T H E B L O C K C R Y P T O . C O M

An overview of private markets And M&A activity during Q1’ 21

April 7th, 2021 T H E B L O C K C R Y P T O . C O M

Why this matters?

Funding data provides us with additional information to quantify interest in the sector beyond prices

● Examination provides a better understanding of which segments within crypto/ are deserving of your time and attention. ● Gives us the ability to spot trends before they are mainstream. ● The investment deals offer us perspective on how the investors themselves are seeing/approaching the market. ● Historical data can shows us additional context and can assist with spotting when the market is potentially becoming overheated relative to its past data.

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Our methodology.

● Crunchbase & Pitchbook provide a solid foundation but they only show part of the picture. ● Our team filters through all of the deals provided by these sources to eliminate and verify that they belong in the data set. ● Additionally, we use our own sourcing, additional resources, and communicate with private investors to uncover missing deals. This quarter - 100 deals added - Nearly ⅓ of the data set ● Lastly, our Research team analyzed the 314 crypto/blockchain-related investment deals and then recorded the investors involved, labeled their vertical, and determined their sub-categories.

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A historical quarter in private funding

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A historical quarter

● Roughly $3.18 billion in venture funding allocated to crypto/blockchain projects ● 314 total investment deals ● Average deal size of approximately $12.7 million and a median deal size of $2.0 million ● Seed deals accounted for 41% of investments (DeFi & NFTs/Gaming) ● 2021 is on track to surpass 2018 as the largest year in private funding for the industry.

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Why it’s historical:

● More money has already been raised in crypto so far this year than all of 2020 combined! ● Five deals this quarter qualified as one of the fifteenth largest crypto/blockchain funding deals of all time ● Fourteen investments rounds raised $50 million or more. ● The month of March alone had roughly $2.3 billion in private funding or nearly ten times the dollar volume of January.

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Why it’s historical:

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Five of the largest deals ever

Company Vertical Raise ($m) Valuation ($m)

BlockFi Crypto Financial Services $350 $2,650

Dapper Labs NFTs/Gaming $305 $2,170

Blockchain.com Crypto Financial Services $300 $4,900

NYDIG Crypto Financial Services $200 -

Bitpanda Crypto Financial Services $170 $1,030

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Funding by deal size

● An increase in velocity of small, mid, and larger-sized funding deals. Higher valuations and funding rounds across the board ● The first quarter alone this year had more deals >$100m than 2019 & 2020 combined ● From 2019-2020 there were a total of 14 deals that raised $50m or more. Q1 alone had the same number of deals.

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Defining the verticals

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Crypto Financial Services

● $1.64 billion in venture funding ● Roughly 52% of the industry’s total venture funding for the quarter was allocated toward this vertical ● Larger-sized deals in the crypto/blockchain sector are predominately being driven by this vertical - 4 of the 5 largest deals fell under this vertical and 57% of deals $50 million or greater in size ● Increased regulatory scrutiny - Crypto-specific tax software driving interest

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NFTs/Gaming

● $444.3 million in total investment ● One of the fastest-growing verticals within the industry - From February to March investment increased by roughly 586% ● NFTs provide a way for content creators to monetize their work, often through digital art pieces, collectibles, or in-game items. NFTs may look to disrupt other areas, including ticketing, content monetization, music, domain names, and fashion/luxury goods. ● Dapper Labs became the first crypto unicorn in the NFTs/Gaming space ● Investment in marketplaces heating up - Opensea, SuperRare, Zora, etc.

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Decentralized Finance (DeFi)

● Roughly 26% of the private investment rounds that occurred this quarter were DeFi-related projects. ● Although DeFi led the investment landscape in the volume of deals, their deals on average tended to be smaller in scale, with the smallest deal size on average out of the eight verticals ● Private rounds and smaller deals at higher valuations are commonplace

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Infrastructure

● The third most funding with approximately $283 million in funding ● Areas that generated the most private investment included layer-2 scaling technologies and mining operations ● Notable deals: Starkware’s $75 million Series B raise led by Paradigm & Optimism’s $25 million Series A funding round led by Andreessen Horowitz ● Dev Tooling projects also garnering interest for networks beyond Ethereum

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Most Active Investors

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The Investors

1. AU21 Capital 2. Genesis Block Ventures 3. CMS Holdings 4. Ventures 5. Spark Digital Capital 6. NGC Ventures 7. Alameda Research 8. Moonwhale Ventures 9. Digital Finance Group 10. LD Capital

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Most Active Investors - Cont.

● Combined, these funds made a total of these firms made 196 investments throughout the quarter ● Only three of the most active funds in 2020 made it to the list during the first quarter - Alameda Research, Coinbase Ventures, & NGC Ventures ● Genesis Block Ventures and Moonwhale Ventures are the only two firms where the DeFi vertical did not make up most of their investments.

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Most Active Investors - Cont.

● AU21 had the most investments with 27 - Primarily focused on DeFi & NFTs ● Repeating 2020, Alameda Research was the most concentrated with its investments, where 69% of its investments were DeFi projects. ● Coinbase Ventures - Most active investment quarter ever & its concentration in DeFi has picked up significantly ● Genesis Block Ventures and Moonwhale Ventures are the only two firms where the DeFi vertical did not make up most of their investments. 19 T H E B L O C K C R Y P T O . C O M

Notable trends & verticals

● Nearly half of the investments made by the most active investors were DeFi-related ● These investors on average were less active in Crypto Financial Services than the market ● Investments were highly concentrated towards DeFi and Infrastructure-related projects working on multi-chain support or alternative networks beyond Ethereum ● Roughly 39% of the investments plan to develop on Polkadot’s ecosystem

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Notable investor mentions

● Tiger Global, the major hedge fund and venture capital investment firm, has been more active in the crypto/blockchain sector of recent investments in crypto-financial services and the trading/brokerage verticals with investments TaxBit, BlockFi, and FalconX. ● Paradigm, one of the leading crypto investment firms in assets under management, has been much more active in participating in deals with nine investments this quarter. ● On the contrary, Digital Currency Group, which has a portfolio of at least 165 crypto-related startups and protocols, and has consistently been one of the most aggressive investors in the sector, had a slow investment quarter with only two investments.

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M&A Activity

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A historic quarter in M&A activity

● 41 M&A transactions - the most in the sectors history ● Previous high was in Q1’ 20 - 29 deals ● Roughly a 116% increase in deals from the previous quarter ● Dating back to 2015 - 333 M&A transactions

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M&A transactions by vertical

● Infrastructure (31%) acquisitions were the most common deal type in Q1 - All were related to Mining/Node Infra ● Trading/Brokerage (23%) was the second most common with 9 acquisitions ● Crypto Financial Services (15%) - Third most common & PayPal’s major acquisition of the custody tech provider Curv

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Infrastructure M&A - Mining/Node Infra

● Activity surrounding Mining/Node Infra companies has been heating up - 12 acquisitions ● Notable acquisitions by 500.com, Coinbase, Blockdaemon & Poolin ● Node infrastructure providers can continue to be a target for traditional firms looking to build out crypto-related services

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Other notable M&A deals

● Acquisitions by Animoca Brands, Coindesk, Coinbase, NYDIG, , Alameda Research, Bitso, and PayPal ● An acquihire of the DeFi project Ren ● NYDIG acquisition - Crypto Financial Services in need of Data/Information plays to compliment their service offerings.

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Looking ahead and verticals of interest

● After Coinbase’s public listing, the firm will likely switch its attention to growth and expansion. ● Coinbase has made the most acquisitions in the industry with 23 ● NFTs/Gaming, International Exchanges, Information Services, & Lending will be prime target areas

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Q&A

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