In 2023, despite an overall decline in venture capital activity, Bitcoin startups saw a significant increase in funding. A report from Trammell Venture Partners (TVP) revealed that the number of pre-seed deals for Bitcoin-native companies skyrocketed by 360% the previous year. Additionally, the number of funded Bitcoin companies grew by 56.9%. TVP defines a “Bitcoin native company” as a firm whose success is closely tied to the Bitcoin network and operates under the belief that BTC is the future global monetary asset.
While Bitcoin venture dollars invested experienced a slight decrease of -12.5% to $305 million in 2023, the number of Bitcoin venture deals saw a significant increase of 69.2%. In contrast, the crypto industry saw a much larger decline of -64.5% in venture dollars and -35.3% in the number of deals. Despite this, crypto venture deals still outnumber Bitcoin deals by a ratio of 20:1. Prominent investors in the Bitcoin space in 2023 included General Catalyst, Y Combinator, and Draper Associates, led by Bitcoin advocate Tim Draper.
Despite the challenges faced by the broader venture capital landscape in 2023, the Bitcoin-native sector emerged stronger and more resilient. TVP expressed optimism about the future of Bitcoin-native startups, indicating that the outlook is positive for the industry. This resilience can be attributed to a revival of developer activity on the Bitcoin network, driven by new technological advancements such as the NFT protocol Ordinals, the BitVM computing paradigm, and the upcoming “Runes” protocol, which will enable efficient token issuance on Bitcoin.
As Bitcoin fees began to rise, developers have been increasingly focused on building more efficient layer 2 solutions to facilitate faster and cheaper transactions on the network. This has led to a surge in funding towards projects that aim to enhance the scalability and usability of Bitcoin. CoinMetrics co-founder Nic Carter noted that there has been a surge in Bitcoin startups, indicating a growing interest and activity within the ecosystem.
The increase in funding for Bitcoin startups in 2023 reflects a growing confidence in the potential of the industry. Despite challenges in the broader market, Bitcoin-native companies have shown resilience and adaptability, positioning them for continued growth and success in the future. The innovative developments and increased investor interest indicate a bright future for Bitcoin startups in the years to come.