Web3 infrastructure was hot, but few expected it to be this hot ??; Worrying layoffs at Polygon ??

???Hey,?Linas here!?Welcome to a????weekly free edition????of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.

If you’re not a subscriber, here’s what you missed this week:

1.???Cash App is turning into a FinTech beast we've not seen before????[deep dive into Block’s latest earnings + 3 more bonus reads]

2.???Coinbase’s latest results provide mixed feelings????[a closer look at the numbers + why the bullish case for Coinbase is still valid]

3.???Venture Capital funding has fallen off a cliff????[what can & should you do + 2 bonus reads on how significantly improve your chances of getting funded]

4.???Stripe expands its reach with Tap to Pay for Android????[why it's big; Stripe’s biggest mistake ever + 3 more bonus reads]

5.???January was great for Robinhood. But it's not good enough??? ♂?

6.???When corporate innovation works, or how Zelle is dominating P2P payments???

7.???NFT lending platform from ex-Coinbase employees. The next big thing????

8.???Tech giants are doubling down on Web3???

9.???Spotify’s NFT-powered playlists????[why they matter; what are Spotify’s Web3 plans + lessons for FinTechs from Spotify’s quest into audiobooks]

10. Permissionless innovation is the future???

and more! Don't miss out and join the community here????

Last week (20-24 February) was a really spicy one in the world of #Blockchain and #Cryptocurrency.?We will look at the Web3 infrastructure that’s having a heatwave right now (will uncover why is that & why it’s a recession-proof vertical), worrying layoffs at Polygon (this came unexpectedly and is really concerning), and other interesting news and developments.

Without further ado, let us dive into what happened in the Blockchain and #Crypto sector last week. Let’s connect the dots.

Web3 infrastructure was hot, but few expected it to be this hot ??

Following the money???Web3 infrastructure firm?Nefta?raised a $5 million seed round led by?Play Ventures?at a $32.5M valuation, The Block reported.

The firm was last valued at $10M last June when it raised $1M in pre-seed funding from?Picus Capital. That's a 225% jump in valuation in just 8 months ??????

The USP ???Founded last year, Nefta provides tools to businesses looking to enter and grow in the Web3 space.

These tools include bespoke APIs, software development kits, and white-label services to help businesses integrate digital assets, multi-chain wallets, and custom marketplaces.

?? THE TAKEAWAY

Recession-proof vertical ??Since the beginning of 2023, I’ve covered a number of Web3 companies that are becoming quite buzzy. Let’s take a big-picture view now so we could understand why it’s happening. One of the key things to understand is that despite the rise of Bitcoin and Ethereum, along with the emergence of new categories like DeFi, NFTs, etc., Web3 developers still represent less than 1% of the 31.1M software developers globally. The core reason is simply that the tools and infrastructure available to Web3 developers are much less robust than that of Web2. This, therefore, makes it more difficult to get started building, experimenting and deploying in Web3. That’s all quickly changing, however, as the number of monthly active Web3 developers hit all-time highs at the end of 2021. And to support this growing contingency, we need a robust infrastructure that could power the next stage of Web3 growth and innovation. Although historically, infrastructure projects in crypto have?raised?around $19 billion between 2017-2022, the most of any category, we’re still very early. If we believe that Web3 is the future, it’s not only a recession-proof vertical. More importantly, now it’s the best time ever to build that infrastructure and define the future going forward.

Worrying layoffs at Polygon ??

The news ???Ethereum Layer-2 scaling solution?Polygon?has joined the crypto winter club. The company announced it is laying off around 20% of its workforce, or 100 employees, as part of a restructuring exercise amid the ongoing crypto winter.

More on this ???The laid-off employees will receive three months of severance pay, regardless of their level or tenure at the startup

The layoffs come almost a year after the Ethereum Layer-2 scaling startup raised $450M in a funding round, led by Sequoia Capital India.

?? THE TAKEAWAY

What’s next? ???First and foremost, the fact that such hefty layoffs at this stage of the bear market are coming from Polygon Labs , which is one of the leading players in its niche, only signals deep pessimism from industry OGs as to the timing of a recovery. It’s hard to believe Polygon would pull the trigger like this unless it thinks 2023 isn’t going to be good. And that’s a huge warning sign for everyone out there.?Rest assured - nobody’s safe.?Furthermore, the fact that layoffs from Polygon are coming during a period of amazing momentum and projects going live only makes things worse. Finally, we must remember that Polygon raised 450M last February. This potentially indicates that they spent a whopping 200M ($16.6M/month???) already… That’s surreal ?? According to their executes, $100M of the $200M was dedicated to their Ecosystem Fund supporting great Web3 projects. And this definitely doesn't help because: most of these $ 100M investments were done at higher valuations in 2022, which basically means Polygon now holds a $30-40M illiquid investment in some Web 3.0 projects that may or may not turn to $10-12M by end of 2023. Worrying, very worrying.

On a bright note though…?Permissionless innovation is the future ??

Extra Reads & Quick Bites for Curious Minds??

• Adyen is coming for Stripe’s lunch? ???Payments superstar?Adyen?is inviting applications for its first North American accelerator event. The financial technology platform said in a?press release?that this edition of the?Adyen Accelerator?program is designed for startups that are focused on social impact initiatives in the United States, Canada, and Mexico. Applicants must be direct-to-consumer (DTC) businesses that have an impact on at least one of the United Nations Sustainable Development Goals, have an existing viable product that has launched in the North American market, be looking for support to scale, and be in their pre-seed or Series A stage, according to the release.?Stripe, Adyen’s biggest competitor globally, is often touted as the payments champion when it comes to SMEs (while Adyen is dominating in the enterprise). This move, although indirect, could be Adyen’s first step towards coming after Stripe’s lunch…?Reread:?Adyen is the fastest-growing global payments platform????[a deep dive into the payments giant you can no longer ignore]
• Goodbye ???Crypto hedge fund?Galois Capital?is?closing down?and returning what remains of its money to investors, per the Financial Times.?Galois was caught up in the FTX collapse, suffering a mortal wound given the amount of money locked up in the now-bankrupt exchange.?Galois Capital confirmed the shutdown in a Twitter thread, saying, "it is true that our flagship fund is shutting down."?Galois sold its bankruptcy claims for 16 cents on the dollar, per the FT report.?Remember: Genesis files for bankruptcy. Here's why it's alarming??
• Falling down ???Moody’s?downgraded?the creditworthiness of?Silvergate Capital?and its bank subsidiary?Silvergate Bank.?The move is the latest public blow to the troubled crypto-friendly bank.?Silvergate reported a fall in deposits, losses, and job cuts last month, citing a “transformational shift” driven by a sea change in the digital asset market.?Investment firms such as?Citadel Securities?and?Susquehanna Advisors Group?have bought significant stakes in Silvergate in recent days.?Bonus: FinTech death toll rises: FTX collapse causes a massive bank run ???[+6 bonus reads]

Money Moves??

• Israel-based fintech?Ledge?is emerging from stealth after raising $9M in seed funding for its automated payments command centre. Led by New Enterprise Associates (NEA), Vertex Ventures, FJ Labs, and existing investors Picus Capitals, Ledge plans to use the funds to enhance its no-code finance operations platform, with greater “treasury management” capabilities.
• Exchange operator?Euronext?has made an indicative offer to buy B2B WealthTech platform?Allfunds?for about €5.5B in cash and stock. In response to press speculation, both parties have issued statements confirming the takeover offer.
• Kaito, an AI-powered crypto search engine, now has $5.3M in its pocket to?improve browsing with AI and ChatGPT.

Continue reading by subscribing to?Linas's Newsletter.?You will receive fresh news about FinTech with hot takeaways every day.

P.S.?You might enjoy my earlier pieces as well:

?? Top 10 FinTech predictions for 2023 ??

?? Top banking trends to watch in 2023 ??

***

About: I am?a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading the company's expansion into Europe, I'm an active member of the FinTech community and a TechFin evangelist.

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