Crypto Startups Defy Odds, Show Resilience Amid 2022’s Market Mayhem
The tumultuous year of 2022 was marked by some of the most significant setbacks in the crypto space, with Terra-Luna crashing, FTX facing insolvency, and crypto lenders struggling to stay afloat. However, despite these challenges, many early-stage startups managed to not only survive but also continue to thrive.
According to a recent report from Lattice VC, over 80% of the crypto startups that announced seed rounds in 2022 are still active today. This is an astonishing finding, considering the volatile market conditions and the massive influx of capital into these startups during this period.
The data suggests that venture capital companies deployed more than $5 billion into approximately 1,200 teams that unveiled their seed rounds in 2022 – a staggering 2.5 times more capital than in 2021. This significant investment had led to expectations of a higher fail rate among these startups.
However, Mike Zajko, co-founder at Lattice, attributes the unexpected resilience of these startups to the sheer volume of capital available. "Because of the massive influx of capital for 2022, there was just a natural expectation" of a higher fail rate, he said. The prediction hasn’t quite come to fruition.
Eigen Labs: A Beacon of Success in a Turbulent Year
One team that stands out from the rest is Eigen Labs, which introduced its revolutionary restaking invention in 2022. This innovation has set the tone for many incoming startups in Ethereum and beyond, showcasing the potential for success in the crypto space.
Despite this remarkable achievement, the data paints a more sobering picture of the overall landscape. Only 1% of teams managed to find product-market fit, and only 12% have secured follow-on rounds, according to Lattice’s report. This indicates that many startups will face significant challenges in securing further funding as they navigate the post-bull market reality.
The data also highlights a notable trend: the decline in token launches among 2022-era startups compared to those of 2021. According to Lattice, only 15% of teams from 2022 have launched tokens, down from 25% in 2021. This decrease may be attributed to teams missing the "bull market window" and centralized exchanges becoming more discerning about which assets to list.
The Importance of Platform in Crypto Startups
The report emphasizes the significance of platform choice for crypto startups. Teams that launched on NEAR, Flow, and StarkNet – three ecosystems that raised substantial sums in 2021 and 2022 – have struggled to raise follow-ons. This raises questions about the long-term viability of these platforms and the potential challenges faced by teams operating within them.
The crypto gaming sub-sector offers a useful case study for this phenomenon. In 2022, this pack secured $700 million from venture companies betting on crypto-powered video games as the future. However, despite initial hype, this trend has largely fizzled out, with NFTs and the metaverse failing to gain significant traction in 2024.
"Whatever the hot trend is during that year is not likely to be what people are talking about or excited about 1-2 years later," said Zajko. This observation highlights the fleeting nature of market attention and investor enthusiasm, underscoring the need for crypto startups to adapt and innovate continuously.
AI and DePIN: Emerging Trends with Uncertain Futures
The two dominant trends of this year – AI and decentralized physical infrastructure (DePIN) – saw limited activity in 2022. As the market continues to evolve, it will be interesting to see whether these narratives have more staying power than those of 2022.
In conclusion, while the crypto space is marked by uncertainty and volatility, early-stage startups continue to show resilience and adaptability. As the market navigates the complexities of AI, DePIN, and other emerging trends, one thing is clear: only the most innovative and forward-thinking teams will thrive in this landscape.
Conclusion
The crypto space has faced numerous challenges over the years, but the data suggests that early-stage startups have managed to defy expectations. While some teams have secured significant funding, others face uncertain futures as they navigate the post-bull market reality. As the market continues to evolve, it remains to be seen which trends will endure and which will fade into obscurity.
Only time will tell whether AI and DePIN will emerge as dominant forces in the crypto space or if new narratives will arise to replace them. One thing is certain: only the most innovative and resilient teams will thrive in this ever-changing landscape.