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Coinbase Cuts Crypto Investment Amid Wider VC Pullback

Crypto investments, venture capital

Coinbase, among the chief investors in the cryptocurrency sector, has reportedly reduced its startup funding.

This pullback is part of a larger decline in investments at crypto firms, many of whom have their own venture capital (VC) operations, Bloomberg News reported Wednesday (Nov. 15). 

And although crypto venture funding dropped to $2 billion during the third quarter — a 63% drop year over year, many corporate venture capital units have cut back even further.

While overall crypto venture funding tumbled 63% to $2 billion in the third quarter compared to the same period last year, many corporate VC offices reduced their investments even more dramatically, PitchBook crypto analyst Robert Le told Bloomberg.

This reduction, along with a bigger shift toward smaller bets, is a sign of “a more cautious approach” from corporate investors, Le said, pointing to an industry-wide wish to save cash.

“In this environment, they want to focus on their core business,” he said.

As for Coinbase, the Bloomberg report said the company has switched to backing more startups outside of the U.S. amid increased scrutiny by American regulators. 

“We are seeing some companies and founders who have great ideas, and they’re saying, ‘OK, I need to extract the U.S. from my business plan and not serve U.S. customers,’ which is a shame,” said Hoolie Tejwani, Coinbase’s director of corporate development and ventures.

As PYMNTS noted earlier this week, this downturn doesn’t just stop at the gates of the crypto world. Recent findings from Pitchbook show that valuations in the U.S. venture capital sector, “as private money goes to work, so to speak,” to find companies to back, are on a decline.

“It’s especially noteworthy that the percentage of ‘down rounds’ has reached 17.1%, a 10-year high,” PYMNTS wrote. 

“A down round is a financing round where the business notches a valuation lower than had been seen in previous financing rounds, and thus the cost of buying equity in a company is cheaper (and the amount invested, of course, may be less, too),” per the report.  

Other recent reports have shown how entrenched the headwinds have gotten. For example, the third quarter saw private investment in FinTechs fall by 46% compared to the same period in 2022, while the number of new deals dipped to 2017 levels

PYMNTS Intelligence data has found that the worldwide pace of announced investments in the FinTech space has plunged to the low single digits over the past several weeks.

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