Crypto winter-era seed startups mostly persist despite tumult and crisis.
The year 2022 was marked by turmoil in the crypto space, with high-profile collapses like Terra-Luna and FTX making headlines worldwide. However, amidst the chaos, a surprising trend emerged: early-stage startups continued to thrive.
A New Report Reveals Surprising Resilience
According to a recent report from Lattice VC, over 80% of crypto startups that announced seed rounds in 2022 are still active today. This finding may bring some hope to what was otherwise a dismal year for the industry.
Venture Capital Deployment Surges in 2022
In 2022, venture capital companies invested over $5 billion into 1,200 teams that unveiled their seed rounds during this tumultuous period – a staggering 2.5 times more than in 2021. This influx of capital led many to predict a higher fail rate among these startups.
Lattice VC’s Co-Founder Shares Insight
"We expected a natural increase in the number of failures due to the massive influx of capital," said Mike Zajko, co-founder at Lattice. "However, this hasn’t really come to fruition."
Eigen Labs’ Success Sets a Precedent
One standout success story from 2022 is Eigen Labs, which introduced an innovative restaking mechanism that has become a benchmark for many incoming startups in the Ethereum and beyond ecosystems.
Challenges Ahead for Startups
Despite these successes, the report paints a sobering picture of the challenges facing these early-stage startups. A mere 1% of teams have achieved product-market fit, and only 12% have raised follow-on rounds – a stark indication that rocky times lie ahead.
"The teams are able to stretch their resources to try to get to the other side," Zajko noted, "but at some point, their runways will eventually run out."
Fewer Token Launches in 2022
Notably, startups from 2022 have seen significantly fewer token launches than their counterparts in 2021 – just 15% compared to 25%. This may be attributed to teams missing the ‘bull market window’ and centralized exchanges becoming more discerning about which assets to list.
Platform Importance Grows
The report highlights the growing importance of platform selection for startups. Teams that launched on NEAR, Flow, and StarkNet – ecosystems that attracted substantial funding in 2021 and 2022 – have failed to raise follow-ons, underscoring the risks associated with launching on less established platforms.
Crypto Gaming: A Cautionary Tale
The crypto gaming sector provides a useful case study. In 2022, this pack raised $700 million from venture companies betting on crypto-powered video games as the future of gaming. However, despite initial hype, the big ideas in crypto gaming – NFTs and the metaverse – have largely fallen by the wayside.
"Whatever the hot trend is during that year is not likely to be what people are talking about or excited about 1-2 years later," Zajko observed.
AI and DePIN: The New Trends
Meanwhile, the two emerging trends of this year – AI and decentralized physical infrastructure (DePIN) – saw little attention from venture capital companies in 2022. It remains to be seen whether these narratives will have staying power over the next two years.
Conclusion
The resilience of early-stage startups in 2022 may bring some hope to an otherwise tumultuous year for the crypto space. However, as the report highlights, challenges lie ahead for these teams, and it’s unclear whether they will be able to sustain their momentum without a bull market to support them.
Will the trends emerging this year have more staying power than those of 2022? Only time will tell. One thing is certain – the crypto space remains dynamic and unpredictable, full of opportunities and risks for startups and investors alike.
