Despite a year filled with high-profile crypto collapses, market turmoil, and a general plunge in investor confidence, over 80% of the crypto startups that raised funds in 2022 are still standing and actively building today. This is according to a new report by venture capital firm Lattice Fund, which highlights the resilience of early-stage crypto ventures in one of the industry’s most turbulent years.
The 2022 Crypto Startup Cohort: Bouncing Back from the Bust
In a comprehensive analysis published on October 1, Lattice Fund revealed that more than 1,200 crypto startups raised a total of $5 billion in 2022, a year marked by the implosion of several major players in the crypto world. Despite the chaos—caused by events like the collapse of FTX, Terra, and other high-profile projects—76% of these startups managed to launch their products on the blockchain’s mainnet. While 18.5% of the companies did not survive, the vast majority are still operational, a testament to the grit and long-term vision of the founders and teams behind them.
Lattice Fund noted that the success stories in the 2022 cohort are relatively rare but significant. One of the standout examples is Eigenlayer, an Ethereum re-staking protocol that managed to execute a successful go-to-market strategy and rolled out a product worth billions by 2023. However, Lattice was quick to point out that Eigenlayer’s success is the exception, not the rule, for the 2022 cohort.
But even though the market conditions were tough, many of these startups managed to build and ship products, with 76% launching on Ethereum’s mainnet—a major milestone for any project.
The Road to Product-Market Fit and Follow-On Funding
Despite the general success in launching products, finding true Product-Market Fit (PMF)—the holy grail of startup growth—remains elusive for most of the 2022 projects. Lattice reported that only 1.5% of startups achieved this elusive fit, meaning that only a small fraction of these companies managed to prove that their products had a real, sustained demand in the market.
Securing follow-up funding proved even harder. Only 12% of these ventures managed to raise additional rounds of investment, signaling a tight market for crypto venture capital.
Still, certain sectors within the crypto ecosystem did outperform others. Centralized Finance (CeFi) and infrastructure projects were the most successful, with 80% of CeFi startups and 78% of infrastructure projects getting their products off the ground and launched on mainnet. These sectors, focused on building foundational tools and platforms for the crypto ecosystem, had far higher success rates compared to trendier sectors like gaming and the metaverse, which saw the highest failure rates.
“Chasing Hype” Leads to Failure: A Hard Lesson in Crypto
In a blunt commentary on the market, Lattice co-founder Regan Bozman stated, “Chasing narratives can get you rekt,” referring to the hype around gaming and the metaverse. Despite attracting significant investment—around $700 million in seed funding—these sectors had some of the highest failure rates. Many projects in the gaming and metaverse space were built on speculative excitement, with little to show for it in terms of product development or real-world use cases.
Bozman’s warning: “Gaming & Metaverse had some of the highest fail rates and likelihood to be active without anything shipped,” speaks volumes about the dangers of over-hyping emerging trends without solid foundations.
Ethereum Dominates, Bitcoin Survives, Solana Struggles
When it comes to blockchain ecosystems, Ethereum remains the dominant player, attracting $1.4 billion in funding for 314 projects. Despite a few failures, Ethereum-based projects had a relatively low failure rate, with 18% of startups going inactive long-term.
On the other hand, Bitcoin-based startups had the highest resilience: out of 18 projects that raised funds, none failed, making them the most durable projects in Lattice’s analysis. This resilience is likely due to Bitcoin’s established position as a store of value and the continued growth of Layer-2 solutions such as the Lightning Network.
However, Solana, which had been gaining momentum in 2021, faced a tougher time. After attracting $350 million in funding for 87 projects, Solana-based startups saw a failure rate of 26%. Factors like the collapse of FTX, which had been a major Solana supporter, and the downturn in the price of Solana’s native token (SOL) contributed to the struggle for these projects.
Interestingly, while Solana’s performance was rough, Ethereum and Solana-based teams showed similar success rates in securing follow-up funding, indicating that blockchain ecosystems with solid developer communities still offer promising prospects, even when external factors are volatile.
The Challenges of the 2022 Vintage: What’s Next?
While the 2022 cohort of crypto startups has weathered the storm better than many anticipated, the future still looks challenging for these ventures. Lattice Fund analysts pointed out that the 2022 vintage—crypto projects that raised funds last year—find themselves in a more difficult position compared to firms that raised capital in 2021.
The market is still flat, with little new retail participation to drive growth, and an increasing number of seed-stage startups entering the crypto space. In this environment, standing out and achieving product-market fit is harder than ever. Additionally, the “tighter token launch market” means many projects may struggle to release tokens and provide meaningful returns to investors.
Further complicating things, investors are increasingly focusing on hotter sectors like Decentralized Physical Infrastructure Networks (DePIN) and AI, as well as emerging ecosystems like Base and Monad. As the report states, “This highlights that returns come not from chasing what is hot right now but from asking what will be hot in 1-2 years.”
In short, the landscape is rapidly evolving, and projects that raised funds in 2022 will need to stay adaptable and innovate to thrive.
Conclusion: A Mixed Bag of Successes and Struggles
While the 2022 cohort of crypto startups has proven to be resilient in the face of adversity, the road ahead is still fraught with challenges. Infrastructure projects and CeFi ventures seem to have the best shot at long-term success, while sectors like gaming and metaverse face higher risks due to overhyped narratives and unmet expectations.
For investors, the message is clear: it’s not enough to chase the latest trends or the “hot” sectors of the moment. True value and returns come from understanding long-term trends and supporting projects that can stand the test of time.
For the startups themselves, the challenge is to find real, sustainable product-market fit and navigate a market that’s still finding its footing. But with over 80% of these ventures still active, the industry has shown that even in the midst of chaos, crypto innovation is alive and kicking.
