Despite a downward trend in 2023, the digital market space continues to witness a steady flow of deals and investments, as indicated by Binance Research’s latest report. The study unveils that a notable portion of this sustained growth is attributed to developments in the gaming and infrastructure sectors.
Traditionally, venture capital (VC) contributions have surged to 45% since the year’s commencement. Interestingly, the report points out a gradual narrowing of the gap between traditional and Web3 investors.
The Gaming Industry Attracts Investors
Amid the bullish market conditions of 2021 and early 2022, a consistent uptick in total funding was observed, peaking at $6.8 billion in April 2022—a significant 361.8% increase from January 2021. However, following the FTX contagion, there was a notable decline in funding between the second and third quarters of 2022, totaling only $2.4 billion in Q3. According to Binance Research’s analysis, funding levels have since stabilized.
Moreover, an uptick in deal funds occurred in January and February 2023, driven by growth in the Infrastructure and Gaming sectors. Over the last four quarters, the gaming category secured the highest funding, with 87 deals. Despite having the highest cumulative funding, the gaming sector recorded a relatively modest average investment per deal at $7.42 million. This suggests cautious optimism from investors due to the early stages of development in Web3 gaming.
“The sustained investment from venture capitalists in the gaming industry signals a strong forecast for its expansion, accompanied by a rise in funding for AI and Data in recent quarters. Q3’23 saw a shift towards four main areas of interest, including DEX.”
Coinbase Ventures Leads as a Non-Lead Investor
Binance Research’s findings spotlight prominent VC firms, including Pantera Capital, Dragonfly, Coinbase Ventures, a16z, and Polychain Capital, engaging in co-investments. Notably, Polychain Capital and Coinbase Ventures distinguish themselves with the highest number of joint investments, totaling 40. This can be partly attributed to Olaf Carlson-Wee, Polychain’s founder and Coinbase’s first employee and former Head of Risk.
Despite a quarterly decrease in the count of unique investors, the decline slowed to 5.9% in the last quarter. Coinbase Ventures has consistently led deal counts over the past four quarters, allocating 33.3% to DeFi and 39.2% to infrastructure. DWF Labs, a newer entrant, commenced investment activities in October 2022.
Coinbase Ventures, with 49 non-lead investments, adopts a diversification strategy, making smaller investments across a broader range of projects. This contrasts with other investors, such as a16z, which prefer larger lead investments in a more selective number of projects.
