Paradigm's Moment of Stagnation: When "Research-Driven" Meets Reality Test

Article by: Gu Yu, ChainCatcher

For a long time, Paradigm has been an iconic venture capital firm in the crypto industry, representing top-tier investment style and aesthetics within the sector. Its research-driven approach to crypto VC has been highly praised. However, influenced by industry cycles, Paradigm has not been immune to the current downturn in VC, and one of the signs is an unprecedented wave of executive departures. Since April this year, at least 7 employees have left, including several partners.

In December, Paradigm’s first employee and general partner Charlie Noyes, along with Paradigm’s head of market development Nick Martitsch, announced their departure successively.

In September, Paradigm’s general counsel Gina Moon and researcher Transmissions11 left the firm.

In June, Paradigm’s head of business operations Teresa G. Grandía resigned.

In April, engineering lead Loren Siebert and research partner samczsun also left.

Source: RootData

This wave of departures is extremely rare among top-tier VC firms, reflecting that Paradigm is facing significant difficulties. Based on publicly available portfolio data and trading frequency, Paradigm’s investment activity has noticeably decreased over the past two to three years, lacking industry consensus “blockbuster” projects, and missing out on many high-return projects. These factors are likely major sources of Paradigm’s current predicament.

Repeatedly picking up the slack, missing star targets

Paradigm’s golden era roughly spanned from 2019 to 2021. During this period, it made key investments in projects like Uniswap, Optimism, Lido, and Flashbots, establishing a strong brand identity: infrastructure technology, Ethereum core ecosystem, and long-termism. This also earned Paradigm a notable reputation among crypto entrepreneurs and investors.

These typical investments share several characteristics: not short-term hot topics, but underlying protocols or critical middleware; relatively early investment timing, but not extremely early; and highly aligned with Paradigm’s internal research focus.

It was during this phase that Paradigm formed a clear and repeatedly emphasized investment strategy: research-driven. However, this methodology has shown diminishing adaptability in subsequent cycles amid rapid industry changes, leading to a noticeable gap between Paradigm’s investment performance and influence.

Starting in 2022, new high-growth projects increasingly appeared in application layers, financial innovation, mechanism design, and product experience sectors—such as prediction markets, yield structure protocols, and perpetual contracts. These projects tend to iterate quickly, are more product-oriented, and have higher tolerance for “technical correctness,” but are more sensitive to “user growth” and “mechanism efficiency.”

In the previous cycle, Paradigm notably supported and invested in the breakout projects Blur and Friend.tech, becoming one of the main drivers behind their popularity. However, both projects quickly declined after token issuance, with teams selling large amounts of tokens and gradually becoming less active, raising questions about Paradigm’s investment perspective and style.

At the same time, Paradigm also participated in follow-on funding rounds for many high-valuation projects. While this strategy brought profits during the bull market, ongoing downturns in the altcoin market and issues within the projects themselves caused most of Paradigm’s heavy holdings to fall below their cost basis shortly after token issuance or seek transformation due to poor development.

In May 2024, Paradigm led a $150 million Series A funding round for Farcaster at a $1 billion valuation. Now, Farcaster has announced it is abandoning the social sector and shifting focus to wallets.

In May 2024, Paradigm led an $80 million funding round for Babylon at an $800 million valuation. Today, Babylon’s token FDV is only $180 million.

In April 2024, Paradigm led a $225 million funding round for Monad at a $3 billion valuation. Currently, Monad’s token FDV is only $1.7 billion.

In June 2022, Paradigm participated in a $130 million funding round for Magic Eden at a $1.6 billion valuation. Today, Magic Eden’s token FDV is only $200 million.

What’s even harder for Paradigm to accept is that it missed early investments in many high-return projects over the past few years, such as Ethena, Pump.fun, Ondo Finance, MYX, and others. In popular sectors like derivatives and RWA (Real-World Assets), Paradigm has not invested in any projects in recent years.

Regarding prediction markets, which have been highly favored by capital markets in recent years, Paradigm invested in Veil as early as January 2019. However, the project ceased operations less than a year later.

The prediction market model is not fundamentally new, nor is its technology particularly advanced. Paradigm’s failed investments in this area led it to skip Polymarket’s first five funding rounds. It wasn’t until January this year, when Polymarket announced a $1.5 billion valuation after raising $120 million, that Paradigm recognized the value of this sector. Subsequently, it shifted focus to Polymarket’s competitor Kalshi, leading a $185 million round at a $2 billion valuation in June, and then participating in two more rounds at valuations of $5 billion and $11 billion within half a year. This is the highest valuation project Paradigm has ever invested in.

This indicates that Paradigm is determined not to miss out on the core investments in the hottest sectors, even exhibiting a “FOMO” mentality.

Incubation projects stagnate

Deep involvement in project incubation has long been a hallmark of Paradigm, with Uniswap and Flashbots being prime examples from previous cycles.

In a prior article, Paradigm described itself as a developer-led group aimed at supporting other developers. The most effective collaborations often involve deep cooperation with startup teams to solve key business and research challenges.

For VC firms, joining projects at the concept stage allows for greater influence on product design and strategic direction, unlocking higher value potential and enabling better bargaining power and returns.

With multiple successful cases, Paradigm has continued exploring incubation models, including launching an institutionalized EIR (Entrepreneurs-in-Residence) program, where both parties work together in the same office, with VC providing strategic, technical, and recruitment support. However, recent cases suggest this model has faced setbacks.

In December 2023, Paradigm collaborated on developing the on-chain developer platform Shadow through the EIR mechanism and invested $9 million. The project has since ceased development, with the founding team launching Ventuals, a platform for derivatives of private company equity.

Previously, Paradigm participated in writing whitepapers, development, and investment in the decentralized fixed-rate protocol Yield Protocol, which announced ceasing operations in October 2023.

Subsequently, Paradigm shifted focus solely to infrastructure. In October 2024, the crypto VC announced a $20 million investment in Ithaca, a spinoff developing a new Layer 2 blockchain called Odyssey. Paradigm CTO and general partner Georgios Konstantopoulos became Ithaca’s CEO, while maintaining his role at Paradigm. Co-founder Matt Huang became chairman of Ithaca.

This team structure shows Ithaca was developed entirely by Paradigm’s core team, with deeper involvement than previous projects like Uniswap. Choosing the Layer 2 sector at this point now appears unwise. Over the following year, Ithaca saw little significant activity.

Earlier this year, the industry’s focus shifted entirely to stablecoins and payment solutions. Paradigm again “followed the trend,” partnering with internet payment giant Stripe to launch Tempo, a high-performance Layer 1 blockchain for payments, in August. Matt Huang, Paradigm’s co-founder, served as CEO. In October, Stripe acquired Ithaca, with all its members joining Tempo.

The payment sector now features strong projects like Arc, RedotPay, Plasma, Stable, 1Money, and BVNK. Tempo, with its leading funding position and Stripe’s resources, has gained a competitive edge.

Tempo’s push into payments will be a decisive battle for Paradigm to once again demonstrate its product and research capabilities.

Conclusion

Whether Paradigm will find its rhythm again remains to be seen, but it is clear that it has reached a point where change is necessary.

Since January this year, Paradigm’s investment frequency has increased significantly—from an average of 1 deal per month in 2023-2024 to 2 deals per month, with a higher proportion of early-stage investments. In June last year, Paradigm announced closing an $850 million fund, making it one of the largest VC firms currently holding cash.

The changes in team composition and the setbacks in investment strategies are not unique to Paradigm but are common challenges faced by almost all long-term institutions during cross-cycle development. If Paradigm once represented the “engineer era” of crypto, the next phase may be more pragmatic and market-result-oriented. The success or failure of this adjustment will determine whether it can continue to be a defining player rather than an observer in the next cycle.