Coinbase’s Deal Count Slumps 34% QoQ but Rises 68% YoY in Q2

Coinbase Ventures (CBV), the investment arm of cryptocurrency exchange, Coinbase, recorded a 34% decrease in its total deal count in the second quarter of 2022.

The total deal count dropped from 71 deals in the first quarter of this year to 47 deals at the end of June.

Despite the dip, however, CBV said its posting in the just-ended quarter represents a 68% year-on-year (YoY) increase.

Coinbase Ventures disclosed these figures on Thursday in a blog post titled ‘Coinbase Ventures Q2 Investment memo’.

According to Coinbase Ventures, which invests in early-stage cryptocurrency and blockchain startups, the YoY increase in its activities “reflects the steady growth” of its venture practice over the past year.

CBV further noted that despite the quarterly dip, it continues to rank among the most active investors in the cryptocurrency industry.

Coinbase Ventures explained, “The decline largely reflected the overall market conditions — with volatility in the markets, we saw many founders rethink or put their rounds on pause, particularly at the later stages.

“We’re seeing that many companies are foregoing a fundraise unless absolutely necessary, and even then, only if they feel confident that they can show the growth needed to justify a new round.”

Coinbase Ventures disclosed that the largest number of founding teams its invested in in the second quarter were from the United States.

It said the North American countries accounted for 64% of the 356 companies in its portfolio.

It, however, emphasized that Singapore, the United Kingdom, Germany and India are all home to growing innovation hubs.

Solana and Developers

Coinbase Ventures further explained that in the second quarter of this year, it invested in 10 ventures building on Solana, a public, open-source blockchain.

The research arm of Coinbase also observed continued momentum from developers in terms of building on Solana.

It noted that various large funds have openly stated support for Solana, adding that the blockchain’s “staying power is real”.

“While Ethereum and the Ethereum Virtual Machine remain king as far as developer traction and compatible apps [are concerned], we’re noting a clear trend in early teams placing importance on Solana,” Coinbase Ventures said.

CBV and Web3

According to data from Coinbase Ventures, the Coinbase research arm invested the most in Web3 protocol and infrastructure (38%).

Investments in ventures centered on platform and developer tools (21%), non-fungible tokens/metaverse (17%) decentralized finance (15%), and international centralized finance (9%) also took portions in Coinbase Venture’s investment chart in the second quarter.

Coinbase Ventures in the blog post stated that it believes that third-generation web (Web3) gaming will champion the next massive wave of cryptocurrency users.

“Web3 gaming remained a sector of heavy investment in Q2, with The Block estimating that $2.6B+ was raised. Our activity over the last few quarters only strengthens our conviction,” the venture outlet explained.

Furthermore, Coinbase Ventures also believes that experienced founders from Web2 gaming will continue to pour into the space.

It noted that while it will take some time for the sector to mature, “it’s growing increasingly clear that blockchain gaming will be a massive category in the future.”

“Expect an increased focus on sustainable economics and gameplay that infuses NFTs with more familiar Web2 gaming experiences,” Coinbase Ventures said.

Beyond Web2

Outside of gaming, CBV noted that it expects the next generation of Web3 user applications to free users from the restrains of the Web2 models.

Web3 user application will achieve this by giving users control over their audiences and communities, the Coinbase research extension explained.

“All told, we remain excited about Web3’s potential to reimagine entrenched Web2 models for social media, music, and more, and ultimately return power to creators,” Coinbase Ventures said.

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