According to CryptoPotato, despite a general decline in venture capital activity, Bitcoin startups saw a significant increase in funding in 2023. A report by Trammell Venture Partners (TVP) revealed that the number of Bitcoin-native pre-seed deals increased by 360% last year, while the number of funded Bitcoin companies rose by 56.9%.
A Bitcoin native company is defined as a firm whose product's success is closely tied to the Bitcoin network's success. These companies are founded on the belief that Bitcoin is the future global monetary asset. This category includes early-stage startups but excludes late-stage firms, Bitcoin miners, and crypto-oriented companies.
Although the total amount of Bitcoin venture dollars invested decreased by 12.5% to $305 million in 2023, the number of Bitcoin venture deals increased by 69.2%. In comparison, the equivalent numbers for the crypto industry were -64.5% and -35.3%, respectively. Crypto venture deals still outnumber Bitcoin ones by about 20:1, but the increase in the latter last year was significant.
Some of the major investors last year included General Catalyst, Y Combinator, and Draper Associates, the early-stage VC firm run by Bitcoin enthusiast Tim Draper. Despite 2023 being a challenging year for the broader venture capital landscape, the Bitcoin-native sector not only survived the storm but emerged stronger.
The increase in funding coincided with a revival of developer activity on Bitcoin over the past year, sparked by new technological capabilities discovered on the network. These include the NFT protocol Ordinals, the Bitcoin computing paradigm BitVM, and the upcoming 'Runes' protocol, which will allow for efficient tokens to be issued on Bitcoin.
The surge in Ordinals activity and the average cost to transact on Bitcoin has led to more developers seeking ways to build more effective Bitcoin layer 2 solutions to enable more efficient transfers. CoinMetrics co-founder Nic Carter stated on Friday that he has never seen more Bitcoin startups in his career, and the pace is currently at least an order of magnitude greater than it has ever been.