Much hope remains after the crypto winter almost froze the sector: the Luna crash, the bankruptcy of Celsius and the arrest of FTX founder Sam Bankman-Fried for alleged fraud. Then there was the venture pullback amid an economic downturn.
In 2021, web3 startups globally raised a record $29.2 billion. By 2022, that number dipped to $21.5 billion — though that’s still much more than the total $4.8 billion and $4.2 billion such companies picked up in 2020 and 2019, respectively.
Black people who invested in crypto were hit disproportionately hard during the winter, though many Black founders and investors who spoke to TechCrunch remain optimistic about the sector’s potential for the community and society overall. If anything, last year’s economic correction was necessary, they told TechCrunch.
“Bubble had to pop,” People of Crypto co-founder Simone Berry said. “It wasn’t sustainable and economic correction was needed. The downturn removed the bad actors who only entered the space for fast dollars. It created an opportunity to exit the hype cycle, clearing the way for development that will ensure the growth of the ecosystem in a sustainable way, adding value.”
Pryce Adade-Yebesi, the co-founder of Utopia Labs, agreed. “This period of time was a rightful consequence for a period of rampant speculation and grift,” he told TechCrunch. “This will be a great time to focus. Getting back to the reality of solving pervasive problems in the world; it’s an important change of pace for the space.”
Funding for Black web3 founders has only increased, and the crypto winter proved the most fruitful year. Crunchbase data shows that U.S. Black web3 founders raised $60 million (out of the $11.9 billion total given to all U.S. web3 startups in 2022). That amount is substantially higher than the $16 million such founders received in 2021, during crypto’s record-breaking year (U.S. web3 startups received $16.5 billion that year).
In 2017, they raised $11 million out of $1.03 billion, and in 2018, they raised basically zero dollars out of around $2.8 billion; note the vanishingly thin red line in the chart below. In 2019 and 2020 Black web3 founders raised $2.5 million and $4.5 million out of $2.4 billion and $3.2 billion, respectively.
Fundraising last year was hard for many Black founders, and many were impacted by the downturn, though it’s quite telling that Black web3 founders were able to pick up record sums amid an overall dip in the web3 funding market. It appears that investors, too, are in some ways bullish on Black founders, a change of tune in how such entrepreneurs are usually considered.
Data visualization by Miranda Halpern, created with Flourish
Berry also sees a bright spot and remains focused on growing her company, an innovation lab dedicated to increasing diversity, participation and representation within web3, because she believes the technology behind web3 can help the Black community seize ownership over their creative work. In a sense, that is what many Black founders told TechCrunch — that one of web3’s most promising aspects is its ability to start anew.
“Creativity has always been a valuable asset within Black communities, but monetization has been limited,” Berry said. She noted, for example, how the blockchain can record Black contributions to art, science, music and fashion in a way that cannot be erased, as it has historically. Noted provenance for Black creators helps lead to monetization, which can, in turn, contribute to the Black community finally building intergenerational wealth.
Berry also said that web3 has the power to “revolutionize” the way businesses are conducted. She and Del Titus Bawuah, the founder of Web 3 Accra and The Ghana Unity DAO, believe there is still much potential for it to have a larger impact on society, especially within the decentralized financial service space. In fact, Bawuah said that web3 could help redefine economies, especially if, for example, unbanked communities can access stablecoins.
“We could be looking at an entirely new world where a lot of [what is] disjointed within our technological infrastructure could be completely renewed,” he told TechCrunch. Bawuah has lived through at least three crypto winters and said that awareness has risen through the ashes of this crash. For example, he’s noticed more engagement from regulators looking to discuss how to remain more receptive toward web3 technology while also developing policies to aid a post-crash world.
“We also witnessed high levels of hacking for some partners and record lows for NFT prices during the period, forcing companies to build more robust ecosystems,” Bawuah continued, noting that the web3 innovation boom will probably be aided by the recent layoffs from Big Tech companies.
Jonathan Moore, an investor at TCG Crypto, added to that. He said there is still a lot of new talent entering the space, helping the sector grow and become more accessible. In crypto especially, there is work being done to reduce the costs of transacting, as well as updating other aspects of the current web3 infrastructure that will help create the “next generation of applications.”
“This year, I expect there to be a lot of choppy price action, where at least in public and private markets, you still see some remnants of FOMO,” Moore said. “My priority this year and next is spending as much time as I can to understand what are the redeeming traits for the businesses that will shape the crypto economy in the future.”
But staying in the industry for some is just as much a necessity as an aspiration. Berry is working hard to ensure that web3 has a proper and fair representation of Black and brown communities, saying that the sector can only scale if “diversity and inclusion are rooted in the foundation of what is being built.”
She is not alone in that thinking. Tobi Ajala, the founder of TECHTEE, pointed out the downsides of what happens when Black people are not involved in the building of new technology.
“This is a chance for Black founders and investors to double down on investing their time and money into Black people creating within web3, regardless of the economic climate,” Ajala said.
So, for now, the marathon continues. Utopia Labs’ Yebesi is looking to build a company that helps organizations understand their spending habits on the blockchain; Bawuah is focused on working with institutions to establish policies that better the web3 industry and soon expects bitcoin and ethereum to bounce back, leading to a “healthy adoption” of stablecoins within emerging markets and the disappearance of altcoins.
Berry, meanwhile, is focused on making web3 more understandable to a wider audience — less jargon, more calling out of bad actors. She predicts the rise of direct-to-wallet, similar to direct-to-consumer, where brands launch marketplaces for more personalized customer experiences, and is ready to help lead the next generation into this new technological revolution. Because realistically, bust or bear, it is always a crypto winter when you’re a Black founder.
And after four centuries, the crypto space poses no threat; the bulls are not afraid of running in the snow.
Comment