From Hype to Rationality: The Growth Path of Crypto Assets Venture Capital

Introduction

Once upon a time, every announcement of Crypto Assets financing excited me immensely.

Each round of seed funding seems to be major news. "Anonymous team raises $5 million for innovative DeFi protocol!"

I will enthusiastically study the backgrounds of the founders, deeply explore their communities, and try to understand what makes the project unique.

The year is 2025. Another financing news appears in the headlines. Series A financing. 36 million dollars. Stablecoin payment infrastructure.

I categorize it as "enterprise blockchain solutions" and then continue with other matters.

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

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 thinking about repeatedly.

This industry was once based on pre-seed financing, with anonymous teams developing DeFi protocols for innovation in rudimentary environments.

And now? Series A and subsequent financing are driving the flow of funds.

What changes have actually occurred?

Everything has changed. But it seems like nothing has changed.

The Transformation of Crypto Venture Capital

Dressed in suits and leather shoes, the venture capitalists. Due diligence extended from a few minutes to several months.

Regulatory compliance. Institutional adoption.

Professional project recommendations, rather than anonymous community news.

Strict identity verification process. Legal team. Practical 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 platforms.

Ordinary, profitable, and scalable business.

The headlines of Crypto Assets venture capital often exaggerate the numbers, so let's take a look at the real data:

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

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

However, the problem is that a certain sovereign fund invested 2 billion dollars in a certain trading platform.

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

According to data from a certain research institution, the correlation between Bitcoin prices and venture capital activity—which has been 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 buy Bitcoin ETFs, they do not need to fund risky startups to gain exposure to Crypto Assets.

The Reality Check of Venture Capital

Investment in Crypto Assets has decreased by 70% from its peak of $23 billion in 2022 to only $6 billion by 2024.

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

What's even more alarming is that among the 7,650 companies that raised seed round financing since 2017, only 17% have entered Series A.

And only 1% reached Series C.

This is the mature process of risk investment in Crypto Assets, and it will be painful for those who think the feast will last forever.

Shift in Investment Focus

The popular fields of 2021-2022—games, NFTs, DAOs—have almost disappeared from the interest of venture capitalists.

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

This indicates that venture capital has finally placed revenue-generating business above narrative-driven speculation.

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

The applications that people actually use have received funding.

The protocol that generates actual returns has received funding.

Other projects will find it increasingly difficult to obtain capital support.

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

Compared to betting on encryption games, investors are more inclined towards AI applications with clear revenue paths. The opportunity cost of crypto native applications has significantly shifted against projects that cannot demonstrate immediate utility.

The Growth Dilemmas of Startups

Let us focus on a thought-provoking statistic: the upgrade rate of Crypto Assets from seed round to Series A is only 17%.

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

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

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

Why? Because for many years, the script of Crypto Assets has been simple: raise risk capital, build seemingly innovative products, launch tokens, and let retail investors provide exit liquidity. Venture capitalists do not need the company to actually grow through funding rounds, as the public market will provide them with an exit.

This safety net has disappeared. Most tokens issued in 2024 are trading at only a small fraction of their initial valuation. The token of a certain protocol was issued with a fully diluted valuation of 6.5 billion USD, and has now dropped by 80%. Projects with monthly revenues exceeding 1 million USD are few and far between.

As the journey of the coin listing comes to an end, the true growth rate gradually becomes apparent. Moreover, the results are not optimistic. The questions raised by venture capitalists now are the same as those traditional investors have been asking for decades: "How do you make a profit?" and "When can you achieve profitability?" This is clearly a revolutionary concept in the field of Crypto Assets.

Trend of Investment Centralization

Although the number of transactions has significantly decreased, there has been an interesting change in transaction scale. Since 2022, the median of seed rounds has increased significantly, despite the overall number of companies raising funds declining.

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

The message to the founders is very clear: if you are not in the core circle, you may not receive funding. If you do not secure financing from top-tier funds, your chances of obtaining subsequent financing will significantly decrease.

This centralization is not limited to funds.

Data shows that 44% of the companies in a top venture capital portfolio have the participation of the institution in subsequent rounds of financing.

For another well-known venture capital firm, this ratio is 25%. Top funds not only select winners but also actively ensure that their portfolio companies continue to receive funding.

Conclusion

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

To be honest, this change feels contradictory.

On one hand, I miss that chaos. The extreme volatility. Those anonymous teams with usernames raising millions of dollars for ideas that sound like fantasies.

There is a kind of purity in that madness. It is merely the builders and believers betting on a future that traditional finance cannot even imagine.

On the other hand, I have witnessed too many promising projects fail due to insufficient fundamentals, understanding that such adjustments are inevitable.

For many years, the Crypto Assets venture capital has operated in a fundamentally flawed way. Startups can raise funds solely based on a white paper, launch tokens to retail investors for liquidity, and then claim success regardless of whether they have built something that users truly want.

The result is an ecosystem optimized for hype cycles rather than value creation.

Currently, the industry is undergoing a shift from speculation to substance.

The market has finally started to apply the performance standards that should have existed from the beginning. When only 17% of seed round companies make it to Series A funding, it means that market efficiency has finally caught up with an industry that was once artificially supported by excessive narrative.

All of this brings both challenges and opportunities. For founders accustomed to raising funds based on token potential rather than commercial fundamentals, the new reality is harsh. You need users, revenue, and a clear path to profitability.

But for those companies building solutions to real problems and genuine businesses, the environment has never been better. Competition for funding has decreased, investors are more focused, and success metrics are clearer.

Speculative funds have already exited, leaving behind the substantial capital needed for genuine entrepreneurial companies. The remaining institutional investors are not looking for the next "popular token" or speculative infrastructure investments.

The founders and investors who survived this transformation will build the infrastructure for the next chapter of Crypto Assets. Unlike the previous cycle, this time it will be based on business fundamentals rather than token mechanisms.

The gold rush is over. The real mining operations have just begun.

Although I mentioned missing that kind of chaos? But this is exactly what the Crypto Assets need.