“The maturity of cryptocurrencies is not a negative development, but a necessary evolution for a technology seeking widespread adoption and long-term growth.”
Over the past few months, I’ve watched four crypto funds I know either shift to liquidity-only strategies or quietly shut down. Several major funds are struggling to raise capital. Many investors I know have abandoned the space entirely—some are chasing AI, others are stepping away altogether (and not just because they made a fortune retiring early on AI memecoins).
This isn’t noise or coincidence; something fundamental has shifted.
If we view this as a coming-of-age story, I believe crypto is leaving its wild, unfiltered childhood and entering late adolescence. Its chaotic early days, marked by short-termism, rampant speculation, and venture capital games, are giving way to a more mature, systematized era. This is an exciting moment, and this shift will have significant implications. For better or worse, I also think most Web3 VCs are unprepared for the changes ahead.
VCs love preaching adaptability to founders. Now, it’s time for venture capitalists themselves to make some adjustments.
Here are my latest thoughts on this transformation: how the old crypto venture capital model is crumbling, what’s replacing it, and which investors are best positioned to thrive in the next phase of crypto VC.
The Old Web3 Venture Capital Model
The previous crypto VC model worked something like this:
- Scout projects about a year from their token launch with connections to major centralized exchanges (CEXs). (Entire funds were raised on the premise that partners were former CEX employees or had deep exchange connections. Their “value-add” was sniffing out which projects would get listed. If a fund pitches you this model today, don’t listen…)
- Invest via a SAFT (Simple Agreement for Future Tokens), maybe with some advisory services thrown in.
- When a project holds a Token Generation Event (TGE), sell quickly to retail investors, as lockup periods were less stringent than today’s 1+3 standard. High retail demand for VC-backed tokens during market cycle peaks fueled this strategy.
This model’s viability led to a lot of bad behavior. First, many VCs raised five-year funds—half the duration of a typical Web2 fund. This structure alone makes it nearly impossible to support long-term builders. If your fund can only hold assets for five years before distributing to limited partners, you can’t systematically invest in projects with a standard 10-year liquidity path.
On the flip side, founders backed by these investors faced immense pressure to achieve liquidity on an accelerated timeline, often rushing to a TGE before even reaching product-market fit (PMF).
For the industry’s health, this model is rapidly becoming obsolete.
As we head into 2025, we’re seeing a maturing market with greater regulatory clarity and renewed interest from traditional financial institutions, driving a more systematic approach focused on fundamentals, real utility, and sustainable business models.
The Look of Growth
I believe the future of the crypto industry will demand more patience from investors and founders. A maturing market is bringing substantial changes:
- Longer Lockup Periods: Most CEXs are standardizing a one-year lockup followed by a 2- to 3-year vesting period.
- Focus on Fundamentals: Oversaturation of altcoins, coupled with a more discerning retail base, is forcing the market to prioritize quality—real revenue, defensible competitive advantages, and clear paths to profitability are replacing speculative plays. To be clear, memecoins aren’t dead, but they need strong fundamentals to stand out.
- Alternative Exit Paths: Initial public offerings (IPOs) are becoming viable for crypto companies, alongside meaningful merger and acquisition (M&A) outcomes, offering new liquidity avenues independent of token issuance.
I’m not confident most Web3 VCs are ready for this reality. From what I’ve observed, firms that have caught on have either exited the market, shifted to liquidity investments, or are raising new funds structured differently to adapt. Meanwhile, firms embracing this new model are poised to thrive.
Who Will Win in This Evolving Market?
There’s no doubt this new landscape presents a massive opportunity for some funds. Multi-stage firms that can support founders from pre-launch to IPO now operate in a market few can match. There are maybe 10(?) crypto funds capable of leading Series A rounds and beyond. Beyond capital, few funds can offer the support and resources to guide crypto companies toward IPOs. How many funds prioritize (and implement) true corporate governance? How much do you know about roadshows, investor relations, and the like? Not much, I suspect… But if you’re one of those funds—holding yourself to a higher standard and operating systematically while the casino lets immature emerging managers pretend to be genius investors—you’re entering a golden era of investing.
In the early stages of the VC market, the role of pre-seed investors is also shifting. Many pre-seed and seed investors used to jump in early to advise on community building and market share growth, securing liquidity before real product development. Now, I believe early-stage investors will need to excel at working with portfolio companies to find product-market fit, iterate on products, and engage with users, rather than rushing to launch and liquidate.
One final thought on this: I recall a CSX 2023 presentation advising companies to find product-market fit before launching a token. It’s wild to admit that this view was somewhat controversial in the industry at the time. Thankfully, I believe this perspective is gaining traction as the focus on fundamentals grows. This, in turn, should drive our industry to build more robust, sustainable businesses. (I’ve noticed some interesting conversations and experiments around “micro” token offerings, which allow teams to secure enough funding to develop a product. The jury’s still out on this path’s viability, but I’d love to explore it further.)
Embrace Maturity
Crypto’s maturation isn’t a negative—it’s a necessary evolution for a technology seeking mainstream adoption and long-term growth. Projects built today are more substantive, focused on solving real problems, and more likely to create lasting value than many of their predecessors.
For venture capital firms, this shift is both a challenge and an opportunity. Firms that adapt their models to accommodate longer time horizons, prioritize fundamentals over hype, and deliver real value beyond capital will thrive in this new landscape. Those clinging to outdated models will fall further behind, and savvy founders will choose to work with funds that can best support them in this new environment.
The crypto industry is growing up. The question for VCs is whether they can grow with it.
