Author: Tiffany Monteverde
Compiled by: Deep Tide TechFlow
For more than two years, I have been dedicated to helping venture capitalists (VCs) find quality deal flow and assisting startups in completing financing. Starting from early 2023, I began systematically organizing relevant data on VC and startup financing. Initially, this was just a personal management tool, and I did not dive deeply into analysis, as real-time interactions with startups and VCs had already given me an intuitive understanding of the market.
However, after reviewing over 1,000 startups in 2024, I collected a wealth of valuable data. With the new charting features added to Notion, I was able to visualize this data and review the market trends of the year.
Popular Areas
Among all reviewed financing transactions, infrastructure remains the most popular financing area, followed by decentralized finance (DeFi). Compared to 2023, the financing heat for data analytics and tooling has significantly declined, while DePIN (Decentralized Physical Infrastructure Network), gaming, and consumer-facing applications have shown strong growth this year.
This change is mainly driven by market sentiment. When the market warms up and on-chain activities surge, consumer-facing applications tend to attract more attention.
Additionally, it should be noted that the startup costs vary significantly across different fields. For instance, infrastructure and DeFi projects often require higher capital investment, which includes not only technology development and liquidity guidance funds but also expenses for marketing and business development. Especially before the Token Generation Event (TGE), additional costs are needed to stimulate market interest and build strong community support.
It is important to emphasize that not all startups are suitable for seeking venture capital funding (more on this can be found here). Nowadays, as infrastructure tools continue to improve, startups can more easily launch prototypes and test through iterative optimization. This approach is particularly popular in Telegram mini-programs (which will be discussed further later).
Top Subfields
Driven by the rise in BTC prices in the first quarter, investment focus remains concentrated in the infrastructure sector, while the Bitcoin Ecosystem has also attracted more attention. The increased demand for specific use cases (such as Staking, cross-chain liquidity, etc.) has led to a significant growth in the number of startups in this field in the second quarter. This trend reflects the follow-on effect of venture capital attention.
It is worth mentioning that market prices (such as BTC) often show a certain correlation with the deployment of venture capital, which in turn affects the number of financings and valuations for startups (to be discussed in detail later).
Recurring Patterns
In specific fields, the increase in deal flow is closely related to the direction of venture capital deployment; this pattern has repeatedly emerged. For example, the number of transactions on the Telegram/TON ecosystem saw significant growth in Q3, which was directly related to Pantera's announcement of an investment in May. Today, Telegram has become a popular platform for rapidly launching projects, testing user demand, and building community engagement.
A continuously attracting area is the intersection of crypto and AI. The number of transactions in the AI/ML field has been steadily increasing, and even in 2023, startups in this area successfully drew venture capital and users (including both crypto and non-crypto users) to the evolving AI field.
Another notable trend is that despite the relative calm in the market from Q2 to Q3, the number of transactions in September significantly increased. This is primarily due to the market's expectation that a bull market will arrive by the end of 2024 or early 2025, with many projects hoping to launch tokens at the optimal time based on this expectation.
"When will the token be launched?"
Affected by the expectations of a bull market, Q4 of 2024 has become the hottest time for project token issuance, followed by Q3 of 2024 and Q1 of 2025.
Successfully launching tokens requires high costs, including attracting community interest, gaining attention through marketing activities, building strong partnerships, and collaborating with market makers and liquidity providers. Therefore, many startups will open private sale/pre-sale rounds and KOL funding rounds prior to the Token Generation Event (TGE) to raise sufficient funds.
Observing the financing timing before TGE, most startups tend to start their funding rounds a quarter in advance to ensure they can meet their fundraising goals on time. However, data for Q3 and Q4 of 2024 indicate that many projects' planned TGE dates overlap with the start of their funding rounds. This may be because some startups failed to complete their funding in a timely manner and eventually had to postpone their TGE dates to ensure that all preparations were in place.
Based on my experience since 2022, although the deployment of venture capital has increased, the overall recovery has been slow, and growth from 2023 to 2024 is not significant. This is also reflected in the comparison between the transaction entry dates and planned TGE dates, as many startups have delayed their TGEs due to financing difficulties.
Changes in Valuation
After analyzing trading volume data and the changes in areas related to venture capital deployment and TGE trends, it can be observed that the average valuation of financing rounds throughout the year is on a downward trend.
Average valuations are often related to the stage of the funding round (such as seed, private sale, pre-sale, etc.), reflecting the maturity of the project and whether it has a history of funding.
In my dataset, 45% of projects are in seed funding, 32% are in private sale/pre-sale funding, 18% are in pre-seed funding, and the rest are in OTC, Series A, and Series B funding.
The main reasons for the decline in valuation are as follows:
Venture Capital Deployment and Investment Willingness
The deployment of venture capital in 2024 has not significantly increased compared to 2023 (see Galaxy's report), and is closely related to market prices (especially the fluctuations of BTC). This makes it more difficult for many startups to raise funds and meet their financing goals.
General User Response to Public Token Issuance
Market sentiment is low, coupled with the historical trend of high fully diluted valuation (FDV) at the time of token issuance, which has weakened retail investors' enthusiasm. Many retail investors believe that venture capitalists obtain tokens at a discounted price in advance, while they have to buy at high valuations, leading to lower return expectations. Among the projects that issued tokens earlier this year, most failed to maintain their FDV at the time of issuance, and token prices generally fell.
To restore retail investors' confidence, many startups choose lower valuations during financing to avoid excessively high prices at TGE, thereby ensuring more sustainable market dynamics.
Conclusion
Although historical data and patterns cannot accurately predict the future, understanding the dynamics and interrelationships between the market, venture capital, and startups is still very meaningful.
In this industry full of uncertainties, the only thing that can be confirmed is: the crypto world is always full of surprises—this 'Wild West' will always bring unexpected changes.
