From Frenzy to Rationality: The Growth Journey of Crypto Assets Venture Capital

Introduction

Once upon a time, every announcement of Crypto Assets financing was incredibly exciting.

Every round of seed financing seems to be major news. "A certain team raises $5 million for an innovative DeFi protocol!"

I will diligently research the founders' backgrounds, deeply explore their communities, and try to understand the uniqueness of the projects.

Time flies and we arrive in 2025. Another financing news hits the headlines. Series A financing. 36 million USD. Stablecoin payment infrastructure.

I categorize it under "Enterprise Blockchain Solutions" and then continue to handle other matters.

Unknowingly, when did I become so......practical?

Since 2020, the late-stage investments in Crypto Assets have surpassed early-stage investments for the first time.

65% to 35%.

This ratio is worth emphasizing again.

This industry was once built on early-stage funding, with innovative teams constructing DeFi protocols in informal environments for innovation.

And now? The financing in Series A and beyond is driving the flow of funds.

What changes have actually occurred?

Everything has changed. Yet it seems that nothing has changed.

The New Face of Crypto Venture Capital

Investors in formal attire. Due diligence extended from a few minutes to several months.

Compliance regulation. Institutional adoption.

Professional project promotion has replaced informal community communication.

Verification process. Legal team. Feasible revenue model.

Some companies raised $36 million for "Unified On-chain Payments". Another company raised $7 million for "Stablecoin-based Payment Services."

These are infrastructure projects. B2B solutions. Enterprise-level platform.

Pragmatic, profitable, and scalable business.

The headlines of venture capital in Crypto Assets often exaggerate; let's start from the facts:

Q1 2025: 446 transactions with a total investment of $4.9 billion (quarter-on-quarter growth of 40%).

So far this year: a total of $7.7 billion raised, expected to reach $18 billion by 2025.

However, it is worth noting that a certain sovereign fund invested 2 billion dollars in a certain trading platform.

This precisely reflects the current venture capital environment: a few large transactions distort the data, while the overall ecosystem remains sluggish.

According to data from a research institution, the correlation between Bitcoin prices and venture capital activity—reliable for many years—broke in 2023 and has not yet recovered.

Bitcoin has reached a new high, while venture capital activity remains sluggish. It turns out that when institutions can purchase Bitcoin ETFs, they do not need to fund riskier startups to gain exposure to Crypto Assets.

Reality Check of Venture Capital

Crypto Assets venture capital fell 70% from its peak of $23 billion in 2022 to only $6 billion in 2024.

The number of transactions plummeted from 941 in the first quarter of 2022 to 182 in the first quarter of 2025.

What every founder claiming "the next big opportunity" should be wary of is that—of the 7650 companies that raised seed round financing since 2017, only 17% made it to Series A.

Moreover, only 1% reached the C round.

This is the mature process of risk investment in Crypto Assets, and for those who believe that prosperity will last forever, it will be a painful realization.

Shift in Investment Focus

The popular sectors of 2021-2022—gaming, NFTs, DAOs—have almost disappeared from the focus of venture capital.

In the first quarter of 2025, companies building trading and infrastructure attracted most of the venture capital. DeFi protocols raised $763 million. Meanwhile, the Web3/NFT/DAO/gaming category, which once dominated transaction volume, has slipped to fourth place in capital allocation.

This indicates that venture capital has finally placed revenue-generating businesses above concept-driven speculation.

The infrastructure that truly drives Crypto Assets trading has received funding.

Projects with wide practical applications have received funding.

The protocol that generates actual returns has received funding.

Other sectors are facing a shortage of funds.

Artificial intelligence has also become a major competitor in venture capital.

Compared to betting on crypto games, investing in AI applications with a clearer income path is obviously more attractive. The opportunity cost of crypto native applications has significantly increased, which is unfavorable for projects that cannot demonstrate immediate utility.

Financing Dilemma

The most thought-provoking data is: the upgrade rate of Crypto Assets from seed round to Series A is only 17%.

This means that out of every six companies raising seed rounds, five will never be able to obtain meaningful follow-up financing.

In contrast, about 25-30% of seed-stage companies in the traditional technology industry reach Series A, highlighting the severity of the issue.

The success metrics of Crypto Assets have long had fundamental flaws.

The reason lies in the fact that for many years the development model of Crypto Assets has been overly simplistic: raising venture capital, building seemingly innovative products, issuing tokens, and letting retail investors provide exit liquidity. Venture capitalists do not need to care whether the company has really grown through financing rounds, as the public market will provide them with a way out.

This safety net has disappeared. The trading price of most tokens issued in 2024 is only a small fraction of their initial valuation. A certain project's token was issued at a fully diluted valuation of $6.5 billion, but has now dropped by 80%. There are very few projects with monthly revenues exceeding $1 million.

When the path of coin issuance comes to an end, the true growth path gradually emerges. However, the results are not optimistic. The questions now posed by venture capitalists are eerily similar to those that traditional investors have been asking for decades: "How do you make a profit?" and "When can profits be realized?" This is clearly a significant shift in the realm of Crypto Assets.

The Trend of Investment Centralization

Despite a significant decrease in the number of transactions, there has been an interesting change in transaction scale. Since 2022, the median for seed rounds has risen considerably, even though the overall number of companies raising funds has declined.

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

The message to the founders is clear: if you are not in the core circle, it will become much more difficult to secure funding. Without support from top-tier funds, the chances of obtaining follow-up financing will significantly decrease.

This centralization is not limited to the allocation of funds.

Data shows that 44% of the companies in a top-tier fund's investment portfolio had participation from that fund in subsequent financing rounds.

For another well-known fund, this ratio is 25%. Top funds not only select high-quality projects but also actively ensure that their portfolio companies continue to receive funding support.

Conclusion

We have witnessed the transition from "revolutionary DeFi protocols" to "enterprise blockchain solutions."

To be honest, this change is quite moving.

On one hand, I miss that time full of uncertainties. The intense market fluctuations. Those anonymous teams raised millions of dollars for seemingly whimsical ideas.

That kind of madness contains a certain purity. It is merely the builders and believers betting on a future that traditional finance cannot imagine.

But on the other hand — having witnessed too many potential projects fail due to insufficient fundamentals — I am well aware that this adjustment is inevitable.

For a long time, Crypto Assets venture capital has operated in a fundamentally flawed manner. Startups can raise funds solely based on concepts, launch tokens to retail investors for liquidity, and then claim success regardless of whether they have created actual value.

What is the result? An ecosystem optimized for short-term speculation rather than long-term value creation.

The industry is now undergoing a shift from speculation to substance.

The market has finally begun to apply performance standards that should have existed long ago. When only 17% of seed-stage companies are able to enter Series A funding, it means that market efficiency has finally caught up with this industry that was once supported by excessive hype.

This transition brings both challenges and opportunities. For founders accustomed to raising funds based on concepts rather than business fundamentals, the new reality may seem harsh. You need users, revenue, and a clear path to profitability.

But for companies that solve real problems and build real businesses, the environment has never been more favorable. Competition for funds has decreased, investors are more focused, and success metrics are clearer.

Speculative funds have withdrawn, leaving behind substantial capital that truly supports innovation and entrepreneurship. The remaining institutional investors are not looking for the next "hot concept" or speculative projects.

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

The speculative frenzy has ended. The real value creation has just begun.

Although I said I miss that chaotic period, it is precisely the change that the Crypto Assets industry needs.