Funding Wrap: Investor focus shifts to layer-2s

Plus, derivatives are growing in popularity, and a16z Crypto has a new way for LPs to invest


Evannovostro/Shutterstock modified by Blockworks


Ethereum’s Dencun upgrade, the network’s most consequential since the 2022 Merge, went off without a hitch last week, reducing gas fees on many layer-2s to a couple of cents. 

A week later, Ethereum’s layer-2 ecosystem has become a focus of funding announcements.

The layer-2 infrastructure startup Espresso announced $28 million in Series B funding led by a16z crypto on Thursday. Various layer-2-related firms participated, including Polygon, StarkWare, and Arbitrum developer Offchain Labs.

Read more: Espresso lands $28M to become marketplace for shared sequencing

Espresso is largely known for building a shared sequencer for layer-2s, where rollups can order and process transactions via a shared marketplace, rather than in their own execution environments. This could theoretically make layer-2s more interoperable, though the program is still in testnet. 

“At its core, crypto is a technology movement that builds tools for better human cooperation at a larger scale—especially when the cooperating parties mutually distrust one another. Espresso and Ethereum are the perfect embodiment of that ideal,” a16z general partner Ali Yahya wrote in a blog post. 

The funding follows on $32 million Espresso raised led by Greylock Partners and Electric Capital in 2022. 

Read more: Espresso Sequencer’s fourth testnet launch integrates with Arbitrum

Two layer-2s also announced noteworthy raises. 

Morph raised $20 million in seed funding led by Dragonfly. Co-founded by Cecilia Hsueh, formerly of derivatives exchange Phemex, and Azeem Khan, previously at Gitcoin, Morph brands itself as a consumer-centric blockchain. Pantera, Foresight Ventures, and The Spartan Group were among other investors in the layer-2, which is also still in testnet. 

The developer behind privacy-focused layer-2 TEN, short for the encrypted network, raised $9 million led by R3, The Block reported

Derivatives exchanges

As crypto prices rise, derivatives exchanges where traders can speculate on future crypto asset prices are becoming more popular. 

Rails came out of stealth with $6.2 million in seed funding this week for a self-custody-focused perpetuals exchange. The round saw participation from Slow Ventures, Round13 Capital, CMCC Global, and Quantstamp. Two of the project’s three co-founders previously held leadership positions at the LGBTQ dating app Grindr. 

Institution-focused derivatives infrastructure startup Kemet also announced $5 million in funding led by Further Ventures. 

Further said it felt Kemet is offering the “first true institutional single-access point into the digital asset derivative ecosystem” in a blog post announcing its investment. 

Other notable fundraises

  • Zero-knowledge infrastructure developer Succinct announced a $55 million Series A led by Paradigm.  
  • Limited partners at a16z will be able to invest in the VC’s crypto seed and venture verticals through a new general fund Andreessen is raising called Multiplexer, The Information reported
  • Real world asset tokenization startup MANTRA raised $11 million led by MENA-based Shorooq Partners. 
  • Sonarverse secured $7 million in funding led by BlockTower Capital for an on-chain data platform aimed at institutional investors.

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