Web3 & DeFi the New Target of Smart Money

Research from PitchBook released this week, has revealed that Web3 & DeFi (Decentralised Finance) was a standout segment of investment in Q3 with USD $1.3 billion invested across 12 deals, outdoing both the FinTech ($860m) and Enterprise SaaS ($493m) sectors.

The USD $1.3 billion invested was by far the largest amount PitchBook has tracked in a single quarter and represented the overwhelming majority of the USD $1.9 billion invested in the space over the last four quarters.

Interesting you say, but what on earth is Web3 and DeFi?

Web3 refers to a potential new iteration of the internet that runs on public blockchains, the record-keeping technology best known for facilitating cryptocurrency transactions.

The appeal of Web3 is that it is decentralised, so that instead of users accessing the internet through intermediaries like Google, Apple, or Facebook, all of which are facing various “trust” issues, it is individuals themselves who own and control pieces of the internet.

Web3 does not require permission, meaning central authorities do not dictate who uses what services, nor is there a need for “trust”, referring to the idea that an intermediary does not need to facilitate virtual transactions between two or more parties, theoretically protecting user-privacy.

One element of Web3 that’s gaining a lot of traction is decentralised finance, also known as DeFi, which involves conducting financial transactions on the blockchain without assistance from traditional financial institutions or governments.

PitchBook suggests that despite limited consumer adoption of Web3 products to date, the sector is new and there are several key trends driving investment. These include the growth of marketplaces for trading cryptocurrencies and NFTs (non-fungible tokens), continued fund formation from high-profile investors, and steady development of new protocols and DeFi projects.

The major deals in the space during Q3 included a USD $900m investment into crypto trading and NFT marketplace FTX, which counts NFL legend Tom Brady among its high-profile investors, as well as USD $120m for Offchain Labs, the developer of software used to help scale Ethereum-based protocols and a USD $100 million Series B for NFT marketplace OpenSea.

With this space only just starting to open up, this trend is set to continue and investors have a real chance at getting in early on an exciting new sector fundamental to the continued growth and innovation of the web, and the introduction of the much anticipated “metaverse”.

Watch this space as we aim to bring you some of the most exciting and innovative ventures we have come across to date.

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