The crypto industry has not had a great run over the past year. Along with increasing regulatory scrutiny and skeptical investors, capital deployment has pulled back significantly from the highs of 2021, which has left many young startups struggling to raise funds.

This capital crunch is affecting the Bitcoin ecosystem as well. According to Erik Svenson, co-founder and CFO of blockchain infrastructure firm, Blockstream, Bitcoin-focused companies are falling behind as fewer checks are being written.

“I think investment into crypto kind of peaked early last year,” Svenson said on TechCrunch’s Chain Reaction podcast this week. “But Bitcoin itself has always been an area that has been undercapitalized.”

Founded in 2014, Blockstream focuses on its own sidechain technology, dubbed Liquid Network, it has bitcoin mining operations, and provides hardware wallets for bitcoin and other assets. Notably, it doesn’t have a token of its own, unlike many other crypto companies that launched their own during the initial coin offering (ICO) boom in 2017.

“We decided early on not to issue our own token,” Svenson said. “We didn’t raise an ICO like many projects did, so we’ve been relying on more traditional VC investment,” he added.

Blockstream raised $125 million in late January, bringing its total funding to about $400 million. The company had a post-money valuation of $2.49 billion as of August 2022, according to PitchBook data.

However, it’s not been all smooth sailing for the company, especially as the crypto waters have grown choppier amid the broader funding crunch. Svenson pointed out that while Blockstream has some “really bullish Bitcoin investors” on its cap table, it also has LPs, and the turbulence in the crypto market has made things more challenging. “The LPs are trying to parse both the macroeconomic factors and then also the industry-specific direction that everybody’s experienced in the last year.”