The Transformation Path of the Crypto Assets Venture Capital Industry

Once upon a time, every Crypto Assets fundraising announcement was incredibly exciting. Every round of seed funding felt like major news, capturing attention. I would eagerly research the founders' backgrounds, diving deep into the project community, trying to understand its uniqueness.

As the year 2025 arrives, another round of financing makes headlines. Series A financing of 36 million dollars is allocated for stablecoin payment infrastructure. I categorize it as "enterprise blockchain solutions" and then continue with other matters. Unknowingly, my attitude has become so pragmatic.

Since 2020, the late-stage transactions of Crypto Assets venture capital have for the first time surpassed early-stage transactions, at a ratio of 65% to 35%. This industry, which was once based on seed-round financing, is now driven by A-round and later financing.

What does this change mean? Everything has changed, yet it seems that nothing has changed.

Today's crypto venture capital is becoming more specialized. Due diligence has extended from a few minutes to several months. Regulatory compliance and institutional adoption have become the focus. Professional project pitches have replaced anonymous social messages. KYC processes, legal teams, and sustainable revenue models have become standard.

Companies like Conduit have raised substantial funds for "unified on-chain payments," while Beam has secured financing for "stablecoin-based payment services." These are infrastructure projects, B2B solutions aimed at enterprises. They may seem unremarkable, but they are profitable and scalable businesses.

Data Interpretation

In the first quarter of 2025, the crypto sector completed a total of 446 transactions, with an investment amount of 4.9 billion USD, reflecting a quarter-on-quarter growth of 40%. The annual financing amount is expected to reach 18 billion USD.

However, there is a certain bias behind these data. A sovereign fund invested 2 billion dollars in a certain trading platform, and such large transactions distort the overall data. In fact, the financing environment of the entire ecosystem remains sluggish.

The correlation between Bitcoin prices and venture capital activity broke in 2023 and has not yet recovered. Bitcoin reached new highs while venture capital activity remains sluggish. Clearly, when institutions can directly purchase Bitcoin ETFs, they no longer need to gain Crypto Assets exposure by investing in risky startups.

Venture Capital Status

Crypto Assets venture capital has dropped 70% from the peak of $23 billion in 2022, down to only $6 billion in 2024. 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 noteworthy is that among the 7,650 companies that raised seed round financing since 2017, only 17% entered Series A, and just 1% reached Series C. This reflects the maturation process of Crypto Assets venture capital, and it is undoubtedly a harsh reality for entrepreneurs who expect their funding to be inexhaustible.

Investment Focus Shift

In the fields of gaming, NFT, DAO, and others that were highly favored from 2021 to 2022, they have now almost disappeared from the perspective of venture capital. In the first quarter of 2025, transaction and infrastructure companies attracted the majority of venture capital. DeFi protocols raised $763 million. Meanwhile, the Web3/NFT/DAO/gaming categories, which once dominated transaction volumes, have fallen to fourth place in capital allocation.

This indicates that venture capital has finally placed revenue-generating businesses above narrative-driven speculation. The infrastructure, practical applications, and protocols that truly drive Crypto Assets trading and generate substantial income have received funding support. Meanwhile, artificial intelligence has also become a major competitor for venture capital, and those Crypto Assets projects that cannot demonstrate immediate utility are facing greater opportunity costs.

Financing Bottleneck

The advancement rate of crypto assets from the seed round to the Series A round is only 17%, meaning that out of every six companies raising a seed round, five will be unable to secure meaningful follow-up financing. In contrast, about 25-30% of seed round companies in the traditional technology industry are able to advance to Series A.

This data reflects the fundamental flaws in the success metrics of the Crypto Assets industry. For a long time, the script for Crypto Assets has been too simple: raise risk capital, build seemingly innovative products, launch coins, and let retail investors provide exit liquidity. Venture capitalists do not need companies to actually grow through funding rounds, as the public market provides them with an exit.

However, this safety net has disappeared. Most of the tokens issued in 2024 are trading at only a fraction of their initial valuation. When the path to token listing comes to an end, the true upgrade rate gradually becomes apparent. The results are not optimistic.

The questions raised by venture capitalists now are the same as those that traditional investors have been asking for decades: "How do you make money?" "When will you be profitable?" This is a revolutionary change for the Crypto Assets space.

Centralization Trend

Despite a significant decrease in overall transaction volume, the scale of individual transactions has shown a growth trend. Since 2022, the median of seed rounds has increased significantly, although the number of companies securing financing has decreased.

This indicates that the industry is consolidating around fewer, larger investments. The message to founders is clear: if you are not in the core circle, you may find it difficult to secure funding. Without support from top-tier funds, the chances of obtaining follow-on financing will be significantly reduced.

This centralization is not limited to capital allocation. Data shows that certain leading venture capital funds maintain a high level of involvement in the follow-on financing of their portfolio companies. The best funds are not only good at selecting potential projects but also actively ensure that their portfolio companies continue to receive funding support.

Industry Outlook

The Crypto Assets industry is undergoing a transition from speculation to substance. The market has finally begun to apply stricter performance standards, which is necessary for an industry that has long been supported by excessive hype.

This transition brings both challenges and opportunities. For founders who are used to fundraising based on token potential rather than business fundamentals, the new reality may seem harsh. However, for companies dedicated to solving real problems and building genuine businesses, the current environment is unprecedentedly favorable.

With the exit of speculative funds, what remains is substantial capital that truly supports innovation and entrepreneurship. These institutional investors are no longer looking for the next "hot token", but rather focusing on projects that can create real value.

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

Although people may miss the crazy times of the past, this rationalization is exactly what the Crypto Assets industry needs. The gold rush is over, and true value creation has just begun.