Article Author: Thejaswini M A
Article Compilation: Block Unicorn
Original Title: From Hype to Rationality: The Mature Path of Crypto Venture Capital
Preface
I used to get excited about every crypto financing announcement.
Every seed round felt like breaking news. "Anonymous team raises $5 million for a revolutionary DeFi protocol!"
I would obsessively research founders, dive into their Discord, trying to understand what made the project special.
Fast forward to 2025. Another funding round appears in my news feed. Series A. $36 million. Stablecoin payment infrastructure.
I categorized it under "enterprise blockchain solutions" and then continued with other tasks.
When did I become so... pragmatic?
Since 2020, late-stage crypto venture capital transactions have first surpassed early-stage transactions.
65% versus 35%.
Read that again.
This industry was once built on pre-seed funding, with anonymous teams building DeFi protocols in garages for innovation.
Now? Series A and later funding are driving capital flow.
What changed?
Everything changed. And yet, nothing seemed to change.
Crypto Venture Capital
Venture capitalists in suits. Due diligence transformed from minutes to months.
Regulatory compliance. Institutional adoption.
Professional project pitches, not anonymous Discord messages.
KYC processes. Legal teams. Truly meaningful revenue models.
Companies like Conduit raised $36 million for "unified on-chain payments". Beam raised $7 million for "stablecoin-based payment services".
These are infrastructure projects. B2B solutions. Enterprise-level platforms.
Boring, profitable, scalable businesses.
Crypto venture capital headlines always love to exaggerate numbers, so let's start with the facts:
Q1 2025: 446 transactions totaling $4.9 billion (40% quarter-on-quarter growth).
Year to date: Total raised $7.7 billion, projected to reach $18 billion in 2025.
And the issue is: MGX (Abu Dhabi sovereign wealth fund) wrote a $2 billion check to Binance.
This perfectly reflects the current venture capital environment: a few massive transactions distort the data, while the overall ecosystem remains subdued.
According to Galaxy Research, the correlation between Bitcoin price and venture capital activity - reliable for years - broke in 2023 and has not recovered.
Bitcoin hits new highs, yet venture capital activity remains low. It turns out, when institutions can buy Bitcoin ETFs, they don't need to fund risky startups to get crypto exposure.
Venture Capital's Reality Check
Crypto venture capital dropped 70% from its 2022 peak of $23 billion to just $6 billion in 2024.
Transaction numbers plummeted from 941 in Q1 2022 to 182 in Q1 2025.
But this should terrify every founder claiming to be the "next big thing" - of the 7,650 companies that raised seed funding since 2017, only 17% made it to Series A.
And merely 1% reached Series C.
This is the maturation process of crypto venture capital, and it will be painful for those who thought the feast would last forever.
Category Rotation
The hot narratives of 2021-2022 - gaming, Non-Fungible Tokens, DAOs - have almost disappeared from venture capital interest.
In Q1 2025, companies building trading and infrastructure attracted most venture capital. DeFi protocols raised $763 million. Meanwhile, the Web3/Non-Fungible Token/DAO/gaming categories, which once dominated transaction numbers, have slipped to fourth place in capital allocation.
This is venture capital finally placing revenue-generating businesses above narrative-driven speculation.
Infrastructure that truly drives crypto transactions is getting funded.
Applications people actually use are getting funded.
Protocols generating real fees are getting funded.
Everything else will increasingly lack capital.
Artificial Intelligence has also become a major venture capital competitor.
Why bet on crypto gaming when you can bet on AI applications with clearer revenue paths? The opportunity cost of crypto-native applications has significantly shifted against projects unable to demonstrate immediate utility.
Graduation Crisis
Let's dig out the most thought-provoking statistic from the data: crypto's graduation rate from seed to Series A is 17%.
This means out of every six seed-funded companies, five will never receive meaningful follow-on funding.
In comparison, traditional tech sees about 25-30% of seed-round companies reaching Series A, and you start to understand the severity.
Crypto's success metrics have fundamentally been flawed.
Why? Because for years, crypto's script was simple: raise venture capital, build something that looks innovative, launch a token, let retail investors provide exit liquidity. VCs didn't need companies to truly graduate funding rounds because public markets would bail them out.
This safety net has disappeared. Most tokens issued in 2024 trade at a fraction of their initial valuation. EigenLayer's EIGEN launched at a fully diluted valuation of $6.5 billion and has since dropped 80%. Projects with monthly revenues exceeding $1 million are rare.
The true graduation rate becomes apparent when the token listing path ends. And the results are not optimistic. The result? The questions VCs are now asking are identical to what traditional investors have been asking for decades: "How do you make money?" and "When will you become profitable?" Clearly a revolutionary concept in the crypto space.
Centralization Takeover
While transaction numbers have significantly dropped, transaction sizes have changed interestingly. Since 2022, the seed round median has grown significantly, despite fewer companies raising funds.
This indicates an industry consolidating around fewer, larger bets. The era of "spray and pray" seed investing is over.
The message to founders is clear: if you're not in the core circle, you might not get funding. If you haven't secured funding from top-tier funds, your chances of subsequent funding drop dramatically.
This centralization is not limited to funding.
Data shows that 44% of companies in a16z's portfolio have a16z participating in subsequent funding rounds.
For Blockchain Capital, this ratio is 25%. The best funds are not just picking winners but actively ensuring their portfolio companies continue to receive funding.
Our Perspective
We've all witnessed the transformation from "revolutionary DeFi protocols" to "enterprise blockchain solutions".
Honestly? I'm conflicted.
Part of me misses that chaos. The violent fluctuations. Those anonymous teams with Discord nicknames raising millions for ideas that sounded like fever dreams.
There was a purity in that madness. Just builders and believers betting on a future traditional finance couldn't even imagine.
But the other part of me - the part that has witnessed many promising projects fail due to insufficient fundamentals - knows that this adjustment is inevitable.
For years, crypto venture capital has been operating in a fundamentally flawed manner. Startups could raise funds based solely on a white paper, launch tokens to retail investors for liquidity, and call it a success regardless of whether they built something users truly wanted.
The result? An ecosystem optimized for hype cycles rather than value creation.
Now, the industry is experiencing a long-overdue shift from speculation to substance.
The market is finally beginning to apply performance standards that should have existed from the start. With only 17% of seed-stage companies advancing to Series A funding - this means market efficiency has finally caught up with an industry previously artificially propped up by over-narration.
This brings both challenges and opportunities. For founders accustomed to raising funds based on token potential rather than business fundamentals, the new reality is brutal. You need users, revenue, and a clear path to profitability.
But for companies building solutions to real problems and genuine businesses, the environment has never been better. Reduced funding competition, more focused investors, and clearer success metrics.
The "tourist money" has left, leaving behind the substantial funds truly needed by startups. The remaining institutional investors are not looking for the next "meme coin" or speculative infrastructure investment.
The founders and investors who survive this transformation will build the infrastructure for crypto's next chapter. Unlike the previous cycle, this time it will be built on business fundamentals, not token mechanisms.
The gold rush is over. Mining operations are just beginning.
Although I said I miss that chaos? This is exactly what cryptocurrency needs.
