May - June 2024:
Exit Stage Right: A Mini M&A Boom and The Hope of Crypto IPOs

Key Themes

10SQ Takeaways From Consensus 2024

Consensus 2024, organized by Coindesk and held from May 29 to May 31 in Austin, Texas, is renowned for being the world’s largest and longest-running gathering in the crypto space. This year, the event brought together over 15,000 attendees from more than 100 countries, including 6,800 companies.

Key narratives discussed:

DePIN	We have never seen so many DePIN events as we saw at Consensus 2024. The combination of Web3 and AI is driving the decentralization of hardware products. Products such as smart wearables, in-car equipment, smartwatches, and green energy technology actively seek opportunities to transition to the Web3 industry. This area is evolving in the most interesting way, with lots of projects innovating. DePIN projects started cooperating, and discussions were held about how to connect the upstream and downstream DePIN projects. The sensitivity of network data and regulations in various countries bring various practical obstacles to the DePIN technology. Many ecosystems are considering building a liquidity center pool around DePIN to maximize user numbers.
Web3+AI / Decentralized compute	Web3+AI was still one of the largest discussion topics, as it has been all year. Despite the overall enthusiasm about the prospects of this intersection, many market participants have become much more cautious when speaking about the potential outcomes of some of the existing Web3+AI projects, especially in decentralized compute. There were discussions about a possible bubble in this sector within the crypto community and ways to effectively break it.
Real-world Assets	Asset innovation was a recurring theme throughout the RWA Summit within Consensus, with panelists emphasizing the need to create unique investment opportunities and leverage blockchain technology's benefits to unlock new markets and attract investors. The current tokenization cycle differs from previous ones in that it focuses on building essential infrastructure and reflects DeFi's growing maturity. While allocators recognize the potential of tokenized assets, it's crucial to understand that these products are not yet at the stage of broad adoption. The urgent need for market structure development, including global issuance, collateralization and lending, and efficient secondary trading, is a key focus for the industry.
Infrastructure building	Builders of fully homomorphic encryption (FHE), multi-party computation (MPC) and Zero-Knowledge (ZK) technologies were seen together on stages, discussing how to create further the technical infrastructure landscape for a more secure Web3.
TradFi institutions	TradFi institutions were broadly represented at the conference this year, creating a good marketing for the space. It was evident that they have big plans for crypto and approach this opportunity very seriously after the wave of ETF approvals earlier this year. It was great to see more commitment from Visa as well, as Visa’s Head of Crypto highlighted, "We see ourselves as a bridge between stablecoins, Blockchain technology, and the existing payments ecosystem."

Crypto Venture Capital Rebounds: Early-Stage Startups and Upcoming IPOs Drive Optimism

Venture capital activity in crypto is picking up for early-stage startups

The crypto market rebound in H1 2024 brought renewed optimism to the sector and the crypto venture capital market. This year, we see a much more active fundraising environment, which means more innovation and building. About 80% of the VC capital goes to early-stage startups, while 20% goes to later-stage companies.

Early-stage startups were able to source funding, particularly via tokens or equity + token structures, from crypto-focused early-stage venture funds. We have been seeing many exciting opportunities in the most innovative areas of crypto, like DePINs, AI infrastructure, social apps, tokenization, stablecoins, including sizeable early-stage rounds of Telegram, Farcaster, Polymarket, and others.

It is more difficult for later-stage crypto companies to raise capital as many large generalist venture capital firms have exited the sector or dramatically reduced their exposure.

The last ten years produced many public company scale crypto companies that continue to grow

Many sizeable crypto companies, such as Circle and Kraken have reached public company scale and are strong candidates for listing when the IPO markets re-open in full. We see 5-7 strong IPO candidates for 2025-2026 that are well positioned. For example, Circle, Figure, Kraken, and Animoca Brands have already publicly commented on their IPO plans or confidentially made filings with the SEC. This potential for major IPOs should drive investor optimism about the future of the industry. This prospective wave of IPOs will be a positive catalyst for the crypto sector and create natural acquirors for earlier stage venture backed companies.

It is worth noting how quickly these companies reached this milestone. A decade ago, Coinbase did not exist; now, it generates $2.8Bn in revenue a year. Kraken and Circle took ten years to go from zero to more than $1Bn in revenue. Having achieved scale, these companies are still growing and innovating. For example, Circle announces product and partnership developments and milestones almost daily. Adding to that, many of these companies successfully weathered the market downturn, still have significant funding runway from prior rounds, and have demonstrated strong operating performance over the last six months.

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