look back at the year and see what my database has to say!

Trending Verticals

Out of all deals reviewed, Infrastructure continued to be the leading category in fundraising, closely followed by DeFi. In comparison to 2023, there has been a significant decline in data analytics and tooling, while DePIN, Gaming, and Consumer facing applications rose this year.

This shift in demand is due to market sentiment, where we tend to see increased interest into Consumer facing applications as markets pick-up and on-chain activity surges.

Another consideration to take into account are that certain verticals are more capital intensive to launch, not to mention the costs required to build excitement and a strong community prior to TGE. Particularly for Infrastructure and DeFi, raises need to account for costs related to technical development, liquidity/bootstrapping, marketing, and business development to name a few.

Not all startups are necessarily a fit for VC (more on this here) and with infrastructure tooling available today, it has become easier to launch a prototype, test and refine it iteratively, which has become a popular method via Telegram mini-apps (a bit more on this below).

Top Sub-Verticals

When BTC prices rose in Q1, investment focus continued in Infrastructure, with additional concentration into the Bitcoin Ecosystem, where demand for particular use cases (Staking, Cross-Chain Liquidity, etc) increased. This is reflected in the sub-vertical chart where an increase of startups building in the Bitcoin ecosystem surges in Q2 as a post-reaction to capturing some of the VC fund attention.

Speaking of markets, we tend to see a correlation on pricing (i.e. BTC) together with VC capital deployment, which then feeds into influx of startup raises and valuations (more on this below).

This pattern in increased deal flow in specific verticals linked to where VC capital is being deployed commonly repeats itself, similar with the number of deals building on Telegram / TON ecosystem, which significantly increased in Q3 following Pantera’s investment announcement in May. Telegram has since become a popular choice for fast-launches, testing and validating user demand as well as building community engagement.

One vertical that continuously captures attention and excitement is on the intersection of Crypto and AI. The number of deals categorised under the AI/ML space continue to increase and maintain its position even in 2023, where startups are capitalising on the interest from not only VCs, but also from users (both crypto and non-crypto) who are closely tuned into the ever evolving AI space.

Speaking of AI, AI Agents have emerged as a rapidly growing category since Q4 2024. Notable examples include @truth_terminal, @ai16zdao (Eliza Framework), @luna_virtuals from Virtuals Protocol, all of which have achieved substantial market capitalisation since their launch. As products centreed around AI Agents continue to gain traction, we can expect to see an uptick in AI Agent-related deals in Q1 2025, following current market trends and patterns.

Another takeaway from these charts are the large influx and increase in number of deals in September despite markets being relatively sleepy and unexciting from Q2-Q3. This is heavily due to speculations of the bull market coming in end of 2024 to early 2025 with projects trying to capitalise on the expected momentum to launch their tokens at the right time.

Wen Token?

As noted above on bull market speculations and timing token launches, Q4 2024 was by far the most popular quarter for projects wanting to launch their tokens, followed by Q1 2025 and Q3 2024.

Launching a token successfully can be costly in order to attract community excitement and gain exposure through marketing campaigns, securing strong partnerships, as well as listing partners or working with market makers and liquidity providers. This leads to many startups opening private/pre-TGE as well as KOL rounds to raise enough capital before launch.

If we look at when projects decide to fundraise before TGE; assuming that the added date (deal inbound) is a proxy to the round opening date; the majority of startups plan their rounds a quarter in advance of launching their product/token, with the expectation that they will be able to meet their fundraising goals in time.

If you look closely at the number of deals with open rounds in Q3 and Q4 2024, you will notice that there are a number of deals with planned TGE dates in the same corresponding quarters. This is most likely due to startups not able to reach their desired fundraising goals in time, with many eventually delaying their TGE dates to ensure that they have everything in line.

Speaking from experience working with Web3 startups and VCs since 2022, although VC capital deployment has slightly increased since, it has not really picked-up fully and has been making a slow recovery throughout 2023 and 2024. This is also reflected in the observation above on deal inbound dates compared to planned TGE dates where many startups struggle to raise VC capital and close their rounds, therefore delaying TGE.

Valuation Shifts

Having analysed the data points on the volume of deals per month with vertical shifts correlating to VC capital deployment and TGE trends correlating to market sentiment, it is interesting to look at the dynamic in the decreasing average valuation of rounds over the year.

The average valuation is highly linked to the stage of the round (pre-seed, seed, private/pre-TGE, series A…); usually being a reflection on product/business maturity and whether or not the startup has previously raised capital.

In my dataset, around 45% were raising in seed, 32% in private/pre-TGE, and 19% in pre-seed; with the remainder covering OTC, Series A, and Series B rounds.

The reason why valuations have decreased over the year likely corresponds to two factors;

1. VC Capital Deployment and Appetite

We have covered earlier how VC capital deployment hasn’t drastically increased in 2024 compared to 2023 (check Galaxy’s reports) as well as its close correlation to market prices (particularly movements in BTC), which naturally made it more difficult for many startups to raise capital and meet their fundraising goals.

2. Retail and Market Reactions on Public Token Launches

Poor market sentiment and the historic trend of token launches at inflated FDVs dampened retail investor enthusiasm. Many felt sidelined by VCs securing early discounted positions, leaving retail participants grappling with the pressure of buying into overvalued tokens at launch, where the potential for high ROI seemed out of reach. Many projects who launched their tokens earlier this year were not even able to maintain their initial FDVs at launch, with the majority of tokens trading at subsequently lower valuations.

In response, startups began adopting lower valuations during fundraising to prevent excessive price inflation at TGE, aiming to restore retail investor confidence and ensure more sustainable market dynamics.

Ending Notes

Although historical data and patterns will never give an accurate look into the future, it is interesting to understand the dynamics and correlations between the market, VCs, and startups, which are all delicately intertwined.

Working in this industry, the only thing I can guarantee is that; crypto will never cease to amuse - it’s truly the wild west; and prepare for the unexpected.

Disclaimer:

1. This article is reprinted from [Startup-VC Platform)]. Forward the Original Title: Crypto VC Deal Flow | 2024 Data Insights. All copyrights belong to the original author [Tiffany Monteverde]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
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