Web3 funding recovered in early 2024, but pre-FTX levels remain out of reach

Interest in Web3 rose during the first half of the year, with the sector raising $4 billion. Up from $2.6 billion in the previous six months, Crunchbase figures show. However, these figures are significantly lower than the nearly $20 billion raised during the first half of 2022, before the spectacular collapse of the crypto exchange FTX in November of that year. 

For those unfamiliar with Web3, we’ll need to go back about three decades when the Internet gained widespread adoption. At the time, users could only read and search for information shared by businesses, media outlets and academic institutions. This first phase is referred to as Web 1.0. Over time, the Internet evolved, giving rise to web applications such as Facebook, YouTube and blogs that allowed users to post and share their own content – ushering in the era of Web 2.0. Today, we’re in the middle of the next phase, known as Web 3.0 or Web3.

Unlike the preceding phases , Web3 empowers users with control over their data and online interactions by leveraging blockchain technology. This innovation not only disrupts finance, but also social media, content distribution, internet navigation and many other areas. 

Booming market prospects for Web3 solutions

Today, there are over 24,250 active companies in the Web3 sector, with 100 of these having achieved unicorn status (i.e. whose valuations exceed $1 billion). The total funding across the entire Web3 sector is estimated at almost $100 billion, according to Crunchbase. And its outlook is bright. Precedence Research expects the global Web3 market to post a 46 percent compound annual growth rate (CAGR) between 2023 and 2032, driven by the ascent of the metaverse. Its market size is forecast to exceed $65 billion in 2032.

“With Web 3.0 technology at its core, it is frequently regarded as the next evolution of the internet. The metaverse may transform the way we work, learn, and play,” Precedence Research said. “Augmented reality (AR) and virtual reality (VR) are becoming integral to Web 3.0, providing immersive and interactive experiences,” it said, adding this has applications in gaming, education, healthcare, and other sectors. 

The rise of edge computing, which brings processing power closer to where the data is generated, reduces delays and boosts overall performance. “This is particularly relevant for real-time applications and services in the Web 3.0 environment,” the analytics company underlined. 

Funding obstacles persist on the horizon

Despite these positive signs, Web3 startups still face funding hurdles. Deal flow dropped by a quarter during the second quarter of the year, with only 292 funding rounds announced, Crunchbase data shows. This trend could indicate that investors are becoming more selective or that fewer compelling startups are in or entering the market.

“A challenging funding market offers an opportunity for founders to differentiate themselves by keeping step with the changes, developing a strategic plan for achieving product market fit,” the founder of Ape Terminal and former CMO of DAO Maker, Hatu Sheikh, told Alexa Blockchain in an interview.