VCs pile into web3 startups in anticipation of $66bn blockchain gaming boom

Crypto winter may still grip the industry, but web3 gaming is proving resilient. More than a dozen startups and protocols in the space raised almost $119 million in February, according to DefiLlama.

The performance accounts for an eighth of the total $867.5 million raised in 88 crypto industry deals last month.

While that’s two-thirds less than the $2.7 billion raised in February 2022, it was enough to cheer stakeholders that there’s still plenty of action in the market. And players in the gaming subsector were especially relieved.

“Blockchain adds another feature in games that can enhance the player experience,” Marieke Flament, CEO of the blockchain organisation the NEAR Foundation, told DL News. “Investors [are now] backing experienced teams that they believe can execute and have seen valuations come down to a more fair level.”

The new figures come as web3 game investments are expected to propel the global blockchain gaming market’s value to $65.7 billion by 2027 from $4.6 billion in 2022, according to ResearchAndMarkets.com.

Of the web3 gaming companies that raised rounds in February, Indian Kratos Studios secured the biggest raise when it picked up a $20 million in a seed round led by Accel. Other raises included Mino Games’ $15 million Series B round and Worldwide Webb’s $10 million Series A.

Apart from NFT Gaming Company’s $7 million IPO and Bibliotheca DAO’s public token sale, all web3 gaming startups and protocols securing funding in February did so through seed, Series A and Series B rounds.

NOW READ: Meet the startups winning VC funding in the crypto ice age

While early-stage web3 gaming startups seem to be steaming ahead, there is a concern that their momentum could turn out to be a bubble akin to the NFT craze that saw sales skyrocket in 2021 only to fall by 97% from $17 billion in January to $466 million in September 2022.

Ramona Ciocea, head of business development at web3 developer Protokol, rejected that notion. She argued that the convergence of “blockchain and web3 features like NFTs, DAOs and in-game assets” give “real value to gamers and studios” alike.

Blockchain and web3 gaming is not a bubble

“Blockchain and web3 gaming is not a bubble, it’s a foundational shift in the way the relationship between gamers and studios is structured, and it’s here to stay,” Ciocea told DL News.

While web3 gaming startups secured $118.7 million in February, they were only a small part of the raises made. The five biggest crypto rounds highlight that the industry continues to be about more than fun and games.

Chain Reaction secures $70 million

Israeli startup Chain Reaction secured the biggest crypto cash injection in February. The semiconductor company focused on disruptive blockchain and privacy hardware, bagged $70 million in its Series C funding round.

The raise brought the total capital injected into the company to date to $115 million. Chain Reaction said it would use the money to fund recruitment and development drives.

Morgan Creek Digital led the raise with participation from Hanaco Ventures, Jerusalem Venture Partners, KCK Capital, Exor, Atreides Management and Blue Run Ventures.

Taurus nets $65 million

Digital asset infrastructure provider Taurus secured $65 million in a Series B raise in February. It was the second biggest raise in the industry that month. Investment bank Credit Suisse led the cash injection. Deutsche Bank, Pictet Group, Cedar Mundi Ventures and Arab Bank Switzerland also participated in the round. Taurus would use the funds to recruit new talent, expand its compliance effort, and expand into news markets in Europe, UAE, and eventually into the Americas and South-East Asia.

Crypto lender SALT raises $64.4 million

Crypto lender SALT was one of the companies swept up by the shockwaves of the FTX collapse in November. When the now defunct crypto exchange imploded, SALT was one of the companies that caught in the carnage. An undisclosed exposure to FTX put an end to SALT being acquired by online investing platform Bnk To The Future. In February it was revealed that SALT had sold Series A shares worth $64.4 million to existing borrowers and lenders to the company in exchange for the conversion and cancellation of the company’s outstanding debt.

Carbonplace secured $45 million

Carbon credit marketplace Carbonplace topped up its coffers with a $45 million capital raise in February. It was backed by the financial institutions that founded the venture. Those include BBVA, BNP Paribas, CIBC, Itaú Unibanco, National Australia Bank, NatWest, Standard Chartered, SMBC and UBS.

Bitcoin miner TeraWulf raises $32 million

Bitcoin miner TeraWulf bagged $32 million in equity proceeds in February. News about the cash injection came at the same time as the company announced that it had agreed in principle with its existing lenders on certain debt modifications, subject to the equity capital raise condition.

The company said it would use the capital raise and the deal with the lenders to achieve free cash flow, and to build out its facilities in New York and Pennsylvania, and for other general purposes.