Funding Wrap: Y Combinator wants more stablecoin startups

The startup incubator Y Combinator issued its latest “request for startups,” listing 20 ideas it would “like to see more people working on.”

Unsurprisingly, the list heavily featured AI, but it also had a crypto-related pitch — stablecoin finance. Stablecoins are tokens pegged to the prices of fiat currencies, usually the US dollar. Stablecoin issuers often accrue yield on the reserves backing the tokens — a practice that can be highly profitable.

Stablecoins can easily move across borders while avoiding fees and fraud, and their “utility is so straightforward it seems inevitable traditional finance will follow suit [behind startups already using stablecoins],” Y Combinator group partner Brad Flora wrote.

Read more: Tether made nearly $1B in monthly profit during Q4

Y Combinator is a San Francisco-based startup incubator that guides founders through the early stages of their project before making a seed investment in the company. The incubator is known for being among the first backers of some wildly successful startups — including OpenAI, Airbnb and Reddit.

It also counts some crypto heavyweights as alumni, including Coinbase, OpenSea, and Protocol Labs; the company behind Filecoin and IPFS. 

In his blurb on stablecoins, Flora said “it seems clear that stablecoins will be a big part of the future of money.” Flora likened the future adoption of stablecoins to once-illegal music file sharing becoming big business vis a vis Spotify and Apple.

Read more: PayPal Ventures uses its stablecoin for investment in crypto transfer platform Mesh

Some crypto users on social media were slightly surprised but heartened by Y Combinator’s stablecoin embrace. 

“Respect to @ycombinator for coming around to it. Stablecoins are one of the few trillion dollar industries,” Sam Kazemian, founder of the decentralized stablecoin Frax, wrote on X. 

Crypto firms secured $1.9 billion in funding last quarter: PitchBook

Venture capital activity, typically a lagging indicator of crypto market performance, has been turning around. A report on Q4 fundraising from data platform PitchBook found crypto closed 326 deals last quarter totalling some $1.9 billion, a 2.5% increase from Q3. 

Venture activity towards the end of 2023 was buoyed by a series of nine figure rounds, including Wormhole’s $225 million raise at a $2.5 billion post-money valuation. 

Read more: Lava Network heats up the node landscape with market forces

PitchBook’s data shows there was $9.3 billion in crypto venture funding last year overall, down from $24.8 billion and $29.2 billion in 2021 and 2022. 70 VCs exited their investments last year, taking $1 billion with them, according to the report.

Other notable fundraises

• New crypto venture firm RW3 Ventures announced a $60 million fund.
• MetaStreet raised $25 million to build liquid credit tokens, an on-chain debt capital tool for NFTs. 
• Former FTX US exec Brett Harrison raised $12 million for his institution-focused new venture, Architect.
• Armistic Capital purchased shares totaling $6 million in value in Bitcoin mining firm Greenidge. 
• Modular blockchain network LAVA announced a $15 million seed round led by Jump Capital, Hashkey Capital and Tribe Capital.
• Ripple acquired the custody provider Standard Custody & Trust.

---

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.