Bitcoin Startups Remain Undercapitalized as Funding Drought Extends
The crypto industry has not had a good run over the past year. Along with growing regulatory scrutiny and skeptical investors, capital deployment has fallen significantly from 2021 highs, leaving many young startups struggling to raise funds.
This capital crisis is also affecting the Bitcoin ecosystem. According to Erik Svenson, co-founder and CFO of blockchain infrastructure company Blockstream, Bitcoin-focused businesses are falling behind as fewer checks are written.
"I think crypto investing peaked early last year," Svenson said on TechCrunch's Chain Reaction podcast this week. "But Bitcoin itself has always been an undercapitalized area."
Founded in 2014, Blockstream focuses on its own sidechain technology, dubbed Liquid Network, and conducts bitcoin mining operations and provides hardware wallets for bitcoin and other assets. Notably, it does not have its own token, unlike many other crypto companies that launched theirs during the initial coin offering (ICO) boom in 2017.
“We decided early on not to issue our own token,” Svenson said. "We haven't launched an ICO like many projects have, so we rely on more traditional venture capital investments," he added.
Blockstream raised $125 million in late January, bringing its total funding to around $400 million. The company had a post-money valuation of $2.49 billion as of August 2022, according to PitchBook data.
However, it hasn’t all been easy for the company, especially as crypto waters have become choppier amid the broader funding crisis. Svenson pointed out that while Blockstream has “really bullish Bitcoin investors” on its cap table, it also has LPs, and the turmoil in the crypto market has made things more difficult. "LPs attempt to analyze both macro factors, but also the industry-specific direction that everyone has been experiencing over the past year."
The crypto industry has not had a good run over the past year. Along with growing regulatory scrutiny and skeptical investors, capital deployment has fallen significantly from 2021 highs, leaving many young startups struggling to raise funds.
This capital crisis is also affecting the Bitcoin ecosystem. According to Erik Svenson, co-founder and CFO of blockchain infrastructure company Blockstream, Bitcoin-focused businesses are falling behind as fewer checks are written.
"I think crypto investing peaked early last year," Svenson said on TechCrunch's Chain Reaction podcast this week. "But Bitcoin itself has always been an undercapitalized area."
Founded in 2014, Blockstream focuses on its own sidechain technology, dubbed Liquid Network, and conducts bitcoin mining operations and provides hardware wallets for bitcoin and other assets. Notably, it does not have its own token, unlike many other crypto companies that launched theirs during the initial coin offering (ICO) boom in 2017.
“We decided early on not to issue our own token,” Svenson said. "We haven't launched an ICO like many projects have, so we rely on more traditional venture capital investments," he added.
Blockstream raised $125 million in late January, bringing its total funding to around $400 million. The company had a post-money valuation of $2.49 billion as of August 2022, according to PitchBook data.
However, it hasn’t all been easy for the company, especially as crypto waters have become choppier amid the broader funding crisis. Svenson pointed out that while Blockstream has “really bullish Bitcoin investors” on its cap table, it also has LPs, and the turmoil in the crypto market has made things more difficult. "LPs attempt to analyze both macro factors, but also the industry-specific direction that everyone has been experiencing over the past year."
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