Web3 Funding in Q3 2023 Lowest in 3 Years: Report However, the number of Web3 unicorns for Q3 2023 rose to surpass that of Q2 2023 with five unicorns. The space also saw about 180+ deals in the same quarter.

While the Web3 space saw an influx of a whopping USD 19.6 billion in Q4 of 2021, it is no longer the case in 2023. Funding winter continues to envelope start-ups across the globe and in spite of the emergence of new players and offerings, investors are just not as keen on Web3 as they used to be.

According to the new data released by Crunchbase, a market research firm, venture funding to Web3 has plummeted to its lowest levels in years. The third quarter of the ongoing year saw a small sum of USD 1.3 billion being invested in the space. The last time an amount dropped lower than this was in Q1 of 2020, touching USD 1 billion.

"A good indication of the current investment chill in the sector is the dearth of big rounds in crypto and blockchain this quarter so far. There have only been two rounds of $100 million or more in Q3 — Palo Alto, California-based crypto custody firm BitGo and India-based Web3 security firm Zyber 365 both raised $100 million rounds," read the report.

However, the number of Web3 unicorns for Q3 2023 rose to surpass that of Q2 2023 with five unicorns. The space also saw about 180+ deals in the same quarter.

Shutters down on many start-ups

Chinese fintech giant Ant Group was reported to have withdrawn USD 100 million from its crypto-focused fund A&T Capital due to unfavourable market sentiments. In August, Recur, an NFT start-up, announced it was shutting down its operations. The start-up raised USD 50 million in its Series A round back in 2021 and saw Joe Lubin, co-founder, Ethereum and founder, ConsenSys as one of its investors.

A small Web3-edtech start-up by the name 101 also shut down in this period, "The story is simple: we made a bet that didn't play out. We built a web3 education platform believing the industry would mature in time for us to have a sizable market. It's been two years now, and although the space has made strides forward, it does not offer a meaningful market for our product," shares Tim Connors, co-founder and CEO, 101 on LinkedIn.

In April, Nigerian crypto and Web3 start-up, Lazerpay, announced it was shutting down. The failure to close a successful funding round proved to be the final catalyst. "We welcome offers from companies who are interested in purchasing Lazerpay's IP and who would like to continue building the future of crypto payments. We are more than happy to talk further about how our technology works, and how we can help you set up to build or integrate with it," said Njoku Emmanuel, CEO and Co-Founder, Lazerpay.

Clockwork, a Solana-based smart contract automation project, is expected to cease its operations this month. "Ultimately the reason we are stepping away now is simple opportunity cost. We admittedly see limited commercial upside in continuing to develop the protocol, and have a growing personal interest to explore new opportunities," shared Nick Garfield, founder, Clockwork on X.

The silver lining

While the general state of the ecosystem may be in the doldrums, certain players and investors are managing to steer in the right direction. San-Francisco-based Blockchain Capital recently announced its two new funds, a sixth early-stage fund and a first opportunity fund, summing up to USD 580 million.

NEAR Foundation recently announced its partnership with ICC and Shemaroo to expand Web3 user base and create new use cases for India, respectively.

Tech giant Google has also shown interest in Web3 start-ups through its "Google for Startups Cloud Program" initiative. The initiative is aimed at providing an early-stage support program for budding crypto ventures.