Ethereum Startups Lead in Venture Capital Race
In 2024, venture capitalists (VCs) are projected to invest a whopping $12 billion into cryptocurrency startups, with a significant portion favoring Ethereum-focused projects over those on the Solana blockchain. Ethereum startups have demonstrated a notable edge in the competitive landscape of decentralized finance (DeFi) and blockchain technology. According to a comprehensive report by the venture capital fund Lattice, Ethereum-based startups that sprang up in 2022 have outperformed their Solana counterparts. This comes as a notable instance where entrepreneurs who pursued popular narratives, such as web3 gaming, faced challenges, with the data showcasing Ethereum's relative robustness.
Success Rates and Project Sustainability
The report highlights that only about 20% of Ethereum ventures ceased operations in the last two years, compared to 26% of Solana projects. This analysis was based on blockchain networks with at least 15 startups that secured funding during 2022. BNB Chain projects fared worse, with one-third of its teams shutting down. The influx of speculative capital during the bull market spurred projects to overreach, eventually leading to shutdowns when the market took a downturn, exacerbated by the Terra ecosystem collapse and FTX bankruptcy.
Product Launch Success
An impressive 80% of seed-stage Ethereum startups successfully launched their products since 2022, whereas just over 60% of Solana projects achieved the same, indicating Ethereum’s stronger position in the crypto ecosystem. Solana’s price increase by 32% this year may seem promising, yet the historical data serves as a reminder of the volatile market conditions that persisted before the expected investment surge in 2024.
Investment Shifts and Market Trends
In 2022, investors poured over $5 billion into nearly 1,200 crypto startups, marking a 150% rise from 2021, as per Lattice’s detailed accounting. However, this figure contrasts with DefiLlama’s broader estimate of $19.5 billion, which includes a wider range of deals. Of the investments, $1.4 billion fueled Ethereum-based startups, while early-stage Solana ventures attracted $350 million. The allure of NFTs, metaverse, and web3 gaming initially drew capital, but chasing these narratives led to high failure rates. As Lattice Capital Co-Founder Regan Bozman noted, the buzz around gaming seed rounds resulted in significant setbacks.
Path Forward for Crypto Startups
With the enthusiasm tapering due to scandals and industry failures, raising follow-up funds became challenging, with only 12% of 2022’s cohort securing additional support. Despite this, 72% of funded teams launched a product since 2022, though 18% have not shipped or have shut down. However, Ethereum ventures still lead with 80% success in product delivery compared to Solana’s 61%.
Future Prospects: New Investment Trends
Looking ahead, venture capitalists are expected to inject $12 billion into crypto projects in 2024, with some funds likely to support emerging startups. There is a growing interest in areas like privacy-enhancing technology, artificial intelligence, and DePIN (decentralized physical infrastructure networks). Notably, Franklin Templeton, a global asset manager, recently spotlighted Solana as a potential leader in the DePIN sector, indicating evolving dynamics in the crypto investment landscape.
