In a recent report , venture capital firm Lattice examined the follow-on of more than 1,200 cryptocurrency pre-seed and seed-round startups since 2022 (covering only blockchain networks with at least 15 projects funded) develop. It was found that approximately one-fifth of the Ethereum projects have failed in the past two years, which is lower than the 26% failure rate of the Solana ecosystem. In comparison, projects based on BNB Chain are the most unstable, with one-third of the teams stopping operations.
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ToggleEthereum startups perform better
Lattice said the influx of speculative money during the bull market caused many projects to overextend and eventually fail. In addition, according to the public statements of founders in their closure statements, many projects attributed their collapse to the dramatic decline of the market, as well as events such as the collapse of the Terra ecosystem and the bankruptcy of FTX.
The report also pointed out that since 2022, nearly 80% of Ethereum seed round startups have launched products, while only slightly more than 60% of Solana projects have been able to do this.
Although Solana's price is up 32% this year, the report serves as a reminder that the cryptocurrency market has just endured two grim years before the 2024 rally and may not yet fully recover.
According to data from Lattice, investors poured more than $5 billion into nearly 1,200 crypto startups in 2022, a 150% increase compared to 2021. Nearly 30% of this amount, or approximately US$1.4 billion, was used for seed round investments in Ethereum-related new companies, while early Solana projects attracted 7% of the funding, approximately US$350 million.
Games and metaverse concepts have the highest failure rate
Hot topics such as NFT, Metaverse and Web3 games have driven the influx of funds, and cryptocurrency entrepreneurs have chosen to invest in these concepts. However, this may be the wrong decision. Lattice Capital co-founder Regan Bozman said on Twitter:
"Chasing hot topics can cost you a lot. There are $700 million invested in game seed rounds, but games and the Metaverse are the areas with the highest failure rate."
On the other hand, Lattice pointed out in the report that there are growing trends in investment in privacy-enhancing technologies, artificial intelligence, and DePIN (decentralized physical infrastructure network).
Market crash reduces VC interest in follow-on investments
Enthusiasm has faded as scandals and industry failures have ebbed, and capital flows have stopped, making it harder for startups to raise capital. Only 12% of teams that received funding in 2022 received follow-on funding.
Although 72% of the teams that received funding have launched products, 18% have not yet launched products or have gone out of business. During this period, Ethereum-related startups had the highest success rate in launching products, reaching 80%, while Solana’s rate was only 61%.
