- The crypto landscape experienced a significant overhaul in 2022, with over 1,200 startups successfully raising funds despite a backdrop of market turmoil according to Lattice Fund.
- Early-stage startups have shown resilience, with over 80% still operational and many launching innovative products on mainnets.
- Despite the successes, 18.5% of funded projects have either ceased operations or decided to shut down.
Explore how crypto startups navigated a tumultuous 2022, facing market downturns and still managing to launch groundbreaking products.
Crypto Startups Display Resilience Amid Market Challenges
A recent report by venture capital firm Lattice Fund offers a nuanced perspective on the performance of crypto startups in 2022. Despite facing significant market collapses, a substantial number of these startups not only survived but thrived. Of the 1,200 startups that collectively raised $5 billion, 76% managed to launch a product on the mainnet. This is a testament to the fortitude and innovation inherent in the crypto industry.
The Success Stories and Sectoral Performance
Among the standout successes is Ethereum re-staking protocol Eigenlayer, which has distinguished itself by successfully navigating its go-to-market strategy to produce a multibillion-dollar product by 2023. This, however, is the exception rather than the rule. Most startups have not found such product-market fit (PMF), with only 1.5% achieving this milestone and 12% securing additional funding rounds. Infrastructure and Centralized Finance (CeFi) sectors have been the most rewarding, with 80% and 78% of projects launching products on mainnet respectively. In contrast, gaming and metaverse projects exhibited the highest failure rates, underscoring the risks of following market hype.
Ethereum Dominates, While Bitcoin Showcases Resilience
Ethereum continues to solidify its position as the preferred layer-1 ecosystem for new projects. According to the Lattice Fund report, $1.4 billion was funneled into 314 Ethereum-based projects, though 18% of these failed over time. Interestingly, Bitcoin-based projects demonstrated remarkable resilience with all 18 funded startups still active.
Solana and Other Ecosystems: A Mixed Bag
Investment in the Solana-based ecosystem tells a different story. Despite raising $350 million for 87 startups, the collapse of FTX and a significant drop in the price of the SOL token contributed to a 26% failure rate. Comparatively, startups on other networks like Near, StarkNet, and Flow have struggled, with none successfully securing follow-up funding.
Future Challenges for the 2022 Cohort
The report from Lattice Fund also highlights impending challenges for startups that raised funds in 2022. These startups are navigating a flat market with limited new retail participation, raising concerns about their ability to find product market fit. Additionally, the rise in the number of new seed-stage startups and a tighter token launch market may hinder efforts to bring tokens to market and deliver returns to investors. Compounding these issues is a shifting investor focus towards DePIN and AI sectors, leaving fewer resources for traditional crypto projects.
Conclusion
The data from Lattice Fund paints a complex, yet optimistic picture for crypto startups. While challenges abound, particularly for the 2022 cohort, the resilience and innovation displayed by the majority of these startups provide hope for the industry’s future. The key takeaway? The best returns often come from forward-thinking investments rather than chasing immediate market trends.
