In a surprising turn of events, venture capital funding for Bitcoin startups saw a dramatic increase in 2023, despite an overall decline in venture capital activity. A report from Trammell Venture Partners (TVP) revealed that the number of Bitcoin-native pre-seed deals soared by 360% last year, with the number of funded Bitcoin companies increasing by 56.9%.
According to TVP’s report, a “Bitcoin native company” is one whose success is closely tied to the Bitcoin network and is built on the belief that BTC is the future global monetary asset. This category includes early-stage startup companies but excludes late-stage firms, Bitcoin miners, and other “crypto” oriented companies.
While the total amount of venture capital dollars invested in Bitcoin startups decreased by 12.5% to $305 million in 2023, the number of Bitcoin venture deals rose by a significant 69.2%. In comparison, the crypto industry experienced a -64.5% decline in funding and a -35.3% decrease in deals. Despite this, crypto venture deals still outnumber Bitcoin deals by a ratio of 20:1, highlighting the substantial growth seen in the Bitcoin startup sector.
Key investors in the Bitcoin startup space in 2023 included General Catalyst, Y Combinator, and Draper Associates, led by long-time Bitcoin advocate Tim Draper. TVP expressed optimism about the future of Bitcoin-native startups, noting that these companies not only withstood the challenges of 2023 but emerged stronger.
The increase in funding for Bitcoin startups aligns with a resurgence of developer activity on the Bitcoin network, driven by new technological advancements. Projects such as the NFT protocol Ordinals, the Bitcoin computing paradigm BitVM, and the upcoming “Runes” protocol are attracting attention and investment. These innovations are paving the way for more efficient token issuance on the Bitcoin network and are spurring interest in building effective layer 2 solutions to enhance transaction efficiency.
CoinMetrics co-founder Nic Carter expressed optimism about the current state of the Bitcoin startup ecosystem, mentioning that he has never seen as many Bitcoin startups as he has in his career. This sentiment reflects a broader belief that Bitcoin-native companies are poised for success in the coming years, fueled by increased funding and technological progress.