From Frenzy to Rationality: The Maturation of Crypto Assets Venture Capital

Introduction

Once upon a time, every funding announcement of a Crypto Assets would excite people immensely. Each round of seed funding seemed to be major news. "An anonymous team raised $5 million for a revolutionary DeFi protocol!" Such news was always eye-catching.

However, by the time it reaches 2025, the situation is vastly different. A headline appears about a Series A funding round: $36 million for stablecoin payment infrastructure. Such news would now only be classified as "enterprise blockchain solutions" and then quickly overlooked.

This change reflects the overall trend of risk investment in Crypto Assets. Since 2020, late-stage transactions have first surpassed early-stage transactions, with a ratio of 65% to 35%. This industry, which once relied on seed financing and garage innovations, is now shifting towards a more mature investment stage.

The New Normal of Crypto Venture Capital

The world of crypto venture capital has undergone tremendous changes. Due diligence has been extended from a few minutes to several months, with regulatory compliance and institutional adoption becoming key terms. Professional project pitches have replaced anonymous Discord messages, and KYC processes, legal teams, and viable revenue models have become standard configurations.

Companies like Conduit and Beam have raised tens of millions of dollars for "unified on-chain payments" and "stablecoin-based payment services" respectively. These are enterprise-focused infrastructure projects that, while seemingly unremarkable, represent profitable and scalable business models.

Venture Capital Status

In the first quarter of 2025, the crypto sector completed a total of 446 transactions, with a total investment of $4.9 billion, a month-on-month increase of 40%. It is expected that the total financing for the entire year of 2025 may reach $18 billion. However, behind these numbers lies a fact: a few large transactions distort the overall data, while most of the ecosystem remains in a sluggish state.

It is worth noting that the correlation between Bitcoin prices and venture capital activities broke down in 2023 and has not yet recovered. When Bitcoin reached new highs, venture capital activities showed no signs of improvement. This indicates that when institutional investors can directly purchase Bitcoin ETFs, they no longer need to gain exposure to Crypto Assets through risky startups.

The Reality Check of Venture Capital

Crypto Assets venture investments dropped from a peak of $23 billion in 2022 to $6 billion in 2024, a decrease of 70%. The number of transactions also plummeted from 941 in the first quarter of 2022 to 182 in the first quarter of 2025.

What is even more alarming is that among the 7,650 companies that raised seed funding since 2017, only 17% successfully entered Series A, and only 1% reached Series C. This data will undoubtedly make every founder claiming to be the "next big thing" feel uneasy.

Shift in Investment Focus

The game, NFT, and DAO projects that were highly sought after in 2021-2022 have almost disappeared from the venture capital attention list today. In the first quarter of 2025, trading and infrastructure companies became the main targets favored by funding, with DeFi protocols raising $763 million. In contrast, the Web3/NFT/DAO/gaming category, which once dominated transaction volumes, has dropped to fourth place in capital allocation.

This shift indicates that venture capital is beginning to prioritize businesses that can actually generate revenue over speculative narratives. Those providing infrastructure for crypto asset trading, applications that users actually utilize, and protocols that can generate real fees are receiving more funding support.

At the same time, the field of artificial intelligence is becoming a major competitor for venture capital. Compared to betting on crypto games, investors are more inclined to choose AI applications that have clear revenue paths.

Graduation Crisis

The graduation rate of Crypto Assets from seed round to Series A is only 17%, meaning that for every six companies that raise a seed round, five may never obtain meaningful follow-up financing. In contrast, this ratio in the traditional tech industry is about 25-30%.

This low graduation rate reveals long-standing issues in the Crypto Assets industry. In the past, many companies relied on a simple model of "raising venture capital, building innovative products, launching coins, and providing exit liquidity from retail investors." However, this safety net has disappeared. Most coins issued in 2024 are now trading at only a small fraction of their initial valuation.

Today, venture capitalists are starting to ask the questions that traditional investors have been asking for decades: "How do you make money?" and "When will you be profitable?" This represents a revolutionary shift for the Crypto Assets space.

Centralization Trend

Despite the overall decline in trading volumes, the median size of seed rounds has significantly increased since 2022. This indicates that the industry is consolidating around fewer, larger investments. The "spray and pray" era of seed investing is over, replaced by a more concentrated allocation of funds.

For founders, this means that if they are not in the core circle, the chances of obtaining funding will be significantly reduced. Without support from top funds, the possibility of subsequent financing will also decrease significantly.

This centralization is reflected not only in funding but also in the ongoing support from investors. For example, 44% of the companies in the A16z portfolio have A16z participating in subsequent rounds of financing.

Looking to the Future

Crypto Assets venture capital is shifting from "revolutionary DeFi protocols" to "enterprise blockchain solutions." While this transition loses some of the early purity and craziness, it also signifies that the industry is maturing.

In the past few years, there has been a fundamental problem with the operation of venture capital in the crypto assets space. Startups can raise funds solely based on a white paper, obtaining liquidity by launching tokens to retail investors without having to actually build the products that users need. This has led to an ecosystem optimized for hype cycles rather than value creation.

Currently, the industry is undergoing a transition from speculation to substance. The market is beginning to apply stricter performance standards, which poses a significant challenge for founders who are used to raising funds based on token potential rather than business fundamentals.

However, for companies dedicated to solving real problems and building genuine businesses, the current environment may present an unprecedented opportunity. Competition for funding has decreased, investors are more focused, and the standards for success are clearer.

The exit of "tourist funds" has left a substantial amount of capital needed for genuine entrepreneurship. The remaining institutional investors are no longer looking for the next "meme coin" or speculative infrastructure investments, but are instead seeking projects that can establish long-term value.

The surviving founders and investors in this transformation will lay the foundation for the next chapter of Crypto Assets. Unlike the previous cycle, this time it will be built on a solid business foundation, not just token mechanics.

The gold rush is over, and the real value creation has just begun. Although we miss the chaos of the past, this is exactly the growth process that the Crypto Assets industry needs.