The crypto industry is maturing, but VC has been half a step behind
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The crypto industry is maturing, but VC has been half a step behind
The maturation of cryptocurrency is not a passive development, but a necessary evolution for technologies seeking mainstream adoption and long-term growth.
Navigating Web3 tides with focused insightsAuthor: Sam Lehman
Translation: TechFlow
Over the past few months, I’ve seen four crypto funds I know either shift exclusively to liquidity or quietly shut down. Several top-tier funds are struggling to raise capital. Numerous investors I know have exited the space entirely—some chasing AI, others stepping away completely (not just because they made early-retirement money on AI meme coins).
This isn’t noise or coincidence; something fundamentally has changed.
If we view this as a growth story, I believe cryptocurrency is leaving behind its wild, unfiltered childhood and entering late adolescence. Its early chaotic phase—defined by short-termism, speculative hype, and VC gaming—is giving way to a more mature, systematic era. This is an exciting moment, and this transition will bring significant consequences. For better or worse, I also think most Web3 VCs aren’t ready for what comes next.
Venture capitalists love preaching adaptability to founders. Now, I believe it’s time for VCs themselves to make some adjustments.
Below are my latest thoughts on this shift: how the old crypto VC model is breaking down, what’s replacing it, and which investors are best positioned to thrive in the next phase of crypto venture capital.
The Old Web3 VC Model
The traditional crypto VC playbook looked roughly like this:
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Identify projects about a year away from token launch with strong connections to top centralized exchanges (CEXs). (There were entire funds raised solely on the premise that partners were former CEX employees or had deep exchange relationships. Their “value-add” was knowing which projects would get listed. If any fund pitches you this today, don’t believe them…)
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Invest via SAFT (Simple Agreement for Future Tokens), maybe throw in some advisory services
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At token generation event (TGE), quickly offload tokens to retail, thanks to looser lock-up terms than today’s standard 1+3 structure. This was supported during market peaks by consistently high retail demand for VC bags.
This model enabled many poor behaviors among investors. First, many VCs raised 5-year funds—the half-life of a typical web2 fund. This structure alone makes supporting long-term builders nearly impossible. If your fund must distribute assets within five years, you can’t systematically back projects aligned with a more standard 10-year liquidity timeline.
On the flip side, founders taking money from these types of investors faced immense pressure to achieve liquidity on an accelerated timeline—even before reaching product-market fit (PMF)—to meet investor exit expectations.
For the industry’s long-term health, this model is rapidly becoming obsolete.
As we enter 2025, we’re seeing a maturing market—with increased regulatory clarity, and renewed institutional interest bringing a more systematic focus on fundamentals, real utility, and sustainable business models.
What Growth Looks Like
I believe the future of crypto will demand greater patience from both investors and founders. A maturing market is driving tangible shifts:
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Longer lock-up periods: Most centralized exchanges (CEXs) are now standardizing a 1-year cliff followed by an additional 2–3 year vesting schedule.
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Focus on fundamentals: Altcoin oversaturation combined with a more discerning retail base is forcing the market to prioritize quality for differentiation—real revenue, defensible moats, and clear paths to profitability are replacing pure speculation. To be clear, this doesn’t mean tokens are dead—it means your token needs strong fundamentals to stand out.
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Alternative exit paths: IPOs are becoming viable for crypto companies, along with major M&A outcomes. This opens new liquidity routes independent of token launches.
I’m not confident most Web3 venture firms are prepared for this new reality. From what I’ve seen, those who recognize this are either exiting the space entirely, shifting to liquidity-only strategies, or raising newly structured funds to adapt. Conversely, the firms that have already been operating under this new paradigm are well-positioned to thrive.
Who Will Win in This Changing Market
Without question, this new landscape presents a massive opportunity for select funds. Multi-stage firms capable of backing founders from “pre-seed to IPO” can now operate in a market where few others can compete. Only about ten (?) crypto funds can lead Series A+ rounds. Beyond capital, even fewer offer the support and resources needed to guide crypto companies through an IPO. How many funds prioritize (and execute) genuine corporate governance? How many understand roadshows, investor relations, and public company readiness? Not many… But if you’re one of those firms—one that maintains higher standards and operates systematically while others let immature upstarts play pretend genius investors—you’re entering a golden age of investing.
In the early-stage VC world, the role of pre-seed investors is also evolving. Many pre-seed and seed investors used to jump in early, advise on community building and mindshare, and achieve liquidity before any real product development occurred. Now, early-stage investors will need to become far better at working closely with their companies to find product-market fit (PMF), iterate on product, engage users, and avoid rushing toward premature launches and liquidity events.
One final thought on this. I remember a CSX talk in 2023 advising teams to find product-market fit before launching a token. The fact that this idea was considered controversial within the industry at the time now seems absurd. Fortunately, I believe growing emphasis on fundamentals is shifting this mindset. In turn, this should lead our industry to build more solid, resilient, and authentic businesses. (I’ve noticed some interesting conversations and experiments around “micro” token launches that allow teams to raise just enough to build product. The viability of this path isn’t settled yet, but I’m open to exploring it further.)
Embracing Maturity
Crypto’s maturation isn’t a negative development—it’s a necessary evolution for a technology seeking mainstream adoption and long-term sustainability. Projects being built today are more substantial, focused on solving real problems, and more likely to create lasting value compared to many of their predecessors.
For venture capital firms, this shift is both a challenge and an opportunity. Those able to adapt—extending their time horizons, prioritizing fundamentals over hype, and delivering real value beyond capital—will thrive in this new environment. Those clinging to outdated models will increasingly find themselves left behind, as sharp founders choose to partner with funds that can best support them in this evolved landscape.
The crypto industry is growing up. The question for VCs is whether they can grow with it.
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