Ethereum-focused startups from 2022 are more successful than Solana-based projects. Entrepreneurs who chased popular stories like web3 gaming ended up paying for it. VCs are expected to pour $12 billion into crypto startups in 2024.
In the race to build DeFi projects, Ethereum-based startups have an edge over their Solana counterparts.
According to A, a fifth of Ethereum projects have been shut down in the past two years Report From Lattice, a venture capital fund. This is better than 26% of established Solana projects.
The researchers looked at blockchains with at least 15 crypto startups that raised funding in 2022, the most recent period with available data.
BNB chain-based projects are less likely to remain active, with one-third of teams ceasing operations.
Speculative capital
Lattice said the speculative capital influx during the bull market caused projects to overextend themselves.
Those projects are largely to blame for the brutal market decline caused by events like the collapse of the Terra ecosystem and the bankruptcy of FTX.
The report notes that nearly 80% of seed-stage Ethereum-based startups have shipped products by 2022, while only 60% of Solana projects can say the same.
Although Solana's price is up 32% this year, the report stands as a grim reminder of the crypto's brutal two years ahead of the 2024 rally.
Join the community to get our latest articles and updates
The market crash reduced VC interest in follow-ups
Investors poured more than $5 billion into nearly 1,200 crypto startups in 2022, according to Lattice, a 150% increase from 2021.
That's lower than DeFillama's figure $19.5 billion This comes from a broader accounting of crypto VC deals, but Lattice only considered blockchains, where at least 15 projects received funding.
About 30%, or $1.4 billion, went to seeding Ethereum-based startups, while early-stage Solana projects attracted 7%, or $350 million.
The buzz around NFTs, Metaverse and Web3 Gaming has fueled capital inflows. Many crypto entrepreneurs decide to capitalize on those trends, which can be a mistake.
“Chasing narratives can get you rectified,” says Regan Bozeman, co-founder of Lattice Capital He tweeted. “$700 million has gone into gaming seed rounds, but gaming and Metaverse have some of the highest failure rates and are likely to remain active without shipping anything.”
Gravy train
When enthusiasm waned from scandals and industry failures, the gravy train stopped running. That made it difficult for startups to raise more money. Only 12% of the 2022 cohort raised follow-up funds.
72% of teams that received funding started production by 2022, while 18% failed to ship or closed.
Ethereum-based startups during that period were the most successful at shipping products, with 80% of them doing so, compared to just 61% of their Solana-based counterparts.
Things are improving
As News previously reported, VCs are expected to splash $12 billion in 2024 to support crypto projects, with some funding likely to seed new startups.
Lattice noted an increase in investments in DePIN, which stands for privacy-enhancing technology, artificial intelligence and decentralized physical infrastructure networks.
Earlier this year, global asset manager Franklin Templeton identified Solana as a leading network for DePIN.
Osato Awan-Nomayo Our Nigeria based DeFi representative. He covers DeFi and technology. To share tips or information about articles, please contact him here [email protected].
Related TopicsSOLANAETHEREUMVC
