Funding for Bitcoin startups more than quadrupled in 2023, despite an overall decline in venture capital activity, according to a new report.
According to a study by Trammell Venture Partners (TVP), the number of Bitcoin-native pre-seed deals increased by 360% last year, and the number of funded Bitcoin companies increased by 56.9%.
VC funds surge with Bitcoin
As explained in TVP’s Friday report, “Bitcoin-native companies” are those whose product success is interconnected with the success of the Bitcoin network, and where BTC is “the future global financial asset.” We are a company founded on the principle of
This includes early-stage startups, while later-stage companies, Bitcoin miners, and “crypto” oriented companies are discounted.
Although the absolute amount of Bitcoin venture investments invested in 2023 decreased by -12.5% to $305 million, the number of Bitcoin venture transactions increased by 69.2%. In contrast, the comparable numbers for the cryptocurrency industry were -64.5% and -35.3%, respectively.
Although the number of crypto venture trades still outnumbers Bitcoin trades by about 20 to 1, the increase in Bitcoin trades last year was significant. Large investors last year included General Catalyst, Y Combinator, and Draper Associates, an early-stage VC firm run by longtime Bitcoin bull Tim Draper.
“2023 was a difficult year for the broader venture capital landscape, but the Bitcoin native sector not only weathered the storm, but came out even stronger,” TVL wrote on X on Friday. The future is bright for CoinNative startups.”
Rise of Bitcoin development
This surge in funding coincides with a resurgence of developer activity around Bitcoin over the past year, inspired by new technological capabilities discovered on the network. These include the NFT protocol Ordinals, the Bitcoin computing paradigm BitVM, and the upcoming “Runes” protocol that enables efficient token issuance on Bitcoin.
This week, ordinal activity started to spike again, and the average cost of transacting Bitcoin also rose. Rising fees have led more developers to look for ways to build more effective Bitcoin Layer 2 solutions that enable more efficient transfers, and funding is moving in that direction.
“As a side note, I have never seen more Bitcoin startups in my career.” Said CoinMetrics co-founder Nick Carter said on Friday. “The current pace is at least an order of magnitude faster than in the past.”
