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Coinbase Ventures Q3 Investment activity and Highlights

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Q3 investment reached 49 deals. Key themes for the quarter included regulatory penetration, multi-chain trends, NFT 2.0 and crypto gaming.

Coinbase Ventures 2021-Q3 Activity and Takeaways

Coinbase Ventures

原文编译：余顺遂，Odaily星球日报

The Coinbase Ventures team posted on Coinbase's official blog.Third quarter 2021 summary report.

Coinbase Ventures has grown into one of the most active VC investors in the crypto space. In the third quarter, Coinbase Ventures made a record 49 investments, averaging one New Deal every 1.8 days. That's up from 28 investments in the second quarter and 24 in the first. As of the third quarter of 2021, Coinbase Ventures' portfolio includes more than 200 companies and projects.

On a cumulative basis, 90% of Coinbase Ventures' invested funds have been spent since the beginning of 2021, reflecting the accelerated pace of Coinbase Ventures in its fourth year of operations. 50% of the unique new "Logo" in its portfolio also appears in 2021.

Motivation and Philosophy

Coinbase Ventures' primary mission is to support the growing crypto ecosystem, thus investing broadly in the powerful entrepreneurs driving the growth of cryptocurrencies. Coinbase Ventures wants the crypto ecosystem to thrive, rather than focusing on specific outcomes (typical corporate venture capital).

Ultimately, Coinbase Ventures sees cryptocurrencies as a rising tide, an ecosystem that "lifts all boats," including Coinbase. Traditional strategic benefits, such as business partnerships and potential mergers and acquisitions, are great, but Coinbase Ventures sees them as icing on the cake.

Investment category

Coinbase Ventures' investments range from six-figure seed rounds to multi-million dollar growth rounds. There are many ways to categorize investments, but Coinbase Ventures has broken the market into the following categories: Protocol + Web3 infrastructure, DeFi, CeFi, Platform + development tools, NFT/ Metaverse, and others.

Coinbase Ventures 三季度投资报告：共投资 49 笔，Web3 基础设施占比最大

Specifically, protocol +Web3 Infrastructure (29%) is the largest of Coinbase Ventures' six investment categories, followed by DeFi (24%), CeFi (18%), Platform + development tools (15%), NFT+ Metasomes (9%), and Others (5%).

Key topics and insights

In its most active quarter to date, Coinbase Ventures saw significant growth in U.S. CeFi, Tier 1/ Tier 2 (L1/L2), cross-chain protocols, and Web3 tools. Here are some of the main themes Coinbase Ventures observed:

Regulators and centralised players are deeply involved in cryptocurrencies

Regulators became more widely known in the third quarter, as the SEC and Treasury, as well as the International Financial Action Task Force (FATF), both stepped up their involvement in the entire crypto ecosystem. This creates some form of regulatory risk for early agreements and teams. On the other hand, BTC, the largest crypto asset by market capitalization, received positive support, with THE BTC Futures Exchange Traded Fund (ETF) approved by the SEC. Coinbase Ventures believes this will allow potential capital to enter the crypto market, resulting in a high volume of trading, inflows and interest.

Web 2.0 companies such as Square, Twitter, Stripe and Tik Tok also expanded their encryption strategies in the third quarter. Square announced a bitcoin-based financial services platform, Twitter revealed a future integration of BTC Lightning Network and NFT, and Stripe announced a return to crypto with its dedicated new crypto team. Tik Tok has announced a collaboration with ImmutableX to launch a creator-driven COLLECTION of NFT collectibles.

At the same time, banks, fintech companies and broker-dealers are starting to further integrate cryptocurrencies into their products, backed by Coinbase Prime, Coinbase Cloud and other third-party platforms. Overall, the crypto industry has made great strides in maturity and institutional adoption over the past quarter.

Multi-chain ecosystems are developing rapidly

After years of developing solutions aimed at alleviating Ethereum bottlenecks, the expansion is finally happening with the rise of a series of Tier 1 and 2 ecosystems. The main driver today is EVM (Ethereum Virtual Machine) compliant solutions that allow users and developers to migrate to new environments with relatively low switching costs. Users can access EVM-compatible L1 using their existing wallet, such as Avalanche; Or side chain /L2, such as Polygon, Arbitrum, Optimism. Sopdity Smart Contracts can usually also be copy-pasted to any EVM-compatible L1/L2, which facilitates deployment of popular DeFi applications across multiple chains.

As CeFi exchanges have been slow to integrate with these new L1/L2, Coinbase Ventures sees the appeal of the newly launched cross-chain bridge. These cross-chain Bridges facilitated the transfer of billions of dollars from Ethereum to various L1s/L2s.

While EVM-compatible apps written in Sopdity in Q3 had the most traction on L1 and L2, other ecosystems are bringing more expressive programmability to desktop programs. The new Primitives focus on more familiar programming languages such as Rust (Solana, Polkadot), Golang (Cosmos) and Move (Facebook Diblockquote, Flow), Could bring a new wave of Web 2.0 developers to the industry.

Better Web3 UX is coming

During the third quarter, Coinbase Ventures saw further development of Web3 tools that will simplify the Web3 interaction experience. XMTP is leading the way in messaging standards across Web3 addresses. Spruce is standardizing "OAuth" (Open Authorization), which will allow users to securely share digital credentials, private files, and sensitive media content with Web 3 applications. Snapshot makes it easy to access governance forums and decisions across DApps.

In the meantime, a lot of work is under way to create additional security for Web3 applications. Forta, OpenZeppepn's decentralized initiative, is making progress on real-time security monitoring of smart contracts, with the goal of providing more transparency on smart contract code execution, error detection, and ultimately real-time hacking prevention. Similarly, Certik is offering "quick and easy" automated auditing tools to help get DApps to market faster.

At the same time, the DAO technology stack continued to evolve as the on-chain community technology and bill creation model began to pay off. Syndicate (among other projects) aims to be a "crypto version of Angelpst" by creating decentralized investment protocols and social networks.

NFT 2.0 and crypto games are booming

Q3 also saw a significant focus on the development of NFT creator tools that will eventually expand the reach of NFT use cases and audiences while creating new social features.

Meanwhile, NFT games continue to accelerate, led by Axie Infinity, as their play-to-earn model is gaining popularity in emerging markets (Philippines, Brazil, India, etc.), attracting 2 million DAILY active users. And generate more than $200,000 in revenue. Loot Project also appealed to the industry with a reverse approach to game development. This is done by first releasing NFT based game assets to the public to guide the community and inspire further growth.