Lightspeed Newsletter: Solana’s missing venture capital

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VC is ducking the high valuations

Solana keeps garnering mindshare as SOL tokens continue a banner year, and retail crypto users keep on gambling with memecoins. But while Solana may be becoming one of the more high-profile crypto assets, this hasn’t exactly led to a flood of fresh venture capital.

This isn’t to say VCs don’t like Solana. Light Protocol co-founder Swen Schaeferjohann posted about a recent “tier-1” VC event where Solana founders were in the minority, but the founders and investors present said they “love” the layer-1.

Rather, it might be a question of valuations creeping too high in the bull market, Frictionless Capital general partner Logan Jastremski told me. Earlier this month, Frictionless announced it had raised $20 million to invest in “high performance blockchains” including Solana. 

“The venture market in 2023 was much better,” Jastremski explained, “because once the liquid market started pumping, then everybody was kind of tripping over themselves on the venture market to deploy because they need markups to show to their LPs to go raise more funds and show that they’re good investors.”

This deployment peaked in the first quarter of 2024, Jastremski told me. With VCs anxious to deploy funds before the end of the bull market, the valuations of early-stage startups started getting bid up. 

“Realistically, rounds were getting done in 2023 at $10 to $20 million seed stage, and now they’re at like $30 to $50 million,” Jastremski said. Higher valuations limit investors’ upside, and some appear to be waiting out the market. 

In my non-comprehensive straw poll of recent venture rounds, Solana-based startups seem to be skewing somewhat in the direction of apps rather than infrastructure. On the infrastructure side, there was notable activity with Rome Protocol, which is integrating some Solana capabilities into Ethereum, and the restaking service Solayer, which also raised funds.

On the app side, game-related startups like GolfN, Shaga, and Sonic all secured funding this summer. The air rights marketplace SkyTrade also announced its pre-seed round. And that’s all beside the Solana hackathon-cum-accelerator Colosseum, the recent winners of which skewed towards DePIN.

This might be attributed to a certain developer open-mindedness on Solana, which fosters more novel use cases. Anonymous Paradigm partner Frankie wrote over the weekend that they are “impressed by the amount of things being tried by teams on Solana that aren’t being tried anywhere else.”

Jastremski agreed that he’s seeing “a lot of funky things getting funded.” But in today’s world, where seemingly every new project has plans to launch a token, this may not be an unequivocally good thing.

“I think there’s a lot of perverse incentives where potentially you can launch a token and not have product market fit,” Jastremski said, adding that “a lot of applications are probably getting funded that probably wouldn’t have gotten funded otherwise.”

— Jack Kubinec

Zero In

75%

That’s the amount of Telefonica mobile data that Helium Mobile CEO Amir Haleem said is being offloaded to Helium hotspots, among users who opted into Helium’s network.

The context here is that Helium Mobile, the Solana-based phone carrier DePIN, entered into an agreement in January with the Spanish telecommunications company Telefonica. As part of this agreement, some mobile data from Telefonica’s network can be offloaded to Helium hotspots.

I couldn’t find a public version of Haleem’s dashboard, and Nova Labs didn’t immediately return a request for comment, but if the figure cited by the CEO is accurate, it could be the sort of thing that other major phone companies would find eye-catching.

— Jack Kubinec

The Pulse

Solana, like much of the crypto space, has had a wild few days. Prices surged over the weekend, following the bullish events at the Bitcoin 2024 conference, with SOL peaking around $193 early Monday. This movement aligns with a broader trend in the markets, driven by renewed investor interest and undeniably positive sentiment from certain political figures.

The network also passed a number of significant milestones Monday, with Solana exceeding Ethereum in total transaction fees and MEV tips on a weekly timeframe for the first time ever ($25M vs $21M). As noted by Blockworks’ own Dan Smith (@smyyguy), “Solana validators and stakers are absolutely eating this cycle.”

Calls for “Solana Summer!” rang out across the social landscape as prices returned to their highest value since April 2024. User @van00sa joked, “Once it breaks out, price will move so fast you won’t have time to say hawk tuah,” while @VVSDiamondsCoin exclaimed, “SOLANA HAS BROKEN $190! THE BULL-RUN IS BEGINNING!” @blknoiz06 opined, “Going to be funny when solana is deflationary & ppl realize about 500x too late that this was even possible.”

As is tradition, even a slightly bullish turn in the markets seems to send hopeful hodlers into ultra-bull mode, with some optimistically calling for prices exceeding $200, $500, $1000, and beyond. @CryptoSmithyy declared, “SOLANA WILL BE KING THIS CYCLE,” while @jonbking hinted, “You don’t want to know my target. At this point, it would remove credibility.” Others chided their more bearish brethren, with users like @wats4tea enthusing, “Solana Bears [are] still waiting for the ‘ultimate trap’ & nothing can stop what’s about to happen.”

Sure, at the time of writing, the price has dropped back down to around $187. But just between us, I think I might be about to reenter my “I told you so” era.

— Jeffrey Albus

One Good DM

A message from Ian Unsworth, co-founder of Kairos Research:

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