In a recent report, venture capital firm Lattice examined the subsequent development of more than 1,200 cryptocurrency pre-seed and seed-round startups since 2022 (covering only blockchain networks with at least 15 projects funded). . It was found that approximately one-fifth of Ethereum projects have failed in the past two years, which is lower than the 26% failure rate of the Solana ecosystem. In comparison, projects based on BNB Chain are the most unstable, with one-third of the teams halting operations.
Ethereum startups perform better
Lattice said the influx of speculative money during the bull market caused many projects to overextend and eventually fail. Additionally, many projects attributed their collapse to the dramatic decline in the market, as well as events such as the collapse of the Terra ecosystem and the bankruptcy of FTX, according to founders’ public statements in their closure announcements.
The report also states that nearly 80% of Ethereum seed-stage startups have launched products since 2022, while just over 60% of Solana projects have been able to do so.
While Solana's price is up 32% this year, the report serves as a reminder that the cryptocurrency market has just endured two grim years ahead of the 2024 rally and may not yet have fully recovered.
Investors poured more than $5 billion into nearly 1,200 crypto startups in 2022, a 150% increase compared to 2021, according to Lattice. Nearly 30% of that, or about $1.4 billion, went to seed rounds in Ethereum-related startups, while early-stage Solana projects attracted 7%, or about $350 million.
Games and metaverse concepts have the highest failure rate
Hot topics such as NFT, Metaverse and Web3 games have driven the influx of funds, and cryptocurrency entrepreneurs have chosen to invest in these concepts. However, this may be the wrong decision. Lattice Capital co-founder Regan Bozman said on Twitter:
"Chasing hot topics can cost you a lot. There are $700 million invested in game seed rounds, but games and the metaverse have the highest failure rate."
On the other hand, Lattice noted in the report that there are growing trends in investment in privacy-enhancing technologies, artificial intelligence, and DePIN (decentralized physical infrastructure networks).
Market crash reduces VC interest in follow-on investments
Enthusiasm has faded as scandals and industry failures have ebbed, and capital flows have stopped, making it harder for startups to raise capital. Only 12% of teams that received funding in 2022 received follow-on funding.
While 72% of the funded teams have launched products, 18% have not yet launched or have gone out of business. During this period, Ethereum-related startups had the highest product launch success rate at 80%, compared to Solana’s 61%.
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