Analysis of Web3 financing in 2024: Public sale projects account for more than 80%, and retail investors gather together for warmth

Original title: Token Trendlines #1 – Fundraising Deep Dive

Original author: Jasper De Maere, Outlier Ventures

Original translation: J1N, Techub News

Since March 2024, the cryptocurrency market has seen a sharp correction, with most Altcoins (tokens other than Bitcoin, Ethereum, etc.), especially some relatively mainstream Altcoins, falling more than 50% from their highs, but this has not had much impact on newly listed tokens. By studying more than 2,000 token issuance cases, we found that the prices of native tokens of early-stage projects with a financing scale of millions of dollars can remain stable and move independently of the market.

Summary

· In the private market of Web3, the investment scale of Pre-Seed and Seed rounds is around one million US dollars. At the same time, projects with a long financing process will have a longer time interval to obtain the next round of financing and obtain less financing.

· Based on the observation of the market from January to April, we found that the investment and financing market has a lag in responding to the rise and fall of the market, that is, a large number of investment and financing will emerge only one month after the market rises sharply.

· Token issuance through public sales has dominated this year, accounting for 81% of all token issuances since the beginning of the year. There is not even a track with more private projects than public sales, which shows that public sales are strongly favored by the market.

· Because the valuation data of each stage is too different after the projects complete different stages of financing, and because these projects often have subjective biases when disclosing information, it is impossible to draw meaningful conclusions from them.

Funding scale and track maturity

Web3 itself is not an industry, but a technology stack that is changing the entire industry. At the same time, no two tracks in Web3 are the same. The backgrounds of the founders are different and the blockchain solutions provided by the projects are different. Therefore, each track in Web3 has different requirements for capital. In order to make everyone more clear about the capital needs of each track, we combined the financing scale with the financing stage of each track, with a time range of early 2024 to August 11, and then got a chart:

· X-axis: the stage of financing of the project.

· Y-axis: the average financing amount of the project.

· Bubbles: the size of the bubble represents the number of financings of the project.

The diagonal line from the lower left to the upper right divides the yellow and blue areas, blue represents tracks with relatively less financing, and yellow represents capital-intensive tracks.

2024 Financing Stage and Scale Chart of Each Track

Token Financing

Based on the data from the beginning of the year to August 11, we studied a total of 375 projects, which either carried out a public-private hybrid token issuance model or used non-stablecoins for financing.

Over the past year, 375 tokens have been listed in the cryptocurrency market, of which 70 were privately offered and 305 were publicly offered. By making a chart of the number of tokens listed and the rise and fall of the Altcoin market value, we can see that the number of tokens listed and the rise and fall of the Altcoin market value are positively correlated. When the Altcoin market value is on an upward trend, the number of tokens listed will rise sharply in the next month. In the past few months, due to many holidays and poor market performance, the activity has decreased.

Comparison of the number of tokens listed and the rise and fall of the Altcoin market value

Looking further, we found that not only the number of tokens listed is related to the rise and fall of the Altcoin market value, but also the number of tokens listed through private offerings is positively correlated with the rise and fall of the market. We think this is expected, because public offerings usually require more preparation from the project party, and too long preparation time may lead to missing the market.

Number of token issuance activities vs. monthly Altcoin market cap growth

We also analyzed how projects were financed. About 81% of newly listed tokens were sold to the public, and so far this year, no track has had more private sales than public sales.

On the X-axis, with the middle as the dividing line, you can see private sales on the left and public sales on the right, the Y-axis shows the median amount of financing, and the size of the bubble indicates the number of tokens listed.

There are 82 game projects, 44 exchange projects, 19 DeFi yield agreements, and 19 metaverse projects. These four tracks account for the majority of token issuance projects this year.

Relative share of public and private token issuance and median financing amount

Traditional venture capital

We studied 1,919 financings and analyzed the data of each financing stage. The final conclusions include:

· Seed rounds are the most active financing stage, followed by accelerators and pre-seed rounds. As tokens are listed, the gap between pre-seed rounds and seed rounds is narrowing.

· As the cycle heats up, more and more ecosystems emerge, and the number of projects incubated by accelerators increases.

· From 2024 to date, we have calculated the average financing size of each stage: Pre-Seed round of $2.2 million, Seed round of $4.9 million, Series A round of $19.8 million, and Series B round of $51 million.

Let's take a closer look at these numbers. We found that the Seed round is the most active stage of financing, followed by the Pre-Seed round. Interestingly, we found that fewer and fewer companies distinguish between the financing stages of these two rounds, because sometimes the Seed round is replaced by the Private Round.

Next, we noticed a lot of accelerator incubation programs. According to our observation, these incubation programs have increased compared to last year. This year we have seen the birth of many new accelerators in Web3. But there is a problem with the data, which is the number of grants. I think the actual number of incubation projects is an order of magnitude larger than the statistical number. Therefore, grants are not considered financing.

Different financing stages and amounts from the beginning of the year to date

Marking the financing amount data, we get the following figure. It is relatively common for project parties to choose not to disclose the financing amount, but if the data sample is large enough, the missing data can be inferred.

As shown below, the gray area is the inferred data. In order to eliminate the huge impact of outliers, we use a conservative method to calculate the total by mixing the median and the mean.

Total Funds Raised by Stage

Using the above two charts, we further calculated the approximate average financing amount for each stage from the beginning of the year to date, that is, simply dividing the number of financings by the total financing amount. Although the results are not accurate, they are consistent with the recommended analysis we provide to our peers.

Average Financing Amount by Deal Stage

Finally, we studied the changes in the financing size of Pre-Seed, Seed and Series A over time. From the data, it can be seen that despite the market turmoil, the size of Pre-Seed and Seed rounds is less affected by the market because these early projects focus on innovative fields.

In contrast, Series A is closer to or at the TGE stage, which requires project parties to prove the attractiveness of their products. Market corrections usually have a greater impact on later-stage investments, leading to a decline in both financing activity and size, as was the case in 2022.

The increase in early-stage financing size this year (starting in January 2024) may be due to investors' belief that the market has shifted from the late stages of a turbulent period to the early stages of a recovery, so the financing market was red at the beginning of the year.

Compared with January, the change in financing size of each stage

Data adjustment

Key information:

· Token listings are usually synchronized with seed, A and strategic rounds.

· The most common financing combination in a short period of time is accelerator + seed round. Many people complete new financing when they join a new project program or shortly after joining the project.

We report all the financing data of the cryptocurrency industry from the beginning of 2024 to the present. However, there are some problems in the process of collecting data, which are explained below.

In our data, 1,392 companies register their financing information in multiple channels at the same time, of which there are two situations:

· The company has multiple rounds of financing in one year.

· Companies raised both traditional VC and on-chain token rounds.

Here are some of the most common funding combinations. The most common are accelerator and seed rounds, which makes sense because accelerator programs help de-risk a project’s business model and projects often choose to join an accelerator when preparing for a pre-seed or seed round. We also saw token sale rounds being raised in conjunction with strategic or seed rounds, often in conjunction with a TGE before or at launch. Additionally, only four companies raised both a seed and a Series A round this year.

Various funding options and number of adoptions

We highlight these trends to show founders that non-traditional funding structures are not uncommon and that we strongly recommend that founders raise a combination of traditional equity and tokens.

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