Web3: start-ups that are no longer able to finance themselves

Web3: start-ups that are no longer able to finance themselves

To grow, web3 start-ups need a product, customers and... money. Especially in the current climate. And funding has never been so hard to come by.

Pierre* has made and re-made his presentation dozens of times, canvassed his network and even lowered his financial demands. The answer is always the same: impossible to convince investors to put a ticket in his studio specialising in NFTs.

"We've been trying to raise money since the beginning of the year, but it's been a real nightmare. Either we're being asked to let go of the reins of the company, or the amounts offered are far too low", details the entrepreneur 🇫🇷 who wished to remain anonymous.

Pierre's aim is to raise just under €1 million to keep his start-up, which has five employees, running. "We're talking about a crypto winter, and that's exactly what it is. Investors are very skittish", he laments, pointing out that he has "three or four months" of cash left. "After that, we'll run out of cash", he lets out a little bitterly.

An ecosystem in slow motion

It's no surprise to anyone that the web3 ecosystem has been running in slow motion for the past few months. Like Pierre, hundreds of European entrepreneurs are facing a drop, sometimes very sharp, in their business, with cash flow melting away like snow in the sun. "We've only signed one customer since the start of the year," confides another French entrepreneur, somewhat dejected.

In this context, and to hold out, you need money!

For crypto companies, there are no 36 solutions.... While the few banks that were willing to lend to the sector have turned off the tap (we're preparing an investigation into this 🧐 ), only investors, notably funds and business angels, could provide fresh money. But here, too, things are stalling 😬.

"There are very clearly fewer deals," confirms David Chreng-Messembourg, founding partner of London-based crypto fund LeadBlock Partners. The same is true of Alven. "We're deploying less money than we did 18 months ago," explains Bartosz Jakubowski, a partner at the Paris-based fund.

The figures speak for themselves: after a totally off-the-charts 2021, with more than $30 billion raised ($6 billion for Europe 🚀 ), and an almost equally good 2022 ($25 billion), the web3 ecosystem has come back to Earth, and brutally so.

According to the investors we interviewed, volumes in Europe were divided by "at least three or four" in the first quarter of 2023. "Funds have paused," confirms Philippe Rodriguez, co-founder and head of French investment bank Avolta Partners, which publishes a quarterly barometer. The United States is also affected by the phenomenon.

Most funds prefer to focus on their portfolio and help start-ups in which they have already put their money. "If there are opportunities, we will always look. But for the moment, the aim is to consolidate existing lines", insists David Chreng-Messembourg. In other words, those who are not warm with enough cash are likely to be in for a complicated time...

The trend is the same all over Europe, whether in London (read our report on the spot), Paris, Lisbon or Berlin.

"There has been a lot of investment in 2021 and 2022, and now we need to focus on our holdings because things are going to be rocky for some," stresses Jonathan Kuhl, who is one of the co-founders of, a Berlin-based web3 fund.

Companies that manage to raise

Not everyone is impacted. Some companies have anticipated the sequence and have already tightened budgets. "There's a real bonus for those who have managed the money well," slips a French business angel.

"Everyone knew that 2021 was a parenthesis. Those who are waking up today are a bit off the mark. With inflation and the crisis, raising funds has become harder and that's a very good thing", tackles another business angel based in Germany.

However, some start-ups are still managing to raise. Some even have no problem doing so, like the leaders in their market: the French unicorn Ledger, for example, which specialises in preserving digital assets, has just completed a €100 million fundraising round.

"At the top end of the market, there's no problem. Companies are finding investors," explains Ivan De Lastours, head of crypto and Web3 investments at Bpifrance.

A sign, however, that even for the biggest players in the market, the situation is not straightforward, Ledger has raised its €100m on the same valuation - €1.3bn - as its previous deal in 2021 😅.

"Valuations are going to be heavily impacted by the context", explains Philippe Rodriguez. "We are reviewing a lot of deals where valuations are significantly lower than they were a year ago," confirms Marguerite de Tavernost, who manages Cathay-Ledger's web3 fund.

"The balance of power has clearly shifted," notes Jonathan Herscovici, co-founder and CEO of StackinSat, a bitcoin buying, selling and custody solution, which is looking to raise around €5 million.

Those that are unable to raise from funds, such as crypto app Swissborg 🇨🇭 , are opting for another solution: raising funds from their community. "It's a good idea", stresses one investor.

Swissborg has thus raised $23 million from 16,660 people who have taken 9.53% of its capital.

"We spoke with funds at the beginning of 2022, but it didn't go through," blows its CEO Cyrus Fazel (read his interview), and we finally decided to rely on those who love us."

Some people are concerned about this kind of practice, however. "These individual investors haven't had access to the same information as traditional funds that ask to see everything. There, it's less transparent", explains a business angel.

The segment, the team, the product...

When they are not leaders like Ledger or then as "popular" as Swissborg, small companies manage to raise, but only under certain conditions.

👉 The first has to do with the sector they are in. "These days it's no longer enough to say you're in Web3 to find investors", says Julien Bouteloup, founder and boss of the Stake Capital fund. "We need to be in buoyant themes such as scalability solutions, payment or gaming."

Start-ups in these sectors are indeed managing to raise money. "There is a real need for simple products that will accelerate adoption", confirms Luc Jodet, head of the web3 fund at XAnge.

According to our information, Rise, which enables companies to pay their employees and partners in crypto and fiat (euro, dollar...), is about to close a multi-million dollar round of funding.

Idem on the Metafight side. Having closed an initial round at the end of 2022 (€1 million), the MMA (combat sport) NFTs gaming platform is currently working on a Series A.

"Obviously the context isn't perfect, but we have no problem convincing investors because from the outset we've been delivering and the team is solid," explains Julia Mahé-Emsallem, co-founder and CEO of Metafight.

👉 The second condition has to do with people. "Having a quality team is fundamental, especially at the moment," insists Owen Simonin, who is known both as an influencer (Hasheur), entrepreneur (he runs the investment platform Meria) and investor.

The jack-of-all-trades has put his marbles into dozens of start-ups in recent years. "We look at the history of the project holders, the successes, the failures, and above all whether they have the capacity to execute."

👉 The third concerns the product: the golden 2021-2022 period when investments were made on mere promises is over. "We can no longer lift on pre-product. You really have to show something," notes Grégory Jessner, co-founder of start-up Narval 🇫🇷 , which develops an NFTs portfolio solution for businesses.

According to our information, the start-up is on the verge of raising funds, from several large American investors such as Andreessen Horowitz.

The risk of bogus projects

Should we consider that the others, those who fail to raise, are doomed? "There's going to be some breakage", says one business angel, questioning the proportion and speed of market recovery. "We have to grit our teeth", confides an entrepreneur in the sector.

If the Bear Market is to last, some think that start-ups, which will not have given up, will play their hand by trying to raise funds at all costs, and even launching tokens for some perhaps not so useful....

"We're likely to see some pretty bizarre things happen over the coming months, with operations launched with the sole aim of raising money," prophesies Owen Simonin. We'll have to be very vigilant. The year 2022 was a good lesson in that respect.

* First name has been changed

Everything that matters in Web3. Each week.
Try insider for free, for 30 days.
All that matters in crypto.
Deciphering, insights, Data. Access the best of the ecosystem.
In this article
No items found.
Read next
No items found.
In this category