Venture funds eye recovery in 2024, but capital remains tight
Markets may be looking better for venture funds and startups looking for capital, but money is still tighter than in the last bull cycle, industry insiders told Cointelegraph.
Investors will need compelling stories and strong metrics before investing in 2024. Carlos Pereira, partner at Bitcraft Ventures, said funds are paying more attention to liquid or pre-launch opportunities in startups.
“This means that capital is not readily available for VC deals and we expect some disparity between the public and private markets.”
The difference between these markets means that investor interest can move in different directions. While public markets – in stocks, bonds and securities – may continue to attract investment, private markets, such as venture capital funds, may reduce funding.
BitCraft, for example, raised $220.6 million for its second token fund in 2023, down from $240 million, according to data from the Securities and Exchange Commission. The capital city is expected to engage in information technology and gaming sectors.
“Web3 gaming is expected to be a strong segment in the Q4 2023 recovery with positive launch activity, both in the near term and in 2024,” Pereira commented, adding that the gaming industry represents a $330 billion market.
However, a number of additional challenges can still await beginners, especially early-stage jobs. Adam Struck, founder of VC firm Struck Capital, explains that funds are looking for businesses with proven models that are ready to scale in the coming months.
After the 2021 frenzy, I think the Series A and growth-stage fundraising markets will continue to cool as startup leaders become more rational in building their companies.
Struck predicts a positive year for the gaming industry as well as the decentralized finance space as more institutional capital is expected to flow into the chain. “I expect Web3 Gaming to open up as dozens of innovative games with seamless integrations on blockchains go live,” he commented.
“With slower deceleration and more real-world assets moving on-chain, I expect the total value locked in DeFi to grow significantly this year.”
Data from Defillama shows that at least $5.7 billion in capital will be allocated to crypto businesses by 2023.
One of the crypto startups that received funding last year was Lolly. The company offers Bitcoin and cashback rewards to shoppers through retailers like Ulta Beauty, Groupon and Booking.com. BitCraft Ventures led an $8 million Series B round at the startup, joined by backers like Serena Williams' Serena Ventures.
Lolly CEO Alex Adelman believes the startup can thrive in the current environment. “Last year's crypto market downturn helped separate companies with sustainable business models from those without.”
For startups looking for cash, Adelman advises avoiding excessive or expensive funding. “Many startups raise excessive capital when the markets are strong just because the money is available,” he says.
“While more capital may seem like a good thing now, raising too much can lead to unsustainable spending habits, future rounds, working with investors who have the wrong view of the company's vision, and damaging the equity of key stakeholders.”
Adelman in 2010 He advises startups raising funds in 2024 to be strategic about “raising only the amount of funding they need to get to their next stage of growth.”
