Coinbase Ventures, a prominent investor in the cryptocurrency industry, has shifted its focus to crypto startups outside the United States. This strategic move comes amidst growing regulatory scrutiny in the country, which has compelled companies and founders to reevaluate their business plans.
New Investment Opportunities
Hoolie Tejwani, the director of corporate development and ventures at Coinbase, revealed in a recent interview with Bloomberg that the company is now backing startups in India, Singapore, Australia, and the UK. He expressed his disappointment that some founders have been forced to exclude the US market from their business plans. Despite this, Coinbase Ventures remains actively involved in deploying capital, having made over 50 investments across 15 countries in the past year.
Decline in Investment Activity
Although Coinbase has been a prolific investor in the crypto industry, its investment activity has experienced a decline in recent months. This trend is part of a broader reduction in investment in crypto companies, particularly among corporate venture capital arms. According to data from PitchBook, corporate VC businesses made significant cutbacks as overall crypto venture funding dropped by 63% to $2 billion in the third quarter compared to the same period last year.
“Over the last two years, we typically do about three to four new deals a quarter and deploy about $3 million in capital,” said Gath, from Kraken Ventures.
However, Coinbase Ventures and other major players in the crypto industry, such as Kraken Ventures and Binance Labs, have reassessed their investment strategies in response to regulatory scrutiny. While Kraken Ventures has seen a decline in its deal count, the venture arm of crypto exchange Kraken remains actively involved in making investments, focusing on startups with real products and revenue. Binance Labs, the venture arm of Binance, the world’s largest crypto exchange, continues to invest in crypto projects despite regulatory setbacks.
“We are more proactively looking for founders,” said Dana Hou, from Binance Labs.
Changing Investment Landscape
The decline in investment and the shift towards making smaller bets reflects a more cautious approach from corporate investors. With increased regulatory scrutiny and a need to conserve cash, corporate venture capital arms are prioritizing their core businesses. This shift has led to a change in investment allocation, with infrastructure projects receiving the largest share of funding, followed by decentralized finance (DeFi), centralized finance (CeFi), and non-fungible tokens/GameFi.
- Infrastructure projects: 24%
- Decentralized finance (DeFi): 21%
- Centralized finance (CeFi): 9%
- Non-fungible tokens/GameFi: 13%
Despite the challenges posed by regulatory scrutiny, Coinbase Ventures and other investors remain committed to finding and supporting founders who are dedicated to the industry. The global expansion of Coinbase Ventures’ investment strategy demonstrates its resilience and adaptability in the face of evolving market conditions.
