The second quarter showed a consistent level of investment in Web3, blockchain, and crypto startups, but several signals indicated that a decline in venture capital inflows was likely. This was confirmed as total capital dropped over 66%, from more than $14bn in Q1 to just under $5bn in Q2, based on data from Beinsure Media and Cointelegraph Research.
All markets faced declines during this period, and blockchain was no exception. Despite the contraction, the crypto sector continued to show activity in several areas that suggest ongoing interest, though not necessarily a return to a bull market.
The total number of VC-backed individual deals in Q2 fell to 338, marking a 45.6% drop from the prior quarter. Capital inflows followed a similar trend, decreasing to $4.98bn. Web3 accounted for 150 deals, or 44.4% of total activity.
The most capital was allocated to seed and Series A rounds, at $977mn and $1.32bn respectively. Additionally, 72 deals were listed as “unknown,” which likely includes debt financing and other operational funding that typically does not receive negative scrutiny during bullish conditions but may cause concern in bear markets.
Venture Capital Investment Trends and Sector Distribution
The top 10 deals in Q2 often used the Web3 label, although most investments focused on infrastructure, GameFi, NFTs, and digital asset exchanges. These deals ranged from $300mn to $80mn.
9 of 10 most active VC firms allocated funding to Web3-labeled projects. However, many of these investments targeted infrastructure, metaverse, and GameFi-related areas.
Sequoia Capital launched a $9bn fund aimed at growing technology startups in China. Several other major VC funds introduced in Q2 also aimed to expand blockchain-related ventures across Asian markets. One reason for the lower Q2 totals may relate to more realistic company valuations, which reduces headline investment figures across the sector.
Monthly Investment and Early Q3 Signals
Venture capital inflows reached $1.98bn in July and dropped further to $1.36bn in August. However, September recorded a 20.6% increase to $1.64bn.
While one month does not constitute a trend, the uptick is notable and may suggest a local bottom, as VC activity typically lags market conditions. This is consistent with the pattern seen in previous cycles where funding resumes as confidence begins to recover.
Unused Capital in Large Funds
Several major funds, including Andreessen Horowitz’s $4.5bn vehicle, have not yet deployed significant capital. Interestingly, a16z did not appear among the most active investors in Q3.
This raises the question of whether Q4 might see a surge in VC inflows, as these funds begin to invest.
Web3: Deal Volume and Sector Breakdown
In Q3, 138 deals fell under the Web3 classification. Gaming led with 34 deals, followed by metaverse with 13. Infrastructure and tooling registered nine and eight deals respectively.
While infrastructure in this context often overlaps with general system architecture and interoperability across Web3, it remains a separate classification from project-specific infrastructure builds.
Data and identity attracted seven deals each. Data analytics, secure storage, and decentralized identity have gained increased attention as the need for secure user verification grows in decentralized environments.
Marketplaces and reward systems also received five deals each. Many of the marketplaces discussed operate across multiple segments of the blockchain ecosystem. Rewards-focused projects explored tokenomics mechanisms that drive user engagement and platform growth.
Continued Web3 Dominance in Q3
Web3 remained the leading focus of investment in Q3 among the ten most active VC firms. DeFi and infrastructure followed, tied for second place. The number of individual deals dropped from 621 in Q2 to 338 in Q3.
Centralized finance platforms like Coinbase and FTX received less attention, and NFT-related projects saw reduced investment following their 2021–2022 peak.
Web3 now broadly includes sub-sectors such as GameFi, metaverse, marketplaces, tooling, art, media, and education. These segments have yet to mature into standalone categories for formal market analysis. Still, rapid changes in the crypto space may accelerate that process.