Venture Capital Gets Left Behind as Crypto Startups Bounce Back in 2025
While blockchain founders celebrate a fundraising renaissance, traditional VC firms are watching from the sidelines—turns out writing checks in bear markets requires actual conviction.
Seed rounds are closing faster than a memecoin rug pull, yet institutional investors still can’t decide if web3 is ’the next internet’ or just an elaborate tax loophole. Meanwhile, founders bypass Sand Hill Road entirely, opting for decentralized fundraising that doesn’t come with MBA-fueled ’visionary’ lectures.
The irony? The same suits who missed Bitcoin at $200 are now overpaying for SAFTs at ATH valuations—some things never change in the casino of ’smart money.’
Crypto VC funds vs. startups
Galaxy Research data shows that while startup fundraising is recovering, venture capital funds are raising less money to invest in crypto projects.
Additionally, the number of new crypto VC funds peaked in 2022 at more than 300 but has steadily declined yearly. Only around 50 new funds were launched in 2024, and just a fraction of that number entered the market in the first quarter of 2025.
The number of repeat investors has also shrunk. DefiLlamashows that of all active funds in the past 180 days, only 67 made more than one investment, which is less than half.
Dunleavy cited several causes, including the absence of distributions to paid-in capital (DPI), a lack of headline investment wins to renew attention from capital allocators, and slower inflows from ultra- and high-net-worth individuals.
He added that institutional investors remain hesitant despite recent regulatory progress across jurisdictions.
Contraction in venture capital
The fundraising side does not mirror the contraction seen with venture firms. The increase in the first-quarter fundraising volumes suggests that interest in crypto startups is growing. However, capital flows from a narrower base of repeat participants and larger allocators.
As a result, venture activity is becoming more concentrated. Capital is no longer widely distributed across many generalist funds but is instead focused within a smaller group of active players with sufficient dry powder and differentiated theses.
Dunleavy believes this new landscape is likely a massive positive development for the industry, as venture capital funds are much sharper with whom they deploy capital, resulting in better companies thriving.
The crypto fundraising landscape is entering a bifurcated phase. While startups continue to raise money faster than last year, crypto VC funds struggle to justify their relevance, raise new capital, and remain active in a leaner, more disciplined market.
