Venture Capital Interest in Bitcoin Startups Has Exploded: Research

Despite venture capital activity declining across the board, funding for Bitcoin startups more than quadrupled in 2023, according to a new report.

Research from Trammell Venture Partners (TVP) shows that the number of Bitcoin-native pre-seed deals ballooned 360% last year, while the number of funded Bitcoin companies rose by 56.9%.

VC Funding Explodes On Bitcoin

As explained in TVP’s Friday report, a “Bitcoin native company” is a firm whose product’s success is mutually aligned with that of the Bitcoin network and which is founded on the principle that BTC is the “global monetary asset of the future.”

That includes early-stage startup companies but discounts late-stage firms, Bitcoin miners, and “crypto” oriented companies.

While the absolute number of Bitcoin venture dollars invested fell -12.5% to $305 million in 2023, the count of Bitcoin venture deals rose 69.2%. By contrast, the equivalent numbers for the crypto industry were -64.5% and -35.3%, respectively.

Crypto venture deals still outnumber Bitcoin ones by about 20:1, though the uptick of the latter last year was substantial. Some of last year’s big investors included General Catalyst, Y Combinator, and Draper Associates – the early-stage VC firm run by long-time Bitcoin bull Tim Draper.

“While 2023 was a challenging year for the broader venture capital landscape, the Bitcoin-native sector not only weathered the storm but emerged stronger,” wrote TVL to X on Friday, “The future looks bright for Bitcoin-native startups.”

Rise In Bitcoin Development

The surge in funding coincides with a revival of developer activity on Bitcoin over the past year, sparked by new technological capabilities discovered on the network. These include the NFT protocol Ordinals, the Bitcoin computing paradigm BitVM, and the upcoming “Runes” protocol – which will allow for efficient tokens to be issued on Bitcoin.

Ordinals activity began to surge again this week, as did the average cost to transact on Bitcoin. Rising fees have more developers in search of ways to build more effective Bitcoin layer 2 solutions to enable more efficient transfers, and funding is moving in that direction.

“Anecdotally I’ve never seen more bitcoin startups in my career,” said CoinMetrics co-founder Nic Carter on Friday. “Pace right now is at least an order of magnitude greater than it’s ever been.”