AWeb3VC - Funding Round Up #35

🗓️ Week of: Aug 27 - Sept 2, 2023

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

$119M+ was raised across 11 funding rounds in Web3. Wow, talk about a drop off in deals as summer comes to an end. Even though funding reach back over the $100M funding market, primarily driven by STELSI’s raise, this week saw a continued decline in the number of announced deals. I remain convinced that seasonality has been playing a main factor for the drop off in Web3 venture the past few week. With September now at our doorsteps, we’ll see if funding picks up, particularly since numerous 2021 Web3 darlings are nearing the two-year mark since their last financing rounds.

Setting deal flow aside, the industry received two favorable outcomes this past week in its ongoing standoff with the SEC, via rulings on the Grayscale lawsuit and a class action against Uniswap. While prospects for a Bitcoin spot ETF and autonomous protocols encounter potential tailwinds, NFTs and Web3 arguably confront their most significant challenges yet, both in terms of regulation and user adoption, which we delve deeper into in this edition. I think next phase of Web3 is starting to shape out substantially different from what we observed during 2021 cycle.

🏆 Largest Funding Round

➡️ STELSI announced $100M in what appeared to be a Strategic funding round led by NGC Ventures.

STELSI is a decentralized metaverse centered around islands and digital cities with an architectural twist. The platform encompasses the entire process of city construction, from design and construction to the management of buildings, using 3D development and production tools powered by the Unreal Engine.

Users can purchase NFTs that represent plots of land within the STELSI ecosystem to erect buildings and manage communities. Additionally, users can earn tokens by achieving various construction goals.

Why this matters?👉I'm baffled to see a nine-figure funding round for a metaverse project, especially in this current funding environment. One might assume that the majority of the funds will be allocated to user acquisition. Given the sparse DAU and MAU figures observed in other metaverse projects, this could be akin to setting money on fire. However, an investor like NGC Ventures must see something special in this endeavor. Perhaps it's the project's architectural focus and its potential as a sandbox for future city planners - although I’m pretty sure thats not that large of a market. Regardless, this deal demonstrates that capital continues to flow, no matter how esoteric the project or the odds of seeing a return on investment.

😎 Noteworthy Company(s)

➡️ IronMill is a hybrid hardware-software solution designed to help developers seamlessly integrate zero-knowledge (zk) technology into new applications. This solution acts as the DevOps equivalent for cryptographic verification, termed ‘ZkOps’ by IronMill. It packages the workload and compute layers, facilitating zk cryptography to operate on a grander scale. Their flagship project, Oxide, serves as an user-friendly package manager for selecting and incorporating zero-knowledge circuits into both on-chain and off-chain programming contexts. Oxide aims to expedite the development and trial phase of zk applications.

IronMill was founded by Dr. Aaron Greenblatt alongside Christian Melton, both with multiple patents, publications, and a background in machine learning. Recently the company secured $2.6M in Seed funding led by gumi Cryptos Capital alongside Blockchain Builders Fund, Superscrypt, LongHash Ventures, Kestrel 0x1, and SevenX.

Why this matters?👉Zero-knowledge (zk) technology is rapidly emerging as a one of the growing areas of Web3 and blockchain infrastructure with great economic potential. In 2023 alone, AWeb3VC reported that over $390M in funding was directed towards projects and companies harnessing this technology. While zk tech augments security and privacy, it also offers a more streamlined processing transactions on-chain . However, the tools for deploying zk tech are in their infancy, with a high degree of fragmentation and a focus geared more towards researchers than mainstream software engineers. Solutions like IronMill aim to abstract developers from the complicated nuances of hardware and software required to integrate zk tech into everyday applications. Drawing parallels to how Docker and Kubernetes revolutionized DevOps for cloud-based software development, ZkOps could pave the way for mainstreaming zk tech scalability.

👀 Observations, Trends & Themes

➡️ Web3 Gaming: From Rise to Downfall ☠️

Web3 gaming, once touted as the future of the gaming industry, has experienced significant challenges, with the "play-to-earn" model and GameFi proving unsustainable. Leading games, like Axie Infinity, faced economic collapses, multi-million-dollar hacks, and limited player growth, leading to the fall of game economies. The initial allure of Web3 gaming, which promised players the ability to earn substantial amounts through in-game cryptocurrencies, now gives way to a reality where only top players and content creators reap significant rewards. Not to mention the associated tokens and NFTs have dropped 90%+ in value through the crypto bear market.

Meanwhile, startups like Mythical Games, serve as a cautionary exemplar of the Web3 gaming gold rush. Once boasting over $300M in venture funding and reaching a unicorn valuation, the company's fortunes quickly shifted. Investor interest waned, leading to rounds of layoffs, and even legal battles as former top executives were accused of fraud and breach of fiduciary duty. Similar legal woes plagued the blockchain gaming platform, Gala Games, with a founder accused of stealing $130M worth of the platform's native token, GALA.

The evolving narrative doesn't signal the end for Web3 gaming. As the industry seeks to rebound, emphasis is shifting towards creating high-quality games, enhancing player onboarding through seamless wallet setups and authentication, and focusing on more sustainable gaming and token models. To realize its potential, Web3 gaming must place a greater emphasis on crafting genuinely engaging gaming experiences rather than the profit-driven approach that overshadowed the space in 2021.

Paving the way forward, Pantera Capital's Matt Stephenson recently released a blog post highlighting areas where Web3 could benefit games. These include: using NFTs to assign unique value to e-sports memorabilia, akin to physical sports; and harnessing the Shapley Value, a concept that quantifies the added value of in-game items, to inform and refine game design. These Web3 applications have the potential to enhance player engagement and elevate game experiences, steering the industry toward a more prosperous gaming future.

💸 Funding Rounds

Top 15 Rounds

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

All Rounds

Builder DAO - Private Sale ($2M) | Web3 talent and project network of engineers, researchers, and operators: https://buidlerdao.xyz/

FirstMate - Seed ($3.8M) | No-code NFT storefront and commerce platform: https://www.firstmate.xyz/

Ironmill - Seed ($2.6M) | Zero Knowledge (ZK) integration solution incorporating a hardware-software hybrid layer for optimized ZK deployments: https://ironmill.xyz/

Lyvely - Seed (Not Disclosed) | Social networking, content monetization, and ecommerce platform enabled by its own cryptocurrency token: https://lyvely.com/home

ProsperEx - Strategic (Not Disclosed) | Universal decentralized exchange for crypto and real-world assets (RWA) designed to empower leveraged trading across all assets: https://www.prosperex.xyz/

GPU.Net - Seed ($500K) | Decentralized network of graphics processing units (GPUs): https://gpu.net/

STELSI - Strategic ($100M) | Decentralized metaverse island and digital real estate platform: https://stelsi.org/

Coral Finance - Seed ($500K) | Decentralized derivatives trading platform built on the Nautilus Chain: https://www.coraldex.finance/

DeForm - Seed ($4.6M) | Crypto native CRM and marketing tool suite that leverages Web3 based forms and on-chain activity: https://www.deform.cc/

Stroom Network - Seed ($3.5M) | Liquid staking protocol built for the Bitcoin Lighting Network: https://stroom.network/

Tako Protocol - Seed ($2M) | Decentralized recommendation engine for Web3-based social networks: https://tako.so/

New Funds

MoonPay - MoonPay Ventures (Not Disclosed)

🙌 Cool Resources

Looking to build your next Web3 startup? Check out this presentation titled "Crypto startups I wish I could build today" by Coinbase co-founder and CEO, Brian Armstrong, as a potential source of inspiration.

🐕 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.