Interest in Venture Capital Explodes in Bitcoin Startups: Survey

Although venture capital activity is slowing across the board, funding for Bitcoin startups will more than quadruple by 2023, according to a new report.

According to a study from Trammell Venture Partners (TVP), the number of Bitcoin-native pre-seed deals ballooned 360% last year, while the number of funded Bitcoin companies grew by 56.9%.

VC funding explodes on Bitcoin.

As explained in TVP's Friday report, the “Bitcoin Native Company” is an organization whose product success is inextricably linked to the Bitcoin network and which is founded on the principle that BTC is “the global financial asset of the future.”

That includes early-stage startup companies, but offers discounts to late-stage companies, bitcoin miners, and crypto-focused companies.

While the absolute number of Bitcoin venture dollars decreased by -12.5% ​​to $305 million in 2023, the number of Bitcoin venture deals grew by 69.2%. In contrast, the equivalent numbers for the crypto industry are -64.5% and -35.3% respectively.

Crypto venture deals still outnumber Bitcoin by around 20:1, although the surge in the latter year has been huge. Last year's biggest investors included General Catalyst, Y Combinator, and Draper Associates — an early stage VC firm run by longtime Bitcoin bull Tim Draper.

“While 2023 was a challenging year for the broader venture capital landscape, Bitcoin's native sector not only weathered the storm, but emerged stronger,” TVL wrote for X Friday.

Rise in Bitcoin development

The increase in funding coincides with a resurgence of developer activity on Bitcoin over the past year, fueled by new technological capabilities available on the network. These include the NFT protocol Ordinals, the Bitcoin computing paradigm BitVM, and the upcoming “Runes” protocol – which will enable the issuance of effective tokens on Bitcoin.

This week, normal activity started to grow again, as did the average cost to trade in Bitcoin. Payments has many developers looking for ways to build more efficient Bitcoin layer 2 solutions to enable more efficient transfers, and funding is heading that way.

“I happen to have never seen more bitcoin startups in my career,” CoinMetrics founder Nick Carter said on Friday. “The current rate is at least an order of magnitude higher than ever before.”