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- AWeb3VC - Funding Round Up #34
🗓️ Week of: Aug 20-26, 2023
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(See "Funding Rounds" section for the complete list of deals)
$40M+ was raised across 17 funding rounds in Web3. August is shaping up to be one of the dullest months for Web3 venture, as funding wane yet again. Interestingly, while the total capital raised this week fell to one of the lowest levels seen in 2023, over half of the announced funding rounds chose not to disclose their total funds raised. Some, like BitOasis, are rumored to be in the eight-figure range, which makes it puzzling that companies chose not to disclose. Furthermore, nearly all these rounds were labeled as "strategic," a term that can sometimes mask bridge financing. Perhaps some of these firms are keen on avoiding the spotlight, either due to investor bailouts or because they've garnered an insubstantial amount of capital. It's hard to say. But as summer draws to a close, we might witness a resurgence in deal flow come September, especially with the industry anticipating a wave of optimism.
🏆 Largest Funding Round
➡️ Anytype announced $13.4M in what appeared to be a Series A funding round. The round was lead by Balderton Capital, with participation from Inflection, Square One, Script Capital, Protocol Labs, Connect Ventures, New Forge, and Foreword VC as well as as prominent angels from the enterprise software and Web3 ecosystems.
Anytype is a local-first, end-to-end (E2E) encrypted software designed to securely store personal data and other digital assets using open-source and peer-to-peer technology, akin to a torrent. With its software, users create their own online spaces where all their information is stored in a graph. Within these spaces, 'objects' such as tasks, documents, and notes are thematically linked, drawing comparisons to the popular productivity app, Notion. Furthermore, users aren't required to be connected to the internet to share, access, and distribute information, thanks to Anytype's Anysync protocol that syncs data across a peer-to-peer network in an encrypted, decentralized manner. Impressively, Anytype already boasts a community of 100K users.
Why this matters?👉Digital privacy, security, and autonomy are increasingly becoming central topics of mainstream conversation. Solutions like Anytype, with its decentralized architecture, could achieve mainstream appeal, emphasizing consumer-facing applications powered by privacy-enhanced technology. Interestingly, the project isn't labeled strictly as blockchain, even though it incorporates IPFS into its back-end. It prioritizes refining the product and boosting user adoption before transitioning to full decentralization. Should the project garner continued adoption, it might become a sought-after candidate for layer 1 blockchains to incentivize deployment, or perhaps it could launch its own standalone protocol and network.
😎 Noteworthy Company(s)
➡️ Circle and Coinbase are two companies that don’t require an introduction for anyone closely following our industry. Last week, both companies grabbed the spotlight when it was announced that Coinbase would acquire a minority equity stake in Circle through a cashless transaction. This announcement followed the news that the Centre Consortium, initially set up to govern the USDC stablecoin, would be dissolved.
Circle and Coinbase founded the Centre Consortium as a jointly managed self-governance consortium for USDC. However, with growing regulatory clarity for stablecoins in the U.S. and internationally, the need for a separate governance body like Centre was deemed unnecessary. Consequently, Circle will remain as the primary issuer of USDC, consolidating governance and operational responsibilities in-house. This includes direct accountability of Circle as the issuer of USDC, managing all the smart contract keys, complying with regulations governing reserves, and enabling USDC on new blockchains. Circle also announced that USDC would be launching on six new blockchains.
In light of these developments, Coinbase and Circle have forged a new agreement. Coinbase will take an equity stake in Circle, ensuring deeper strategic and economic alignment. Both companies will continue to generate revenue from USDC reserve interest income. Under their new arrangement, this revenue will be shared based on the volume of USDC held, and both parties will equally partake in the interest income generated from the broader distribution and use of USDC.
Why this matters?👉This makes sense. While Centre was relatively unknown, Circle essentially led its operations. Simultaneously, interest income from USDC has become an increasingly significant revenue source for both companies. This could have a more profound impact on Coinbase if the partnership were to dissolve. However, that doesn’t seem to be the case. Moreover, the Clarity for Payment Stablecoins Act is gaining traction in the U.S. Congress. If passed, it would introduce a new regulatory framework better managed by a single entity. Notably, Coinbase has already been active on the regulatory front – one less regulator to deal with.
👀 Observations, Trends & Themes
➡️ SEC Adopts Significant Rule Changes for Private Fund Advisers
This past week, the Securities and Exchange Commission (SEC) voted to adopt new and amended rules under the Investment Advisers Act of 1940. The new rules require advisers to private funds (i.e., managers of either hedge and venture funds) to provide additional disclosures to investors in such funds, restrict certain types of preferential treatment to investors, and impose new requirements related to fund audits, books and records, and adviser-led secondary transactions.
Key aspects of the new rules include:
Quarterly Statements: Advisers must provide quarterly statements to investors detailing fund performance, fees, and expenses.
Annual Audits: An independent public accounting firm must conduct an annual audit of each private fund.
Restricted Fees: Advisers are restricted from certain activities like charging fees related to regulatory investigations as well allocating other types of fees to investors.
Preferential Treatment: Advisers can't provide preferential terms to some investors without appropriate disclosure to all current and prospective investors (e.g., redemption and information rights)
Adviser-Led Secondary Transactions: Stricter requirements apply when advisers facilitate secondary transactions and requiring fairness or valuation opinion from an independent opinion provider.
Compliance Dates: Larger advisers have 12 months to comply, while smaller advisers have 18 months. Some rules have staggered compliance dates.
The rules aim to increase transparency and align the interests of advisers and investors.
Why this matters?👉These new rules from the SEC apply to nearly all crypto hedge funds and venture capital funds. For the most part, any competent fund manager is already adhering to these requirements, particularly when it comes to preparing quarterly statements and annual audits. However, concerning annual audits, crypto funds have faced challenges in the past, finding suitable auditors or firms that are open to accepting crypto-related clients. Coupled with the upcoming SEC modifications to the Custody Rule, some funds might find compliance challenging. It's not a widely discussed topic, but this seems like another subtle attempt by the SEC to constrain the industry.
On the flip side, the new regulations will position audit firms catering to crypto, especially crypto funds, as highly sought-after entities – ensuring a steady stream of business. Beyond the Big 4 accounting firms (PwC, Deloitte, EY, KPMG), other companies like Grant Thornton, RSM, Cohen & Co, Withum, Eisner Amper, Richy May, and Weever, which have crypto-focused fund practices, are set to gain. In addition to audit and tax firms, fund administrators will also benefit since they offer the essential accounting and reporting services needed for compliance under the rules. Notably, some leading independent fund administrators specializing in crypto are also considering venture funding.
💸 Funding Rounds
Top 15 Rounds
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All Rounds
UXUY - Strategic (Not Disclosed) | Multi-chain decentralized exchange centered around a multi-party computation (MPC) wallet: https://uxuy.com/
Drip Labs - Seed ($3M) | Digital collectible content and Web3 social platform: https://drip.haus/
Wiziin - Seed ($500K) | Data-driven investment platform for PE, VC and angel investors in the Asia Pacific Region and within Web3: https://wiziin.com/
Moonbox - Strategic (Not Disclosed) | Developer of an interactive digital asset protocol powered by AI and IP rights holder of renowned Hong Kong actor Stephen Chow's films in the form of NFTs: https://moonbox.co/
Delphinus Labs - Strategic (Not Disclosed) | Developers of zkWASM Hub, a zkWASM-based application rollup platform: https://delphinuslab.com/
Circle - Strategic (Not Disclosed) | Principal operator of the USD Coin (USDC) stablecoin and financial services provider: https://www.circle.com/
Maple - Strategic ($5M) | DeFi lending protocol for corporate and institutional capital: https://www.maple.finance/
Nodal Power - Seed ($13M) | Methane powered Bitcoin mining and data center provider: https://www.nodalpower.com/
Relayz Network - Seed (Not Disclosed) | Decentralized communication protocol leveraging peer-to-peer capabilities, end-to-end encryption, and decentralized and verifiable identity: https://relayz.io/
Hungri Games - Seed ($1.9M) | Web3 game studio that focus on role-playing games (RPG) and simulation game (SLG) genres: https://www.hungrigames.com/
LuminaDEX - Strategic (Not Disclosed) | Zero-knowledge (zk) KYC-enabled decentralized exchnage built on Mina Protocol: https://luminadex.com/
Pendle Finance - Strategic (Not Disclosed) | Yield trading protocols that allows users to tokenize and trade future yields from other DeFi protocols: https://www.pendle.finance/
Anytype - Series A ($13.4M) | Local-first, end-to-end (E2E) encrypted software designed to securely store personal data and other digital assets: https://anytype.io/
Cryptoworth - Strategic (Not Disclosed) | Business and enterprise crypto accounting and tax software: https://www.cryptoworth.io/
Irreverent Labs - Strategic (Not Disclosed) | Web3 gaming studio and developer of MechaFightClub as well as Text to 3D video prediction tools to enable generative 3D content: https://irreverentlabs.com/
Raelon - Seed ($3.8M) | Web3 user engagement platform combining growth analytics, marketing automation, and off-chain and on-chain data: https://www.raleon.io/
BitOasis - Series B+ (Not Disclosed) | Cryptocurrency exchange focused on the Middle East and North Africa (MENA) region: https://bitoasis.net/en/home
New Funds
🙌 Cool Resources
A primer for Tokenized Real-World Assets (RWAs): Scaling DeFi to a Global Level that helps provide insights into the total addressable market for decentralized finance. This comes from Chainlink’s blog from February and still holds much relevance.
🐕 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.