Blockchain and Metaverse Get Startup Investment Off the Ground
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Blockchain and Metaverse Get Startup Investment Off the Ground

'FOLLOW THE MONEY', A SURVEY OF BUSINESS INVESTMENT IN DIGITAL SECTORS, SHOWS FUNDING EXPLOSION IN 2021 FOR THE TECHNOLOGY BEHIND CRYPTOCURRENCIES AND VIRTUAL UNIVERSES

2021 was a year to remember, and for once not because of the aftermath of the COVID-19 pandemic. In fact, the past year and the first four months of 2022 marked a change of pace of investments in the startups that populate the digital world. This is the finding of ‘Follow the money’, the survey by SDA Bocconi's Digital Enterprise Value and Organization Lab (DEVO Lab), which studied the trends over the past five years, from 2017 to Q1 of 2022, of investments (eg, venture capital and angel investors) in global startups related to digital technologies. Taking investments greater than $500,000 as a discriminator, more than 140,000 transactions involving 73,592 companies and a total of $4 trillion in investments were sifted through. The resulting picture puts three main players in the foreground: the well-established technologies of artificial intelligence and cloud computing, the unrelenting rise of blockchain technologies, and the explosion of two trends that feed on these technologies: the metaverse and Web 3.0.
 
“Our goal was to understand what kind of investments had been received by companies in the digital world,” Gianluca Salviotti and Leonardo Maria De Rossi, respectively DEVO Lab's operations coordinator and coordinator of the lab's blockchain section, explain. “What we understand from this is that, while considering a general market growth of 100 percent, 2021 represented the explosion of investments in all sectors related to digital technologies.”
 
Leading this general fervor in investments are AI-related companies, which rise from $36bn raised in 2020 to $82bn in 2021 (mostly through late-stage investments, showing that these are now well-established technologies), followed by cloud companies, which increase investments from $15bn in 2020 to $43bn in 2021. Another key feature is blockchain, a sector in which firms in 2021 accumulated 35bn (up from just 3bn in 2020). Looking at growth percentages, it is blockchain that marks the only four-digit increase: +1,118% in 2021 over 2020, followed by +354 percent in 3D printing, +277% in satellite technology, +225% in computer vision (one of the technologies behind self-driving cars, for example), and +185% in cloud computing.
 
The table shows that blockchain investments increase +1118% in 2021 over 2020

The only setback is in investment in 5G technology. However, such a retreat would be “physiological,” Salviotti explains. “5G is a technology that as of today still needs a solid backbone infrastructure, the implementation of which is in the hands of a small number of companies, such as national telephone operators or some large digital incumbents, and it is therefore hard to find room for smaller companies such as startups, the subject of this research.”
 
Going back to the big growth of blockchain, from an investment perspective, this “was a consequence of the rise in the price of Bitcoin in 2020, which brought a great market interest in the technology behind it,” De Rossi explains. “Investments in cryptocurrencies by small-scale savers have attracted big investors’ interest in startups related to blockchain platforms. However, you should be warned,” De Rossi adds, “blockchain is a technology full of scammers and opaque projects. Following others' investments blindly could be risky.”

Looking more in detail into the blockchain sector, the ‘Follow the money’ study shows how the success of this technology has cascaded into that of Non Fungible Tokens (NFTs), whose related companies have gone from raising just $44m in Q1 2021 to $1.77bn in Q1 2022.

The table shows that NFT rises by +271% from Q3 to Q4 in 2021

Finally, the chapter about metaverse and web 3.0 (ie, the decentralized web based on blockchain). Here, we are talking about trends rather than actual technologies, since each of them actually is based on different elements. In any case, these are the trends of the moment: in fact, since Facebook announced its name would change to Meta, investments in companies claiming to deal with the metaverse have jumped +4,500%, with an explosion between Q3 and Q4 of 2021. A similar ferment was also seen in Web 3.0, which has seen investments grow by 500% between 2020 and 2021 (from 26m to 157m) and 145% between 2021 and the first quarter of 2022 alone (from 157m to 38m).
 
“2021 was an incredible year from the point of view of investment in businesses in the digital sectors,” the authors conclude. “AI and cloud computing, mature technologies, are still confirmed as great attractors of funds, also because they are ‘enablers’ of so many other applications. Blockchain is undoubtedly the technology that has seen the biggest increase and has driven interest in NFTs. Finally, the metaverse is the real bombshell that has exploded from a startup investment perspective.”
 

by Andrea Celauro
Bocconi Knowledge newsletter

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