Despite a downturn in venture capital (VC) activity overall, funding for Bitcoin startups experienced a significant surge in 2023, according to a report by Trammell Venture Partners (TVP).
The research highlights a remarkable 360% increase in the number of pre-seed deals for Bitcoin-native companies, with a corresponding rise of 56.9% in the number of funded Bitcoin firms.
Trammell Venture Partners: Bitcoin Startups and VC Firms
A “Bitcoin native company” is defined as one whose success is intricately linked with the Bitcoin network and operates under the belief that Bitcoin is the future’s global monetary asset.
While the total amount of VC dollars invested in Bitcoin ventures saw a modest decline of -12.5% to $305 million, the count of Bitcoin venture deals soared by 69.2% in 2023. In contrast, the broader “crypto” industry experienced a sharper decrease of -64.5% in total funding and a -35.3% decline in the number of deals.
Despite being outnumbered by venture deals of other digital assets at a ratio of approximately 20:1, the surge in Bitcoin funding underscores a notable shift in investor sentiment. Major players such as General Catalyst, Y Combinator, and Draper Associates, led by renowned Bitcoin advocate Tim Draper, were among the prominent investors in Bitcoin startups last year.
TVP expressed optimism about the future of Bitcoin-native startups, emphasizing their resilience in navigating the challenges of the VC landscape. It stated in a post:
“While 2023 was a challenging year for the broader venture capital landscape, the Bitcoin-native sector not only weathered the storm but emerged stronger. The future looks bright for Bitcoin-native startups.”
Resurgence in Developer Activity
The increase in funding for Bitcoin startups coincides with a resurgence in developer activity within the Bitcoin ecosystem, driven by the exploration of new technological capabilities. Developments such as the Ordinals NFT protocol, the BitVM computing paradigm, and the upcoming “Runes” protocol for efficient token issuance on Bitcoin have spurred innovation.
As transaction costs on the Bitcoin network continue to rise, developers are actively seeking to create more efficient layer 2 solutions. The surge in Bitcoin startup activity reflects a growing interest in addressing scalability challenges and optimizing the network’s functionality.
Nic Carter, co-founder of CoinMetrics, remarked on the unprecedented pace of Bitcoin startup creation, signaling a vibrant ecosystem ripe with entrepreneurial activity. The current momentum suggests that Bitcoin startups are poised for continued growth and innovation in the years ahead. “Anecdotally I’ve never seen more bitcoin startups in my career. Pace right now is at least an order of magnitude greater than it’s ever been,” Carter said in a post on social media platform X.
Mining Difficulty Surges to ATH
On the other hand, the interest for the digital asset keeps climbing. As reported earlier by Bitcoinnews, the Bitcoin mining difficulty surged to a new all-time high of 85.51 trillion. Notably, this was a 3.4% increase when compared to the previous difficulty level and analysts expect this adjustment to be the last one before the upcoming halving.
The halving is scheduled for April 10 and recently, the demand for the digital asset went up, potentially signaling a supply shock that could drive prices higher in the near future. Miners have also started to secure funding, with California-based web infrastructure startup known for its Bitcoin miners, Auradine, securing $80 million in a Series B funding round.
