AWeb3VC - Funding Round Up #30

🗓️ Week of: July 23-29, 2023

Also be sure to follow me on Twitter @aweb3vc 🚀

(See "Funding Rounds" section for the complete list of deals)

$264M+ was raised across 20 funding rounds in Web3. This week’s funding was largely influenced by the two companies featured in this edition: ZYBER 365 and Flashbots. While capital is still flowing somewhat sparingly, it's encouraging to see it directed to later-stage companies and categories beyond infrastructure. Also, in the U.S., we're observing progress on the crypto policy front with advancements on the proposed Financial Innovation and Technology for the 21st Century Act, which could ultimately bring further regulatory clarity to the industry. All things considered, I have no complaints!

🏆 Largest Funding Round

➡️ ZYBER 365 raised $100M in Series A funding, valuing the company at a staggering $1.2B. The round was led by the UK-based international conglomerate, SRAM & MRAM Group.

The company is in the process of developing what it describes as a Blockchain Operating System (BOS). This system leverages decentralized blockchain technology and artificial intelligence to provide users with a secure and private computing environment. Furthermore, the BOS will enable ZYBER 365 to develop a suite of blockchain infrastructure components, including Layer 0, 1, and 2 blockchain networks. In addition to this, the company will create other tools and products, such as decentralized applications (DApps) native to the ZYBER 365 ecosystem. These solutions are designed to enable interchain operability, providing users with greater flexibility, seamless integration, and enhanced data privacy.

Why this matters?👉This ranked among the top-10 largest funding rounds of the year. However, it's challenging to pinpoint exactly what ZYBER 365 aims to accomplish, as they seem to be developing every conceivable blockchain-based use-case ever invented (...seriously). Their website and whitepaper are a veritable smorgasbord of Web3 and AI buzzwords. Interestingly, their lead investor has previously funded a similar Web3 smorgasbord-type project, with roughly the same amount of capital and valuation. It seems Masayoshi Son isn't alone in writing nine-figure venture checks for competitors. TBH, I consider this funding round is somewhat overzealous given the current venture climate and the existing infrastructure and base protocols within Web3.

Lastly, if there was any doubt about the legitimacy of this funding round, the founders even took a photo with their lead investor from SRAM & MRAM Group as evidence of the deal.

😎 Noteworthy Company

➡️ Flashbots is a research and development organization that aims to address the potential negative impacts of Maximal Extractable Value (MEV) on stateful blockchains, primarily Ethereum. They aim to create a permissionless, transparent, and sustainable MEV ecosystem through a three-tiered approach of: illuminating MEV activity, democratizing access to MEV revenue, and enabling sustainable distribution of MEV revenue.

Flashbots comprises two semi-autonomous divisions: Flashbots Product and Flashbots Research. Flashbots Product focuses on the construction of core infrastructure and ecosystem tools that redefine the block production supply chain across various blockchains. Flashbots Research, on the other hand, investigates MEV market dynamics and blockchain design challenges, examining the crossroads of economics, security, and cryptography.

Flashbots has developed several public products and infrastructures centered around MEV. This includes:

• Flashbots Auction: a marketplace for transaction ordering including the Flashbots Relay and MEV-Geth (a patch on top of the go-ethereum client).

• MEV-Boost: an out-of-protocol implementation of proposer-builder separation (PBS) for proof-of-stake Ethereum.

• Flashbots Protect: a RPC endpoint that anyone can use for protection from frontrunning and failed transactions.

• Flashbots Data: tools and dashboards to improve the transparency of MEV activity on Ethereum and the Flashbots Auction.

Flashbot is also developing, SUAVE, a new an independent network that can act as a plug-and-play mempool and decentralized block builder for any blockchain. The privacy-first encrypted mempool ensures maximum revenue for validators and the best execution for users, while reducing the economic centralization pressure of MEV on each domain.

Recently, Flashbots secured $60M in a Series B funding round led by Paradigm valuing the company at over $1B. According to the company, investors for this round were "selected based on their reverse pitches in a beauty contest for decentralization." While Paradigm was the only investor explicitly named, it was acknowledged that other investors also participated in this funding round. Paradigm has been an early supper of Flashbots, serving as a Seed investor since 2020 and contributing significantly to the company's early MEV research.

Why this matters?👉MEV has existed since the inception of blockchains, and it brings along with it certain controversies such as potential front running and centralization. Conceptually, MEV resembles the payment for order flow (PFOF) in TradFi. It is increasingly becoming a new revenue stream for miners and validators, offering them opportunities to earn beyond block rewards and transaction fees, and the mechanisms to exploit MEV are becoming even more prevalent.

In response to the potential negative externalities and inefficiencies presented by MEV, Flashbots has emerged as a resource dedicated to maintaining user execution both permissionless and decentralized. Consequently, its tools have achieved nearly 90% network adoption, establishing themselves as an increasingly vital infrastructure component for Ethereum. Much like how PFOF revolutionized commission-free stock trading for retail investors, Flashbots' tools are pioneering opportunities for the democratization of MEV, aiming to return the MEV to those who generate it — the users of Ethereum.

Bonus - For some good resources to familiarize yourself with MEV, check out:

• MEV Whitepaper: How Flashboys Became Flashbots (Galaxy Digital)

• The Secretive World Of MEV, Where Bots Front-Run Crypto Investors For Big Profits (Forbes)

👀 Observations, Trends & Themes

➡️ Crypto Market Structure Bill Progresses

Last week, both the U.S. House of Representatives Financial Services and Agriculture Committees passed the Financial Innovation and Technology for the 21st Century Act, a bipartisan bill proposing clear guidelines and consumer protections for the cryptocurrency industry.

The bill introduces registration requirements for digital asset exchanges, brokers, and custodians, enhanced disclosure requirements, and establishes a CFTC-SEC joint committee on digital assets. It also designates jurisdiction over spot digital asset markets to the Commodity Futures Trading Commission (CFTC) and directs regulators to define clear thresholds for when a digital asset could become decentralized enough to become reclassified from a security to a commodity.

While the bill still needs to pass final votes by both the U.S. House of Representatives and Senate and may get stuck in inevitable bureaucratic process, many note this to be a notable leap forward in advancing crypto policy within the U.S.

➡️ Web3 Venture Moves

Headlining last week, the Wall Street Journal reported that VC giant, Sequoia Capital, has reduced the size of its cryptocurrency fund by more than 65%, bringing it down to $200M from $585M. The fund will now concentrate on early-stage investments, unlike its earlier focus on later-stage companies such as FTX, in which it had invested prior to its collapse.

On the other end of the spectrum, Blockchain Capital, one of the longest-standing VC firms in the crypto space with over $1.9B in assets under management (AUM), announced a new post-investment support program or department named "BCAP Build". The program extends support beyond just providing capital, offering assistance in talent management, go-to-market strategy, and leveraging the firm's partner network. Additionally, Blockchain Capital will help its portfolio companies with their token design projects, considering the second-order effects of token design and how the token integrates into the respective ecosystem. The firm also announced plans to expand its international presences.

Why this matters?👉Undoubtedly, Sequoia Capital is one of the most prominent names in venture capital. However, it is widely recognized that they were "late to the table" when it came to crypto. While Sequoia has invested in some notable names in the crypto space (see below), it pales in comparison to Blockchain Capital, which boasts one of the most impressive portfolios in the Web3 venture space and has even returned capital on several of their funds. This just goes to show that being a specialist pays off when it comes to nascent spaces like Web3 ventures.

💸 Funding Rounds

Top 15 Rounds

Want access to our complete dataset or propose an update? Contact: [email protected]

All Rounds

0xBoost - Series A ($8M) | Decentralized multi-chain staking and yield aggregator protocol: https://www.0xboost.finance/

Ra1se - Seed (Not Disclosed) | NFT liquidity solution platform: https://twitter.com/Ra1se_io 

Jungle - Private Sale ($16M) | AI-centric NFT marketplace enabling traders to find the best deals, discounts, and opportunities: https://jungle.co/ 

Dmail - Seed (Not Disclosed) | AI-powered decentralized anonymous messaging and notification services across multiple chains and applications: https://dmail.ai/ 

Hibiki Run - Seed ($1M) | Web3 lifestyle app offering move-to-earn experience with music: https://www.hibikirun.com/ 

Flashbots - Series B ($60M) | Research and development organization formed to mitigate the negative externalities posed by Maximal Extractable Value (MEV) to stateful blockchains, starting with Ethereum: https://www.flashbots.net/ 

Delabs Games - Seed ($4.7M) | Web3 gaming studio and developer of Rumble Racing Star: https://delabs.gg/ 

SubstanceX - Seed (Not Disclosed) | Decentralized perpetual futures and options exchange deployed on Arbitrum: https://test.substancex.io/ 

Kandle - Seed ($1.7M) | Fantasy crypto trading platform: https://kandle.xyz/ 

Fabric Cryptography - Seed ($6M) | Developer of advance crypto algorithm hardware focusing on special computer chips for zero-knowledge (ZK) proof technology: https://www.fabriccryptography.com/ 

ZYBER 365 - Series A ($100M) | Web3 and AI based operating system enabling the development of Layer 0, 1, and 2 blockchain networks and decentralized applications: https://zyber365.com/ 

Releap Protocol - Seed ($2.1M) | Decentralized social graph that allows users to wholly own and harness their audience and content built on the Sui network: https://app.releap.xyz/ 

Atlendis - Debt ($1.1M) | Decentralized credit protocol connecting DeFi with real-world use cases: https://www.atlendis.io/ 

Aethir - Seed+ ($9M) | Developer of decentralized cloud infrastructure (DCI) through a Decentralized Physical Infrastructure Network (DePIN): https://www.aethir.com/ 

FiNANCiE - Strategic ($10.8M) | Community token issuance and crowdfunding platform focused on sports teams and entertainment projects in Japan and overseas: https://financie.jp/ 

EthStorage - Seed ($7M) | Programmable dynamic decentralized storage based on Ethereum’s data availability: https://eth-store.w3eth.io/ 

Marquee - Seed ($1M) | Web3 insurance and derivates platform offering smart contract based insurance to hedge digital assets: https://marquee.fi/ 

hi - Strategic ($30M) | Crypto and fiat digital banking app offering savings, investments, payments, and lifestyle benefits: https://hi.com/ 

The Animal Age - Seed (Not Disclosed) | Animal-themed metaverse with a variety of featured systems including NFTs cooperated with IPs, brands, and animal organizations: http://www.theanimalage.com/ 

Passage - Private Sale ($6M) | Platform and ecosystem for building and connecting virtual and physical experiences through creator-built games: https://www.passage.io/ 

New Funds

No new funds this week.

🙌 Cool Resources

🐕 About

AWeb3VC is a source for venture funding news, emerging startups and trends across Web3. I've been closely following cryptocurrencies and digital assets since 2013 and started working in space since 2018. Now I'm on a mission to build the most extensive venture ecosystem for BUIDLERS in Web3, starting first by tracking those BUIDLERS.