From Madness to Rationality: The Evolution of Crypto Assets Venture Capital

Introduction

Once upon a time, every announcement of Crypto Assets funding was incredibly exciting. Any seed round financing was considered major news. "An anonymous team raises $5 million for an innovative DeFi protocol!" Such news always prompted me to delve into the founders' backgrounds, explore the project's Discord, and attempt to uncover its uniqueness.

Time flies, and we have arrived in 2025. Another round of financing hits the headlines: Series A $36 million, stablecoin payment infrastructure. I categorize it under "enterprise blockchain solutions" and immediately turn to other matters. I can't help but ask myself: when did I become so... pragmatic?

Since 2020, late-stage investments in Crypto Assets have surpassed early-stage investments for the first time, with a ratio of 65% to 35%. Looking back, this industry was once built on the foundation of pre-seed funding, with anonymous teams developing DeFi protocols in rudimentary environments, pursuing innovation. Nowadays? Series A and subsequent funding have become the main drivers of capital flow.

What changes have occurred?

Everything has changed, yet it seems like everything is the same.

The New Face of Crypto Venture Capital

Today’s venture capitalists are dressed in formal attire, and due diligence has extended from minutes to months. Regulatory compliance and institutional adoption have become key terms. Professional project presentations have replaced anonymous Discord messages. KYC processes, legal teams, and viable income models have become standard.

A certain company raised 36 million USD for "Unified On-chain Payment", while another raised 7 million USD for "Stablecoin-based Payment Service". These are all infrastructure projects, B2B solutions, and enterprise-level platforms. Mundane yet profitable and scalable business models have become mainstream.

Data Pivot

Q1 2025: 446 transactions raised a total of $4.9 billion, a quarter-on-quarter increase of 40%. Year to date: Total fundraising reached $7.7 billion, expected to reach $18 billion for the full year.

However, a major transaction where a sovereign fund invested $2 billion in a trading platform distorted the overall data, and in reality, the entire ecosystem remains in a sluggish state.

Interestingly, the correlation between Bitcoin prices and venture capital activities broke in 2023 and has yet to recover. Bitcoin reached new highs, while venture capital activities remained sluggish. Clearly, when institutions can directly purchase Bitcoin ETFs, they no longer need to gain exposure to Crypto Assets through risky startups.

Venture Capital Reality

Crypto Assets venture investment dropped from a peak of $23 billion in 2022 to $6 billion in 2024, a decline of 70%. The number of transactions plummeted from 941 in the first quarter of 2022 to 182 during the same period in 2025.

Even more alarming is that among the 7,650 companies that received seed round funding since 2017, only 17% entered Series A, and just 1% reached Series C. This reality is undoubtedly a wake-up call for founders who expect the "next big event."

Investment Direction Shift

In the years 2021-2022, fields such as games, NFTs, and DAOs, which were highly sought after, have almost disappeared from the venture capital landscape. In the first quarter of 2025, trading and infrastructure companies attracted the majority of investments, with DeFi protocols raising $763 million. The Web3/NFT/DAO/gaming category, which once dominated transaction volumes, has slipped to fourth place in capital allocation.

Venture capital has finally placed revenue-generating businesses above speculative narratives. Infrastructure that drives actual transactions, applications that users genuinely utilize, and protocols that incur real costs have received funding support. Other projects face the dilemma of running out of funds.

At the same time, artificial intelligence has become a major competitor in venture capital. Compared to betting on crypto games, investors are more inclined to AI applications that have a clear revenue path.

Financing Dilemma

The advancement rate of Crypto Assets from seed round to Series A is only 17%, meaning that for every six companies that raise seed round funding, five fail to obtain meaningful follow-on financing. In contrast, about 25-30% of seed round companies in the traditional technology industry can reach Series A.

This phenomenon stems from a fundamental flaw in the success metrics of Crypto Assets. For years, the script for Crypto Assets has been too simple: raise venture capital, build seemingly innovative products, issue tokens, and let retail investors provide exit liquidity. Venture capitalists do not need to worry about whether the company actually grows through funding rounds, as the public market will provide an exit for them.

However, this safety net has disappeared. Most tokens issued in 2024 are trading at only a small fraction of their initial valuations. A project that issued tokens at a fully diluted valuation of $6.5 billion has seen an 80% drop. There are very few projects with monthly revenues exceeding $1 million.

When the journey of a coin listing comes to an end, the true upgrade rate gradually reveals itself, and the results are not optimistic. The questions raised by venture capitalists are no different from those of traditional investors: "How do you make a profit?" and "When can you achieve profitability?" This is a revolutionary concept in the Crypto Assets field.

Centralization Trends

Despite a significant decline in overall trading volume, there has been an interesting change in trading scale. Since 2022, the median of seed rounds has increased significantly, even though the number of companies receiving funding has decreased.

This indicates that the industry is consolidating around fewer, larger investments. The era of broad net seed investments is over.

The signal to founders is clear: if you are not in the core circle, it may be difficult to obtain funding. Without the support of top-tier funds, the chances of securing follow-up financing will be significantly reduced.

This centralization is not limited to funding. Data shows that 44% of companies in a top fund's investment portfolio have that fund participating in subsequent rounds of financing. For another well-known fund, this ratio is 25%. Top funds not only select winners but also actively ensure that their portfolio companies continue to receive financial support.

Summary

Crypto Assets venture capital is undergoing a transformation from speculation to substance. The market is finally starting to apply performance standards that should have existed from the beginning. When only 17% of seed stage companies are able to enter Series A funding, it means that market efficiency has finally caught up with an industry that was once supported by excessive hype.

This transformation brings both challenges and opportunities. For founders accustomed to raising funds based on token potential rather than business fundamentals, the new reality may seem harsh. However, for companies that solve real problems and build genuine businesses, the environment has never been more favorable. Competition is reduced, investors are more focused, and success metrics are clearer.

Speculative funds have exited, leaving behind a substantial amount of capital needed for genuine entrepreneurship. The remaining institutional investors are no longer searching for the next "hot coin" or speculative infrastructure investments.

The founders and investors who survive this transformation will lay the foundation for the next chapter of Crypto Assets. Unlike the previous cycle, this time it will be built on business fundamentals rather than merely relying on token mechanisms.

The gold rush is over, and the real mining work has just begun.

Although we miss the chaos of the past, this is exactly the growth that the Crypto Assets industry needs.