2022 Seed Stage Retrospective

Introduction

Last year we published the 2021 Seed Stage Retrospective to provide a clear view of trends amongst that year's seed class. What percent of companies had shipped to mainnet? How many had found product market fit? Who launched a token?

With our 2024 report, we now shift our focus to the class of 2022 to better understand the progress and trends across crypto at the seed stage. This report analyzes over 1,200 publicly available crypto pre-seed and seed rounds from 2022, offering insights into industry-wide, sector-specific, and ecosystem-level trends. As with our previous report, we are open-sourcing our database to enable further exploration and analysis. We invite your feedback and welcome any corrections; please feel free to reach out to us at hi@lattice.fund.

Executive Summary

The class of 2022 secured funding during one of the most exuberant periods in crypto history. Teams that announced raises during this year likely benefited from the bullish market of 2021 and early 2022. Given the market's frothiness, we anticipated that the metrics might skew negative compared to those of teams that raised during a bear market. Our analysis confirmed these expectations, though there are also positive takeaways.

A total of $5 billion was invested in nearly 1,200 companies from the 2022 vintage, marking a 2.5x increase over the previous year's figures. Here are the key highlights:

2022 Breakouts

In any given year there are going to be some big success stories and 2022 is no different.
- In infrastructure we saw restaking protocol Eigenlayer, Wallet-as-a-service provider Privy, and parrallized EVM Sei all raise seed rounds. Notably each of these teams helped to kick off a broader narrative. 
- Within DeFi the breakout stories of 2022 were Perp Dexes like Vertex and Apex along with pro NFT exchange Blur. 
- Gaming was the dominant sub-vertical of consumer with nearly $700M invested. Despite the significant amount of capital invested, two of the largest success stories raised relatively small amounts of money. Pixels and and PlayEmber each raised less than $3M in their seed rounds.

Launches during a Challenging Market 

- Despite the bear market, nearly three-quarters of the projects have successfully launched a product on mainnet. Product-Market Fit (PMF) and follow-on funding have been more challenging to secure compared to 2021 with both down significantly YoY.
- 18% of the cohort has either shut down or halted development, up from 13% in 2021.
- Only 12% of teams have secured follow-on venture funding, a significant drop from 50% in 2021.
- Just 15% of projects have launched a token, down from 50% in 2021.

Renewed Focus on Infrastructure and CeFi

- After a detour in 2021, investors returned to more proven consistent sectors of Infrastructure and CeFi, deploying nearly $2 billion and close to $450 million into these sectors, respectively—a 3x and 2x increase over 2021 figures.
- 80% of CeFi projects and 78% of Infrastructure projects have launched on mainnet, reflecting strong investor confidence in these sectors.
- The results at the application layer were more mixed, with 66% of Consumer Web3 and 68% of DeFi teams delivering a product to mainnet.
- Consumer teams were more likely to cease operations, with nearly twice the percentage of teams shutting down compared to those in Infrastructure.
- Projects in Payments (86%) and Wallets (90%) were the most likely to launch on mainnet.

Ethereum Leads, Bitcoin Endures

- Ethereum remained the dominant layer-one ecosystem in terms of fundraising, while Bitcoin projects continue to demonstrate resilience.
- $1.4 billion was invested in Ethereum-based projects, followed by nearly $350 million in Solana-based projects.
- Fundraising in the Polkadot ecosystem declined significantly, down 40% year-over-year.
- Teams building on Solana and Ethereum were equally likely to secure follow-on funding.
- In contrast, no teams in the NEAR ecosystem were able to raise follow-on rounds.
- Projects in the Binance ecosystem were the least likely to remain active, with one-third of teams ceasing operations. Solana's failure rate also doubled from 2021, reaching 26%.
- Bitcoin projects persist, with 100% of teams still active after two years.

Methodology

This report is based on a combination of first-party data, supplemented by insights from Messari, Root Data, Crunchbase, and other sources. To evaluate the progress of the seed-stage market, we categorized each company by stage, including "Active No Product Shipped" and "No Longer Active," with additional segmentation by ecosystem and sector. While we have made every effort to ensure data accuracy, we acknowledge that there may be errors due to the reliance on third-party data. Within ecosystems, we only included in our graphs those ecosystems with more than 15 teams who were able to raise an initial round of funding. 
One of the most challenging aspects of this analysis is determining whether a project has achieved Product-Market Fit (PMF). Unlike the objective milestone of "product shipped," PMF is often subjective and can be fleeting, particularly in the rapidly changing crypto market. We relied on a combination of on-chain data from analytics providers like Dune Analytics and DeFiLlama, as well as information from company websites and blogs, to make these determinations.

_{*Active No Product Shipped: project is active on social channels and providing updates but no product is available for use.
**No Longer Active: project has not updated social channels in > 3 months}
^{Note: projects can be included in two categories (e.g. Token Launched & PMF)}

The State of Seed

Our Seed Stage Retrospective began as an internal analysis aimed at identifying projects that were gaining traction but had not yet raised a subsequent round, potentially making them targets for Lattice. However, the data proved compelling enough to share with the broader industry.

This research is valuable because it sheds light on the health of various sectors, ecosystems, and the broader early stage market over time. Given that most seed-stage teams raise capital to sustain operations for roughly two years, we’ve decided to use that timeframe to look back on seed vintages. 

In 2022, over 1200 crypto companies raised $5B+ in seed and pre-seed funding. Looking back at this cohort, 72% of companies have launched on mainnet or an equivalent, up from 66% last year. Meanwhile, 18% of projects have either failed to ship or have already shut down, which is consistent with last year's figures. However, the most notable decline has been in teams finding PMF, with that figure dropping to closer to 1.5%. Worth pointing out again that for projects that function offchain, it can be difficult to assess how much traction they actually have so we are likely missing some teams that have early PMF. 

During a bear market, as retail interest wanes, it becomes increasingly difficult to attract users. Sectors that were hot during the 2022 vintage, such as NFTs, metaverse, and gaming, are not drawing users as they did two years ago. In contrast, infrastructure projects, which primarily serve other crypto companies, have proven more resilient. Prime example of this is Eigenlayer, which announced its seed round in January 2022 and has successfully scaled its AVS go-to-market strategy, with middleware projects eager to partner.
A good reminder that the hot sectors of today do not always materialize alongside investor appetite. For instance, the metaverse sector had 75 teams raise nearly $280M yet none have found PMF and over 21% have shut down and you’d be hard pressed to hear anyone talking about the metaverse. Compare that with DePIN or Ai which were barely registering in 2022 but two of the hottest narratives today.

VCs Tighten the Purse Strings

The 2022 cohort raised funds during one of the most exuberant periods in crypto history. Teams that announced raises in 2022 likely did so before the collapse of Terra and FTX, which sent the market into a deep freeze. While overall funding was up 92% from 2021, the follow-on market tells a different story. Only 12% of teams from the 2022 cohort have been able to raise additional rounds over the past two years. This contrasts sharply with the 2021 cohort, where nearly a third of teams secured follow-on funding.

Interestingly, token launches have also declined year-over-year, with only 15% of teams from the 2022 cohort launching a token, compared to 50% in 2021. This significant drop can be attributed to two main factors: 1) The 2022 cohort likely missed the bull market window, with many teams rushing to launch in the first half of 2024 and then launches drying up over the summer. 2) There has been a shift back to centralized exchanges (CEXs) for token launches, as decentralized exchange (DEX) launches have lost popularity due to declining DeFi liquidity. CEXs now command hefty listing fees, often in the seven figures, and demand significant percentages of the token supply. The saturated token market, coupled with CEX selectivity and the waning appeal of DEX launches, has made it more challenging to bring tokens to market.

Flight to Infrastructure

Infrastructure investments tripled compared to 2021, reflecting a clear shift in investor focus. While interest in infrastructure seems to be waning in late 2024, it was the favored sector throughout 2022 and into 2023. In contrast, DeFi was the only sector to see a year-over-year decline in investment, likely due to the aftermath of DeFi summer in 2020, which was marked by a proliferation of fast-money schemes, food coins, and ponzinomics. 

Investors have been rewarded for following the infrastructure trend with these teams most likely to raise follow-on rounds and launch on mainnet. Conversely, DeFi and consumer teams were more likely to launch tokens, but they were also more likely to shut down. The app layer has felt the squeeze—without additional capital, teams have been forced to either launch a token or shut themselves down. 

Not All Ecosystems Are Created Equal

Development across ecosystems reveals significant differences in project success rates. Nearly 80% of Ethereum-based projects have shipped a product, outperforming Solana, where only 61% have done so—a decline from 75% in the 2021 cohort. While Solana has clearly weathered the bear market well, the significant influx of capital in late 2021 likely led to overfunding.

The failure rate across the 2022 seed-stage teams remained consistent with the 2021 cohort, yet significant discrepancies emerged within individual ecosystems. As observed in the previous year, teams within the Binance ecosystem were most prone to shutting down, now joined by those in the Avalanche ecosystem. Notably, the failure rate for Solana-based projects doubled, with over 25% of teams ceasing operations. This increase is likely attributable to the influx of speculative capital during the bull market, which led to overextension and subsequent attrition during a particularly challenging period for Solana post-FTX. However, it is clear that the teams that endured this difficult phase have been rewarded. Additionally, it is worth highlighting the resilience of Bitcoin ecosystem teams, which not only continue to deliver but also demonstrate remarkable persistence, mirroring the reliability of the Bitcoin network itself.

The follow-on funding landscape in 2022 reveals a significant decline in all major ecosystems. Only 13% of Ethereum-based projects managed to secure additional funding, down from 31% in the 2021 cohort. Similarly, just 13% of Solana startups raised a follow-on round, a sharp drop from the 30% seen the previous year. Notably, ecosystems like Flow, StarkNet, and NEAR struggled to attract further investment, with none of their projects securing follow-on funding, highlighting the challenges these platforms face in sustaining developer and investor interest. This is particularly interesting given the amount of funding that went into the base layer of each of these ecosystems in late 2021 and 2022 with Dapper Labs raising nearly $600M in 2021, NEAR raising $500M in 2022, and Starkware raising nearly $200M across 2021 and 2022.

What Comes Next

The 2022 vintage is in an even more challenging position than 2021. In a sideways market without a lot of net new retail participation it remains a challenge to find PMF. Some teams have pivoted to hotter sectors (e.g. gambling related apps) where retail participation is today. Additionally, the significant decline in teams that have received follow on funding will limit the time these teams have to pivot to something new. Finally, with a meaningful increase in seed stage startups and a tighter token launch market, means significantly more teams trying to get through a narrower token launch opening.
Compounding all of those problems is that investors have moved on to the hotter sectors (e.g. DePIN & Ai) and ecosystems (e.g. Base & Monad) of today. This highlights that returns comes not from chasing what is hot right now but asking what will be hot in 1-2 years. 

We have no doubt that the seed stage market will remain healthy in crypto with just about all funds participating aggressively including a16z’s newly launched crypto startup school. The robustness of the later stage market is still in question for teams from this cohort that will be looking to raise for Series A’s and beyond. Even in our own portfolio we have seen the effects of shifting narratives impact the ability for founders to raise follow on capital.

Sectors & Trends to Watch

Privacy-Enabled Applications

Recently, there has been a uptick in investment toward privacy-enhancing technologies with two privacy infrastructure trends emeging over the past year; Zero Knowledge Transport Layer Security (ZK TLS) and Fully Homomorphic Encryption (FHE). ZK TLS adds a privacy-enhancing layer to current secure communications on the internet. ZK TLS projects like Opacity are working with companies like Lattice portfolio company NOSH to allow Nosh to piggyback on existing web2 delivery marketplaces. In this example, drivers login with their doordash credentials in the nosh driver app which the protocol views as an identity proof. The driver can perform deliveries for doordash in the nosh driver app while the demand side of the network matures, if an order originates from the protocol network (and not doordash), the driver earns tokens. We expect more use cases to emerge from this new privacy primitive 

Similar to ZK TLS, advancements in FHE infrastructure is likely to lead to a new class of crypto applications, everything from private Defi to DePINfied data collection. An early and practical example of this technology would be the sharing of sensitive health information with Ai companies. Lattice protfolio company Pulse is using a DePIN flywheel to collect health data which can be monetized by allowing researchers to analyze encrypted genetic data to identify patterns or biomarkers without accessing raw genetic information, thus preserving confidentiality. As privacy infrastructure advances and converges with broader trends—namely AI agents and decentralized physical infrastructure networks (DePIN) for data collection—it is likely to unlock a new wave of consumer and enterprise-focused applications. 

Augmented Reality Applications and Infrastructure‍

Broader tech trends heavily influence where crypto founders direct their efforts and investor dollars follow. We witnessed this firsthand with the surge in Ai-related startups in 2023-2024 on the heels of the massive Ai improvements from OpenAi. With Apple, Meta, and Snap all rolling out significant strategies in AR, we anticipate a growing wave of crypto startups emerging within this space as AR related technology finally reaches the masses. One example from the Lattice portfolio is Meshmap which is building a decentralized 3D map of the world. With the install base of AR devices set to explode in coming years, a 3D map for app developers to build experiences into will be critical. The excitement in 2021 for the metaverse was likely premature but the lesson from both last year and this year’s report is that what people are not paying attention to is where alpha can be generated.

Blockchain Enabled Collectibles Marketplaces 

Collectibles trading has mostly been relagated to trading digital assets specifically NFTs but there is a nascent sector emerging of blockchain enabled collecetibles marketplaces, everything from spirits marketplaces like BAXUS to watches with platforms like watches.io and Kettle. The trading of collectibles is already a massive market offchain but is plagued by issues including the lack of instant settlement, physical custody, and reliable authentication. 

We believe these challenges present an opportunity for “Blockchain-Enabled Collectibles Marketplaces” (BECMs), which are specifically designed for the needs of collectibles traders. BECMs enable instant trading through cash settlement, dramatically reducing settlement times from weeks to seconds by using stablecoins, and employ NFTs to represent physical assets held by trusted custodians. This model can unify fragmented markets, enhance liquidity, eliminate personal storage burdens, and build trust through authentication. BECMs also enable financial innovations like borrowing against collectibles, making collecting behavior more financially dynamic. As these efficiencies take hold, BECMs have the potential to significantly expand the total addressable market for collectibles by bringing in more traders, liquidity, and inventory. 

Ecosystem Carousel

Our tables and graphs only included ecosystems that had more than 15 projects raising venture financing, the smallest figure was NEAR with 15 projects thus just making the cut off. Probably not a major surprise but we expect to see significant changes with ecosystems represented and given trends we are seeing, Polkadot, NEAR, and Avalanche to be replaced by L2 ecosystems and up & coming L1 &2s like Monad, Berachain, and MegaETH.