As cryptocurrency prices remain at lower levels, VC funding also posted one of its worst quarters since 2021. Despite this, executives in the space remain optimistic about the potential in the long term of the industry.

Crypto data platform RootData highlighted that the second quarter of 2023 had one of the worst results in terms of crypto fundraising. Compared to Q1 2022, where $12.62 billion was raised in 559 rounds of funding, Q1 2023 saw about $2.1 billion in 292 rounds, an 83% decrease in equity investments of risk flowing into space.

Quarterly chart of crypto fundraising trends data. Source: Root Data

Despite the fact that the flow of VC funds is slowing, professionals working in the space believe that there is still a strong belief that cryptocurrencies have long-term potential.

Gvantsa Chkuaseli, director of structuring and fundraising at Web3 accelerator Outlier Ventures, told Cointelegraph in a statement that despite the recession in Q4 2022, there has also been a rebound in activity. According to Chkuaseli, this suggests that investors strongly believe in the long-term potential of blockchain.

“We can see with our own portfolio, such as Mawari’s recent $6.5 million seed round co-led by Blockchange Ventures and Decasonic, and Zinc’s $5 million Series A, that there is interest despite challenging conditions,” Chkuaseli explained.

Chkuaseli added that some investors seem unfazed by the recent downturn and continue to back early-stage companies within the sector. “However, we still believe there are reasons to be optimistic,” Chkuaseli said. The executive also highlighted the tremendous interest in artificial intelligence (AI)-focused startups, noting that received $40 million in funding from DWF Labs earlier this year.

Saqr Ereiqat, co-founder of Dubai-based start-up Crypto Oasis, believes that despite the downsides brought about by the recession, there are still positives to take from the current situation. Ereiqat explained:

“On the positive side, this change allows for a more demanding selection process, ensuring that only the most promising projects receive funding. Furthermore, tough times serve to crystallize winners, separating the truly innovative startups from the rest.”

Although there are positive prospects, the executive still expressed empathy towards the projects that are struggling due to lack of financing. “It is disheartening to see so many companies facing the risk of extinction due to a dearth of financing opportunities,” he said. Ereiqat also told Cointelegraph that this situation emphasizes the importance of strategic decision making for projects.

Like Chkuaseli, Ereiqat also highlighted how AI-focused projects are still receiving large amounts of investment. Citing the $1.3 billion funding round for Inflection AI, the executive said there is a growing opportunity within the AI ​​startup landscape.

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Meanwhile, Phillip Lord, president of crypto payment platform Oobit, believes there is a need for entrepreneurs to focus on building companies with sustainable business models and clear revenue streams. According to Lord, this will help drive venture capitalists into investing in his projects. He said:

“We are currently in a higher interest rate cycle and rates are expected to remain high for the next three to five years. As such, companies should avoid the ‘grow at any cost’ model and instead focus on developing strong, sustainable operations that will stand the test of time.”

Lord also highlighted that the VC model is undergoing a change due to AI. “Business consumption rates can be dramatically reduced if AI is fully adopted,” Lord said. The executive also predicted that there would be independent entrepreneurs making more than $25 million a year “literally without staff” thanks to AI.

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