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The past couple<\/span> of years have proved to be a turbulent time for the crypto industry. As if a spate of big crypto institutions failing or going under wasn\u2019t enough, the industry saw many tourist investors running for the gates as the wider macroeconomic climate worsened.<\/p>\n But a recent spike of interest in crypto, driven by rising Bitcoin and Ethereum prices, is rebuilding momentum, and many think that next year could be promising for crypto startups\u2019 valuations.<\/p>\n Fundraising was difficult for both startups and venture capitalists in 2023, according to Lydia Chiu, VP of business development at Ava Labs. \u201cOn the startup side, we saw a correction in valuations, with fewer token offerings,\u201d she said. \u201cVCs also had more leverage to negotiate better terms when leading, much more so than in 2021 or 2022. We\u2019ve seen more follow-on and down-round opportunities from teams that had raised during the bull market than new projects raising [today].\u201d<\/p>\n The aftermath of 2021\u2019s hype is still being reflected in the crypto venture landscape. \u201c[In] 2021, [there were] outlandish valuations with a number of terrible ideas being funded by traditional Silicon Valley VC firms that joined the space at the top and had absolutely no idea what they were doing,\u201d said Michael Anderson, co-founder of Framework Ventures. In 2022, the crypto venture capital deck \u201csaw a complete reshuffling,\u201d with \u201cmany tourist VCs in retreat and their weaker portfolio investments bleeding out,\u201d he added.<\/p>\n The drier funding climate of 2023 only served to weed out the weaker businesses that had managed to secure capital in 2021. According to Marc Bhargava, managing director at General Catalyst, a lot of dry powder from the good days still made it to this year.<\/p>\n Valuations \u201ccame back down to earth,\u201d Anderson added.<\/p>\n And when FTX blew up in November 2022, many funds, even those focused on web3, \u201cslammed the brakes on new deals,\u201d Alex Marinier, founder and general partner of New Form Capital, said.<\/p>\n \u201cAnyone should\u2019ve expected venture funding to dry up in 2023, and it did,\u201d said Will Nuelle, general partner at Galaxy Ventures. \u201cFunding returned to levels not seen since 2020 in the crypto and blockchain venture markets.\u201d<\/p>\n \u201cIn 2023, most people seemed to finally get the message that we\u2019re in a new market and that the investor class is thinking and behaving more rationally than before,\u201d Anderson said.<\/p>\n Flat or discounted valuations were not uncommon in 2023 for the wider tech industry, so it wasn\u2019t a surprise that the more beleaguered crypto startups also had to suffer substantial haircuts. According to Nuelle, there has been a dispersion in valuation \u2014 competitive rounds are still receiving multiples that can \u201cmake the stomach quiver,\u201d but a successful raise is no longer preordained, like it was 18 months ago.<\/p>\n<\/p><\/div>\nEarly-stage deals are down but not out<\/h2>\n