Data from Crunchbase revealed that venture capital (VC) funding into Web3 start-ups dropped by 82% year-over-year (YoY) from $9.1 billion in Q1 2022 to $1.7 billion in Q1 2023. The $1.7 billion figure also marked the lowest amount of Web3 start-up funding since Q4 2020 when only $1.1 billion was recorded. The report highlighted that the decline came at a time when many people had never heard of Web3, indicating the significant impact of the drop. The lack of funding could have a ripple effect on the growth of the Web3 industry, which is heavily dependent on early-stage investments.

Web3 start-ups are companies that leverage blockchain and other decentralized technologies to build next-generation platforms and applications. The decline in VC funding comes at a time when the industry is gaining significant attention from both investors and consumers. The term “Web3” refers to the next iteration of the internet, where data is decentralized and controlled by individuals, rather than centralized authorities. It is believed that the Web3 industry has the potential to disrupt multiple industries, including finance, supply chain, and identity management, among others.

The decline in funding could be attributed to several factors, including regulatory uncertainty, market volatility, and a lack of understanding of the Web3 industry. Additionally, the recent market crash and subsequent crypto winter may have contributed to the drop in VC funding. Investors may have become hesitant to invest in Web3 start-ups due to concerns about the sustainability of the industry.

The drop in funding may also have implications for the growth of the broader blockchain industry. Many Web3 start-ups are built on blockchain technology, and a lack of funding for these companies could stifle innovation and slow down the adoption of blockchain-based solutions. The Web3 industry is still in its infancy, and without adequate funding, it may struggle to realize its potential.

Despite the decline in funding, the Web3 industry continues to attract attention from major players. Companies such as Facebook, Google, and Amazon are reportedly exploring Web3-related initiatives, indicating that the industry is still viewed as a potentially lucrative market. However, it remains to be seen whether these companies will invest in Web3 start-ups or build their own solutions in-house.

The drop in VC funding for Web3 start-ups highlights the need for regulatory clarity and education around the industry. Without clear guidelines, investors may remain hesitant to invest in the space, and innovation may suffer as a result. As the Web3 industry continues to evolve, it is crucial that regulators and investors work together to create a sustainable ecosystem that fosters growth and innovation.