Crypto is Growing Up, VCs are Getting Left Behind

In just the last few months, I’ve watched four crypto funds I know either go liquid-only or quietly shut down. Several Tier 1s are struggling to raise. More than a few investors I know have left the space entirely. Some are chasing AI, others just done (and not just because they hit early retirement off their AI memecoin millions).

This isn’t just noise or coincidence; something fundamental has changed.

If we view this as a coming-of-age story, I think crypto is leaving its wild and unfiltered childhood behind and maturing into late adolescence. The chaos of its early years, marked by short-termism, speculative hype, and VC games, is giving way to a more mature, methodical era. It’s an exciting time and there are going to be many critical implications with this shift. For better or worse, I also think most web3 VC firms aren't prepared for what is coming next.

VCs love lecturing founders about the importance of being adaptable. Well, now I think it's time for VCs to do some adapting themselves.

What follows are some of my recent thoughts on this shift: how the old crypto VC playbook is breaking down, what’s replacing it, and which investors are best positioned to thrive in the next phase of crypto venture.

The Old Web3 VC Playbook

The crypto VC model of old used to go something like this:

• Find projects that were ~1 year out from token launch that had connections to top CEXes (there were entire funds raised just on the premise of the GPs being ex-employees of or deeply tied to CEXes. Their ‘value-add’ was that they could sniff out which projects were going to get listed. DO NOT listen to any fund that is serving you this pitch today...)
• Invest via a SAFT (and maybe take some advisory while you’re at it)
• When a project TGEs, dump on retail quickly because lockups were less strict than the 1+3 that is standard today. And to help support this, during peak cycles there was generally greater retail appetite for the Nth VC token

The viability of this playbook allowed for a lot of bad behavior from investors. First, many VCs raised 5yr vehicles – half the length of the typical fund in web2. That structure alone made it nearly impossible to back long-term builders. You can’t invest in a project methodically working on the more standard 10yr path to liquidity if your fund can only hold assets for 5yrs before needing to distribute to LPs.

On the flipside, founders taking money from these types of investors had immense pressure to achieve liquidity on rapidly accelerated timelines, pushing for TGE before even achieving a whiff of PMF.

For the good of the industry, this model is rapidly becoming obsolete.

As we move into 2025, we're witnessing a maturing market with increased regulatory clarity and renewed interest from traditional financial institutions, ushering in a more methodical approach focused on fundamentals, real utility, and sustainable business models.

What Growing Up Looks Like

I think the crypto industry of the future is going to demand much greater patience from investors and founders alike. A maturing market is bringing some tangible changes:

1. Longer lockups: Most CEXs are standardizing 1yr cliffs with an additional 2 or 3yr vesting periods.
2. Focus on fundamentals: Altcoin oversaturation + a more discerning retail base is forcing a greater focus on quality to differentiate – actual revenue, defensible moats, and clear paths to profitability are replacing speculation plays. To be clear, this doesn’t mean tokens are dead, rather, your token is going to need strong fundamentals to stand out from the crowd.
3. Alternative exit paths: IPOs are becoming more viable for crypto companies as is the ability to achieve needle-moving M&A outcomes. This is offering a new path to liquidity separate from token launches.

I’m not confident most web3 venture firms are built for this new reality. From what I’ve seen, the ones that have realized this have either left the space altogether, pivoted to liquid investing, or are raising new vehicles with different structures that can embrace this new playing field. Conversely, the ones that were always able to support this new model are poised to thrive in this new paradigm.

Who Wins in this Shifting Market

Make no mistake, this new landscape is an incredible opportunity for many funds. The multi-stage firms who can support founders from “Pre-Seed to IPO” now get to play in a market where few others can. There are like 10 (?) crypto funds that can write a lead check for a Series A and beyond. Beyond capital considerations, there are also very few funds that can provide the type of support and resources to guide crypto companies towards an IPO. How many funds value (and enforce) real corporate governance? How many understand the roadshow process, investor relations, etc.? I’d argue not many… However, if you are one of these funds, one of the ones that was diligently holding your firm to higher standards and operating methodically while the casino was allowing unsophisticated emerging managers to LARP as genius investor, you're walking into a magical time to invest.

At the earlier end of the VC market, the role of the pre-seed investor is also changing. Many pre-seed and seed investors were able to come in early, advise on community building and growing mindshare, and get their liquidity before any real product building happened. Now, I think early-stage investors are going to have to get much better at working with their companies on finding PMF, iterating on product, talking with users, etc. in lieu of rushing to launch and getting liquid. 

https://x.com/a16zcrypto/status/1829306908412674136

Last thought on this point. I remember a talk from CSX back in 2023 advising companies to find PMF before launching a token. It’s crazy to admit that this take was somewhat controversial in our industry at the time. Fortunately, I think that outlook is changing with this growing emphasis on fundamentals. In turn, this should lead to much more robust, hardened, and real businesses being built in our industry (I’ll note that there are some interesting conversations and experimentation happening around ‘micro’ token launches to allow teams to get seeded with just enough capital to build product. I think the jury is still out on the viability of this path, but I’m open to exploring it more).

Embracing Maturity

Crypto's maturation isn't a negative development. Rather, it's a necessary evolution for a technology seeking mainstream adoption and longevity. The projects being built today are more substantial, more focused on solving real problems, and more likely to create lasting value than many of the companies that came before.

For venture capital firms, this transition represents both a challenge and an opportunity. Those able to adapt their models to accommodate longer time horizons, focus on fundamentals over hype, and provide genuine value beyond capital will thrive in this new landscape. Those holding on to their outdated playbooks will increasingly find themselves left behind, with discerning founders choosing to work with funds that can support them best in this new environment.

The crypto industry is growing up. The question for VCs is whether they can grow up with it.

Orginal Text: https://x.com/splehman/status/1911830750069948866