Large VC Firms and Pension Funds Are Coming in Crypto and Inflating the Valuations: PwC

Cryptocurrency companies are enjoying a rapid rise in valuations thanks to the entry of large investors, according to professional services firm PwC. Big venture capital firms, private equity players, and even pension funds are replacing family offices and boutique firms in these fundraising campaigns of crypto companies, PwC Crypto Leader Henri Arslanian told Bloomberg in an interview. Arslanian said these big names are putting a bid in for a higher valuation, making smaller venture capital firms unhappy. He added,

“This is happening a lot with very early-stage companies, say, $5 million to $20 million -- the prices are being inflated.”

Back in 2020, crypto M&A was about $3 billion, but in 2021 this amount was raised in just the last two to three months alone. Crypto deals have heated up in recent months after crypto asset prices went skywards. According to Arslanian, besides the regulatory risk, the challenge involves assessing the valuation of businesses that are a few months or years old. Another issue, he said, is a lack of suitable assets to invest in as there aren’t many companies that are “investable, looking for capital and could absorb $100 million.”