Venture Capital

Babylon Chain closes $18M funding round for Bitcoin staking

Polychain Capital and Hack VC led the Series A funding round of Babylon Chain, a protocol working on Bitcoin staking for proof-of-stake networks.

Polychain Capital and Hack VC led a $18 million Series A funding round for Babylon Chain, a protocol working on Bitcoin (BTC) staking, bridging the decentralized finance (DeFi) ecosystem with the Bitcoin blockchain. 

According to the Dec. 7 announcement, the funds will be used to support the development of Babylon’s Bitcoin Staking protocol, which enables proof-of-stake (PoS) networks to stake BTC, adding liquidity and security to emerging chains.

For context, a PoS chain is a type of blockchain that relies on participants to validate transactions. To be a validator and create new blocks, a participant must stake the chain’s native coin. The security and integrity of a PoS chain depend on the amount of coins staked. Bitcoin, however, uses a different mechanism, known as proof-of-work (PoW), where miners solve complex mathematical problems to validate transactions.

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VC Roundup: Investors pick games, collectibles and creator economy

Baton, Wormhole, Rokid, Saga, Bazooka Tango, Authentic and Intract are among the latest startups to secure venture capital funding.

November strengthened venture capitalists’ confidence in crypto and Web3 projects, with major funding rounds returning to the charts alongside seed capital for early-stage firms. 

Cross-chain protocol Wormhole, for instance, secured a $225-million investment at a valuation of $2.5 billion. The round was led by Brevan Howard, Coinbase Ventures, Multicoin Capital, Jump Trading, ParaFi, Dialectic, Borderless Capital and Arrington Capital.

Another example of capital flocking to Web3 is Rokid. Backed by Temasek Holdings, the startup secured $112 million at a valuation of $1 billion for international expansion, targeting the next generation of virtual reality hardware solutions.

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Crypto Biz: UAE’s regulatory structure draws crypto firms, Canaan’s revenue slumps, and more

The United Arab Emirates increasingly attracts Web3 companies to its jurisdictions, becoming the center of global crypto innovation.

Behind the wave of companies moving or deploying initiatives in the UAE is regulation. The country has introduced regulatory frameworks for decentralized autonomous organizations (DAOs), virtual asset providers, metaverses and other Web3-related entities.

By offering regulatory clarity and a clear path to compliance — amid a crackdown in the United States — the UAE is moving closer to fulfilling what it wants to be: an international financial hub for digital assets.

While predictions about how it will affect the future of the UAE or the crypto space itself vary, history shows how countries have used regulatory gaps to build new industries or curb existing ones.

This week’s Crypto Biz also explores Canaan’s revenue challenges, Wormhole’s massive fundraising and Banco Santander’s crypto moves.

Iota launches $100 million Abu Dhabi foundation for Middle East expansion

Open-source blockchain developer Iota announced the launch of the Iota Ecosystem DLT Foundation in Abu Dhabi, which is dedicated to expanding its distributed ledger technology (DLT) in the Middle East.

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VC funding into Web3 start-ups down 82% year-over-year: Crunchbase

Crunchbase noted that while it has been a bearish start for Web3 start-up funding in 2023, “venture funding is down in almost every sector.”

According to data from Crunchbase, venture capital (VC) funding into Web3 start-ups tanked 82% year-over-year (YoY), declining from $9.1 billion in Q1 2022 to $1.7 billion in Q1 2023.

Crunchbase News highlighted the data in an April 20 report, noting that the $1.7 billion figure for Q1 2023 also marks the lowest amount of Web3 start-up funding since the $1.1 billion posted in Q4 2020 — a time in which “many people had never heard of Web3.”

In this context, Web3 startups are defined as early-stage companies that are either working directly with crypto or blockchain tech (or both).

Deal flow, or the number of total deals between VCs and Web3 startups, also saw a significant drop with the 333 deals recorded in Q1 2023 marking a YoY decline of roughly 33%.

VC and Web3 start-up deal flow. Source: Crunchbase

Additionally, the report highlights that the number of big Web3 start-up funding rounds hitting nine figures almost completely dried up over the past year.

“In Q1 2022, VC-backed startups raised 29 rounds of more than $100 million. That included massive raises of $400 million or more by ConsenSys and Polygon Technology, as well as — of course — FTX and its U.S. affiliate FTX US,” the report reads, adding that:

“The most recently completed quarter saw only two rounds hit the nine-figure mark, as VCs have hit the brakes on spending big in the space.”

While the business information platform acknowledged that interest in Web3 start-ups has cooled of late, it also emphasized that “venture funding is down in almost every sector.”

Crunchbase attributed much of the decline in Web3 funding to investors opting for a risk-off approach over the past few months by seeking out opportunities in “industries they know best — such as cybersecurity or SaaS, not the promise of the next iteration of the internet [Web3].”

“Undoubtedly the industry is still reeling from the dramatic collapse of FTX, as well as several other crypto lenders, and even some of the banking issues that rattled the economy in general.”

“However, there are some positive signs” the report added, as it highlighted the significant price rallies of Bitcoin (BTC), and Ether (ETH) since the start of the year.

Related: With Web2.5, financial inclusion and economic empowerment are within reach

“Whether that’s enough to bring more venture dollars back to the space — only time will tell,” the report concludes.

In a different report published by Galaxy Research on April 11, the firm looked at the broader amount of VC investment into all crypto companies over the past 12 months.

In a similar vein to the recent trend in Web3 funding, the report indicated that the $2.4 billion invested into all crypto firms in Q1 2023 marked an 80% decline from the $13 billion recorded in Q1 2022.

Notably however, while capital investment plummeted significantly YoY, the report noted showed that the number of VC crypto deals had increased by around 20% in Q1 2023 compared to Q4 2022.

“Historically, venture activity has tracked crypto asset prices pretty closely. Will be interesting to see if crypto VC activity can rebound if prices remain resilient or constructive this year. Lots of macro and monetary headwinds, though,” wrote Alex Thorn, Galaxy’s head of firm-wide research.

Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips

VC funding into Web3 startups down 82% year-over-year: Crunchbase

Crunchbase noted that while it has been a bearish start for Web3 startup funding in 2023, “venture funding is down in almost every sector.”

According to data from Crunchbase, venture capital funding into Web3 startups tanked 82% year-over-year (YoY), declining from $9.1 billion in Q1 2022 to $1.7 billion in Q1 2023.

Crunchbase News highlighted the data in an April 20 report, noting that the $1.7 billion figure for Q1 2023 also marks the lowest amount of Web3 startup funding since the $1.1 billion posted in Q4 2020 — a time in which “many people had never heard of Web3.”

In this context, Web3 startups are defined as early-stage companies working directly with crypto and/or blockchain tech.

Deal flow, or the number of total deals between VCs and Web3 startups, also saw a significant drop, with 333 deals recorded in Q1 2023 — marking a YoY decline of roughly 33%.

VC and Web3 startup deal flow. Source: Crunchbase

Additionally, the report highlights that the number of big Web3 startup funding rounds hitting nine figures almost completely dried up over the past year.

“In Q1 2022, VC-backed startups raised 29 rounds of more than $100 million. That included massive raises of $400 million or more by ConsenSys and Polygon Technology, as well as — of course — FTX and its U.S. affiliate FTX US,” the report reads, adding:

“The most recently completed quarter saw only two rounds hit the nine-figure mark, as VCs have hit the brakes on spending big in the space.”

While the business information platform acknowledges that interest in Web3 startups has cooled of late, it also emphasizes that “venture funding is down in almost every sector.”

Crunchbase attributes much of the decline in Web3 funding to investors opting for a risk-off approach over the past few months by seeking out opportunities in “industries they know best — such as cybersecurity or SaaS, not the promise of the next iteration of the internet [Web3].”

“Undoubtedly the industry is still reeling from the dramatic collapse of FTX, as well as several other crypto lenders, and even some of the banking issues that rattled the economy in general.”

“However, there are some positive signs,” the report adds, highlighting the significant price rallies of Bitcoin (BTC) and Ether (ETH) since the start of the year.

Related: With Web2.5, financial inclusion and economic empowerment are within reach

“Whether that’s enough to bring more venture dollars back to the space — only time will tell,” the report concludes.

In a different report published by Galaxy Research on April 11, the firm looked at the broader amount of VC investment into all crypto companies over the past 12 months.

In a similar vein to the recent trend in Web3 funding, the report indicates that the $2.4 billion invested into all crypto firms in Q1 2023 marked an 80% decline from the $13 billion recorded in Q1 2022.

Notably, however, while capital investment plummeted significantly YoY, the report notes that the number of VC crypto deals increased by around 20% in Q1 2023 compared with Q4 2022.

“Historically, venture activity has tracked cryptoasset prices pretty closely. Will be interesting to see if crypto VC activity can rebound if prices remain resilient or constructive this year. Lots of macro and monetary headwinds, though,” wrote Alex Thorn, Galaxy’s head of firmwide research.

Magazine: Best and worst countries for crypto taxes — Plus crypto tax tips

3AC founders’ OPNX exchange claims to be funded by AppWorks, SIG, MIAX Group

DeFi firm Nascent was also claimed as a backer, but it has clarified that it only bought FLEX tokens from the company’s previous incarnation.

OPNX, an exchange jointly founded by members of the Three Arrows Capital (3AC) and Coinflex teams, has revealed the venture capital firms purportedly backing it. An April 21 video posted by the company featured CEO Leslie Lamb thanking some of the major backers of the project, including AppWorks, Susquehanna (SIG), DRW, MIAX Group, China Merchant Bank International, and Token Bay Capital.

OPNX has been heavily criticized in the crypto community for its association with Su Zhu and Kyle Davies, founders of the bankrupt 3AC hedge fund. Some firms have claimed they may refuse to associate with anyone who helps fund the new exchange. But the company behind the project has defended itself, arguing that it will help make customers of failed crypto ventures whole again.

OPNX will allow traders to buy and sell claims against bankrupt firms such as 3AC and FTX, according to early fundraising documents.

According to the video uploaded on April 21, the backers of OPNX have previously funded various tech and financial projects. SIG was one of the early backers of TikTok, and MIAX Group owns a U.S.-regulated equities and options exchange. AppWorks is also listed on Crunchbase as a partial owner of Uber.

At least one of the firms mentioned in the video has denied funding the project. DeFi trading firm Nascent stated that it bought Coinflex tokens issued by the company’s previous incarnation but did not participate in a funding round for OPNX.

Three Arrows Capital was a crypto hedge fund founded in 2012. In June, it was issued a notice of default by Voyager Digital after allegedly failing to pay 15,250 Bitcoin (BTC) and 350 million USD Coin (USDC) that had been loaned to it. The hedge fund filed for bankruptcy on July 1, and some creditors have accused the founders of being “on the run” or hiding from the bankruptcy court.

LayerZero raises $120M to expand cross-chain messaging efforts

The new funds will be used to increase headcount and expand the cross-chain messaging protocol’s presence in the Asia-Pacific region.

Cross-chain messaging protocol developer LayerZero Labs has raised another $120 million, according to an April 4 announcement. The company plans to use the capital to increase its headcount and expand its reach into the Asia-Pacific region. The company had previously raised $135 million in March 2022.

LayerZero Labs is best known for its cross-chain messaging protocol, LayerZero, which is often used to create asset bridges between blockchain networks. It is also a supporter of the Stargate multichain bridge.

With the completion of this fundraising round, the company now has a $3 billion valuation. Over 33 investors participated in the latest funding round, including Sequoia Capital, Andreessen Horowitz, BOND, Circle Ventures, Christie’s, OpenSea Ventures and Samsung Next.

Related: Uniswap DAO debate shows devs still struggle to secure cross-chain bridges

Ryan Zarick, co-founder and chief technology officer of LayerZero Labs, said the new fundraise will help to create a multichain environment where applications can make the best use of each network’s unique benefits:

“Imagine a future where a single user-facing application can harness the speed of Solana, the security of Ethereum, and the cheap file storage of Arweave, while also being fully abstracted to the user.”

He continued, “This is our vision, made possible by the LayerZero protocol that seamlessly connects all blockchains and enables chain-agnostic applications to be built across various blockchains to create a best-in-class user experience. The days of choosing one chain to build on are over; the future is omnichain applications.”

The issue of securing cross-chain messages has become acute in recent years, as more than $3 billion was stolen from blockchain bridges in 2022, according to a report from Chainanalysis. LayerZero has attempted to solve this problem by using a relayer and oracle to secure messages, where a message is only confirmed if both the relayer and oracle agree that it is valid.

On January 31, LayerZero received 37.58% of the vote to become Uniswap’s bridge protocol for cross-chain governance between Ethereum and BNB Chain, coming in second behind Wormhole. On March 30, Gnosis announced that LayerZero would integrate with its multi-bridge platform, Hashi, to further increase the security of blockchain bridges.

European DeFi startups saw 120% increase in VC investment in 2022: Data

Despite the ongoing tumultuous market conditions, venture capital investments in European crypto startups hit an all-time high of $5.7 billion in 2022.

2022 was a turbulent year for the crypto space, from an ongoing bear market and high-profile collapses of some of the industry’s most prominent players, like Terra and FTX. Despite the setbacks, venture capital (VC) investors continued to show support for crypto startups.

According to a new study released by European investment firm RockawayX, VC investment in crypto startups based in Europe reached its all-time high in 2022, with $5.7 billion invested

European decentralized finance startups hit $1.2 billion in 2022 — a 120% increase from the previous year’s investments of $534 million.

Viktor Fischer, the CEO of RockawayX, pointed out that the crypto market is cyclical. During the 2018 winter, “the total digital asset market cap fell by 80%, but startup funding activity held steady.”

“Investments made when digital asset prices were depressed materialized in tech and usage traction alongside ‘bull market’ price recoveries.”

Europe is also home to the highest number of crypto startups (3,977), according to the headquarters location.

However, it falls behind the United States in the number of startups with over a million dollars of funding and companies with a value of over $1 billion, knowns as unicorns.

Cumulative number of crypto startups by HQ location. Source: RockawayX

Top global investors in European startups include Animoca Brands, Coinbase, Blockchain Capital and the Digital Currency Group. 

Related: Banking crisis pushed over $286B to money market funds in two weeks: Report

In Europe, investment in startups that provide financial services made up more than half (52%) of all investments, with infrastructure and Web3 making up 32% and 16%, respectively.

Crypto VC investment by sector in Europe (2022). Source: RockawayX

However, compared with 2021, investment in financial service-based startups declined by 19%, and infrastructure grew by 24%.

Europe’s growing prominence as a crypto-friendly region comes as lawmakers in the European Union finalize the highly anticipated Markets in Crypto-Assets (MiCA) regulations. 

The regulations have been postponed twice by the EU due to translation issues. Laws passed in the EU must be translated into all 24 official languages of the member states.

At the time of writing, a final vote on the MiCA rules is set for April 2023.

Magazine: Crypto winter can take a toll on hodlers’ mental health

Venture capitalists bail on Zipmex bailout, company warns of consequences: Report

V Ventures, a subsidiary of a Thai shipping company, missed a payment on its $100 million buyout of the troubled crypto exchange.

Cryptocurrency exchange Zipmex has reportedly not received the latest payment under its buyout agreement with venture capital firm V Ventures. The exchange has sent a letter to the firm warning that it will have to begin liquidating one of its units without the money.

The $1.25 million payment was intended to provide working capital for the Singapore-based exchange and was due March 23, according to a Bloomberg report. Zipmex said in a letter to V Ventures that without the cash infusion, it would have to begin liquidating its Zipmex Technology unit and suspend its payroll.

Salaries in Zipmex units in Thailand, Singapore and Indonesia were still covered, the letter added. Zipmex also has operations in Australia.

Related: Digital asset platform Zipmex partners with Visa in Asia-Pacific

The missed payment would be the fourth from V Ventures, a subsidiary of Thai shipping company Thoresen Thai Agencies with offices in Thailand and the United States. Zipmex and V Ventures reached a deal in December for the venture firm to buy the exchange after lengthy negotiations. 

Zipmex suspended withdrawals in July after a deal for its acquisition by Coinbase fell through. The exchange was experiencing liquidity issues due to its exposure to Babel Finance, which reportedly owed Zipmex $48 million and suspended withdrawals in June. Zipmex also had $5 million exposure to Celsius. In February, it proposed the restoration of all withdrawals to investors.

Zipmex was granted three-month protection from creditors in August. The December V Ventures deal triggered an investigation by the Thai Securities and Exchange Commission — an agency it has run afoul of in the past.

Zipmex’s ZMT token fell from a high of $0.1029 on March 23 to $0.057 at the time of writing, according to CoinMarketCap.

Neither Zipmex nor V Ventures replied immediately to Cointelegraph’s request for comment.

Magazine: Justin Sun vs. SEC, Do Kwon arrested, 180M player game taps Polygon: Asia Express

Over 100 VCs, investors voice solidarity with Silicon Valley Bank

Approximately 125 VCs and investors signed a statement supporting Silicon Valley Bank to limit the fallout of the bank’s collapse and the subsequent impact on tech companies.

As the 40-year-old banking institution, Silicon Valley Bank (SVB), winds down operations, numerous venture capitalists (VCs) and investors joined hands and decided to cushion the impact in case the bank “were to be purchased and appropriately capitalized.”

Approximately 125 VCs and investors signed a statement supporting SVB to limit the fallout of the bank’s collapse and the subsequent impact on tech companies. The venture firms included Sequoia Capital and General Catalyst.

A group of investors for high-profile firms met over Zoom in a series of meetings, disclosed a Bloomberg report. Hemant Taneja, the CEO of General Catalyst, initially revealed the joint statement from several VCs, showing support for the bank. It read:

“In the event that SVB were to be purchased and appropriately capitalized, we would be strongly supportive and encourage our portfolio companies to resume their banking relationships with them.”

In parallel, startup incubator Y Combinator posted a petition demanding “depositors to be made whole, and for regulation to prevent this catastrophe.”

According to Y Combinator CEO Gary Tan, the petition — directed toward regulators including United States Treasury Secretary Janet Yellen and Federal Deposit Insurance Corporation chairman Martin Gruenberg — scored signatures from roughly 2,800 founders and 180,000 employees at the time of writing.

“Everyone understands that we have a role to play in trying to calm the situation,” Taneja told Bloomberg. However, disputing this drive to save SVB, prominent Indian entrepreneur Ashneer Grover reminded Taneja that banks don’t get saved by passing bureaucratic, United Nations-type joint resolutions — taking a dig at the mindset of pouring money on a problem in the hopes of fixing it. “It requires intent and balls of steel!” he concluded.

Related: Silicon Valley Bank’s UK branch shut down by Bank of England

Hours after USD Coin (USDC) lost its peg to the U.S. dollar, unconfirmed reports about a resolution momentarily brought back the token’s prices to nearly $1.

7-day chart of USDC/USD price. Source: CoinMarketCap

Although the reports are currently unverified, multiple sources confirm that many different paths to resolution are in the works and that depositors will get back “at least 50% of their deposits” in the coming week.