The State of European Crypto Funding report, published a few weeks ago by Dealroom and the venture capital firm RockawayX, reports some interesting findings regarding cryptocurrency investment in Europe.
Specifically, in 2022 European cryptocurrency startups raised record funding worth $5.7 billion, while funding from US counterparts declined year on year. However, although Europe has the largest number of cryptocurrency startups, the number of late-stage companies is lower than in other regions.
European start-ups make up a significant portion of early-stage funding in the cryptocurrency industry globally, accounting for 20 per cent of the total global funding of early-stage cryptocurrency start-ups. However, US companies dominated funding rounds of over $100m.
Furthermore, more than half of the total investment in European cryptocurrency companies went to projects offering financial products and services, with Centralized Finance (CeFi) attracting $1.7bn and Decentralised Finance (DeFi) accounting for $1.2bn. The second best-funded segment was blockchain infrastructure, worth $1.8bn, where Layer1s and developer tools attracted significant investment.
Major trends for 2023
Based on the numbers mentioned above, we can outline the main industry trends for this year:
· Increase in funding for European crypto startups: record $5.7bn raised last year.
· DeFi growth: decentralised finance (DeFi) was one of the biggest growth areas in the crypto sector in 2022 with $1.2bn.
· Investment in blockchain infrastructure: Layer1s and other pure developer tools raised significant capital.
· Increased focus on regulation: in Europe, regulators are taking a more active approach to regulating the crypto sector with a view to creating a clearer and more predictable environment for businesses and investors.
· Market maturity: the increase in the number of mature companies in the crypto sector could lead to more late-stage investments, providing long-term investment opportunities.
Globally, $872m was invested in cryptocurrency and blockchain companies in February 2023, a 52% increase from $574m in January 2023.
In Europe, London remains Europe's crypto hub with $1.6bn in investments, followed by the Swiss 'crypto valley' hotspots of Zug and Zurich with around $1bn. Berlin and Paris vie for third place with 541 and 403 million each.
How is the Italian venture capital market doing?
Italy is unfortunately not even mentioned in the top ten in Europe for VC investments in crypto companies. In the venture capital market in general, however, we too are beginning to see positive signs. In the first quarter of 2023, Italy, with EUR 201 million raised in 84 rounds, remains broadly in line with the fourth quarter of 2022, both in terms of the number of rounds (+5%) and the amount raised (-5% compared to EUR 212 million).
Analysing segmentation by type, Seed rounds fared well in Q1 2023, with 50 deals and €91m in amount raised. There were 17 Pre-seed rounds, of which 14 Series A and 3 Series B.
Compared to 2022, the share of early-stage rounds (Seed and Pre-seed) increased while the share of Series A and Series B rounds decreased, which explains the decline in the average amount invested in Q1 2023.
In these difficult economic times, investments in innovation are contracting globally, but our country is showing that it is holding up better than others to the repercussions of economic tensions. Italy, in short, has the potential to be more of a European player.