This article comes from: Symbolic Capital investor Sam Lehman
Compiled by Odaily Planet Daily ( @OdailyChina )
Translated by Azuma ( @azuma_eth )
In the past few months alone, I’ve witnessed four well-known crypto funds either switch to pure liquidity management or quietly shut down. Several first-tier funds have also run into fundraising difficulties. Many investors I know have completely left the market - some have switched to AI, and some have simply retired from the circle (and not just because they have made enough money and retired early).
This is not a coincidence; the industry is undergoing a fundamental shift.
If the cryptocurrency industry is a coming-of-age story, I think it is saying goodbye to a wild and unruly childhood and entering a calm late adolescence. The early chaos of short-termism, speculative frenzy, and VC gambling is giving way to a more mature and orderly new stage. This transition is full of opportunities and will also trigger many far-reaching impacts - but with all due respect, I think most Web3 venture capital institutions are not ready for the next change.
VCs always like to tell founders to improve their adaptability, now it’s their turn to adapt.
The old Web3 VC playbook
The old cryptocurrency venture capital model worked something like this:
Look for projects that are about 1 year away from token launch and have close relationships with top exchanges. In the past, some funds could raise funds simply by saying that partners are former employees of exchanges/have deep relationships. Their value-added services are just to sniff out which projects can be listed on exchanges. If there are still funds promoting this rhetoric today, stay away as soon as possible.
Invest through a SAFT agreement — and get an advisory title by the way;
After the project token issuance (TGE), they will be immediately poured into retail investors . After all, the lock-up rules at that time were much more relaxed than the current mainstream 1-year lock-up period + 3-year linear release. In the bull market cycle, retail investors tend to have higher expectations for token valuations, so they will always enthusiastically cooperate with VCs to play this game.
This model condones many bad behaviors of investors:
Short-sighted fund cycle : Most VCs raise 5-year funds, which is only half the traditional Web2 fund cycle. This structure is doomed to fail to support long-term builders. If the fund must distribute assets to LPs after 5 years, how can it invest in projects that require 10 years of liquidity accumulation?
Distorted pressure on founders : Founders who receive this type of investment are forced to accelerate monetization, often rushing to issue tokens before their product-market fit (PMF) is verified.
Thankfully, this model is dying fast.
As we enter 2025, with the gradual clarification of the regulatory framework and the re-entry of traditional financial institutions, the crypto market is shifting to a rational stage that focuses more on fundamentals, real utility and sustainable business models.
The industry is changing dramatically
I believe that the future of the cryptocurrency industry will require greater patience from investors and founders. Here are some tangible changes as the market matures:
More stringent lock-up mechanism : Most CEXs are using 1-year lock-up period, 2-3-year release period as the standard rule for listing coins;
Fundamentals are king : The proliferation of altcoins and the upgrading of retail investors’ cognition have forced projects to break through with hard power - actual income, moat and profit path are replacing speculative narratives. This is not the end of the token economy, but the end of mediocre tokens;
Diversified exit paths : IPOs (initial public offerings) are becoming increasingly feasible for crypto companies, and industry mergers and acquisitions can also create large-scale exit opportunities. Token issuance is no longer the only liquidity exit.
I doubt that most Web3 VCs will be able to adapt to these new normals. From what I have seen, the institutions that have realized this have either exited the industry entirely, have pivoted to become liquidity funds, or are raising new funds with different structures to adapt to the new rules of the game. Conversely, the companies that have been able to support this new model will thrive in this new paradigm.
Who will win in this changing market?
There is no doubt that this new landscape provides huge opportunities for many funds. Full-cycle investment institutions that can support founders from pre-seed to IPO can now thrive in a market with little competition.
Currently, there are only about 10 cryptocurrency funds that are capable of leading Series A and subsequent rounds. In addition to financial strength, there are even fewer funds that can provide full IPO support and resources for cryptocurrency companies. How many funds really value (and can implement) standardized corporate governance? How many are well versed in roadshow processes, investor relations management, etc.? I think not many... But for those funds that always adhere to high standards and systematic operations in a casino-like market, now is the golden age of investment - when the market allows those less professional fund managers to play the role of genius investors, you have quietly built a moat.
In the early stages of the venture capital market, the role of pre-seed investors is also changing. In the past, many pre-seed and seed investors only needed to intervene early and provide advice on community building and mind share growth to achieve exits before the product was truly formed. Now I believe that early investors must be better at helping companies find product-market fit (PMF), iterate products, and communicate with users, rather than rushing to push projects online for monetization.
One final thought on this point. I remember a presentation at CSX in 2023 where someone suggested that projects find PMF before launching a token - incredibly, this view was controversial in our industry at the time. Fortunately, this mindset is changing with the increasing emphasis on fundamentals, which will lead to the industry building more real businesses that can withstand the test of time. It is worth noting that there is currently an emerging discussion and experimentation with micro token issuance, which aims to allow teams to obtain only the necessary infrastructure funds. I think the feasibility of this path has yet to be verified, but I remain open to exploration.
Embracing industry maturity
The maturation of cryptocurrency is by no means a negative trend. Instead, it is a necessary evolution of the technology in pursuit of mainstream adoption and long-term development. The projects being built today are more valuable than early-stage companies — they are more focused on solving real problems and are more likely to create lasting value.
For venture capital firms, this transformation is both a challenge and an opportunity. Those that can adjust their investment models to adapt to longer cycles, focus on fundamentals rather than hype, and provide real value beyond funds will thrive in the new landscape. Investors who stick to outdated strategies will increasingly be eliminated by the market - savvy entrepreneurs are choosing to work with funds that are best suited to the new environment.
The crypto industry is maturing. The question for VCs is: Can you grow with it?
