Bitcoin Apps: A Small Slice of the Investment World's Cake
In 2022, Trammell Venture Partners (TVP), a firm backing early-stage blockchain initiatives, published a succinct report detailing their venture investments in up-and-coming Bitcoin-focused startups.
What are Bitcoin-native companies?
This phrase is frequently tossed around amongst investors and within the Bitcoin community. It not only signifies the adoption of the pioneering cryptocurrency and the adherence to the idea that it's a global asset of the future but also encompasses the implementation of all its associated protocols (like the base, SegWit, CoinJoin, and others) to provide a positive experience for customers. These companies actively encourage the widespread adoption of Bitcoin.
What data was TVP working with?
In the preparation of this report, the goal wasn't to deliver a general overview of investment data, but rather to balance the statistics and indicate market trends. As such, TVP focused on fledgling companies that had achieved a maximum of the third stage of funding (Series A) since those in the later stages generally receive more investment. Additionally, mining operators, despite their significant worldwide growth and capital involvement, were deliberately left out of the selection. This was due to the sector's highly capital-dependent nature, making it riskier and requiring substantial outlays and project-specific financing.
Investing in Bitcoin-native companies
Despite a dip in the market in 2022, venture investors demonstrated a keen interest in Bitcoin startups, signing off on 52.9% more deals than the previous year. This interest sparked a 13.9% boost in total capital (reaching $343 million), with a 70% increase in the number of unique companies.
A comparison of the total rounds, unique companies, and raised funds between 2021 and 2022. Source: TVP official report.
The average deal size during the early stages remained roughly consistent with 2021. However, for Series A, it saw approximately a 38% drop. Meanwhile, the average startup value witnessed a significant uptick.
Comparing the average valuation of companies at each stage. Source: TVP official report.
Yet when taken into a global context, it becomes clear: Despite attracting millions of dollars, investments in Bitcoin-native applications constitute a minute fraction of the market, only 1.31%. The proportion of such deals is just 2.05%, even though Bitcoin's market dominance exceeded 40% throughout the year.
Investment metrics for Bitcoin-native applications as compared to the entire crypto market. Source: TVP official report.
Despite the odds, the number of venture deals involving Bitcoin applications has surged well beyond the rest of the industry over the past year, a sector that only recorded a meager 1% increase. Notably, investors are exhibiting an upbeat outlook for innovations: the Lightning Network has managed to surpass WBTC, and there's a growing consensus that such advancements could potentially bolster Bitcoin's presence, especially in the startup space.
A comparative analysis of the Lightning Network and WBTC capacities. Source: TVP official report.
Christopher Calicott, a founding partner and managing director of TVP, provided his insights on the report, affirming his support for Bitcoin. He stated his company's intent to foster this trend, commenting:
We’ve known for years that there was a misallocation of capital for Bitcoin startups and now we have the data to support that assertion. Bitcoin - the first, best, and only truly decentralized crypto asset - is becoming a platform at an accelerating pace.
