This article is from: Symbolic Capital investor Sam Lehman
Translated by | Odaily (@OdailyChina)
Translator | Azuma (@azuma_eth)
In the past few months, I have personally witnessed four well-known crypto funds either turning into pure liquidity management models or quietly closing down. Several top-tier funds are also struggling with fundraising. Many investors I know have completely exited the market - some have shifted to AI, while others have directly left the industry (and not just because they made enough to retire early).
This is not a coincidence, but a fundamental transformation in the industry.
If the cryptocurrency industry can be described as a growth story, I believe it is saying goodbye to its wild childhood and entering the late stage of steady adolescence. The early chaotic landscape filled with short-termism, speculative frenzy, and VC gambling is giving way to a more mature and orderly new phase. This transformation is full of opportunities and will trigger many far-reaching impacts - but frankly, I believe most Web3 venture capital firms are not prepared to face the upcoming changes.
VCs always talk about founders needing to improve adaptability, and now it's their turn to adapt.
The Old Web3 VC Playbook
The past crypto VC investment model roughly operated like this:
Targeting projects about 1 year away from token launch with close relationships with top exchanges - Back then, funds could even raise money just by having "partners who are former exchange employees or have deep connections". Their "value-added services" were merely sniffing out which projects could be listed on exchanges. If any fund is still selling this pitch, stay away.
Investing through SAFT agreements - And casually grabbing an advisor title;
Immediately dumping tokens on retail investors when the project launches (TGE) - After all, the lockup rules back then were much looser than today's mainstream "1-year lockup + 3-year linear release". During bull market cycles, retail investors often have higher token valuation expectations, so they would enthusiastically "cooperate" with this VC playbook.
This model indulged many investor misbehaviors:
Short-sighted fund cycles: Most VCs would raise 5-year funds - only half the cycle of traditional Web2 funds. This structure is destined to fail in supporting long-term builders. If the fund must distribute assets to LPs after 5 years, how can it invest in projects that need 10 years to build liquidity?
Distorted pressure on founders: Founders accepting such investments are forced to accelerate monetization, often rushing to launch tokens before validating product-market fit (PMF).
Fortunately, this model is rapidly dying.
Entering 2025, with regulatory frameworks gradually becoming clearer and traditional financial institutions re-entering, the crypto market is transitioning to a rational phase that focuses more on fundamentals, real utility, and sustainable business models.
The Industry is Undergoing Dramatic Changes
I believe the future cryptocurrency industry will require investors and founders to have more patience. Here are some concrete changes as the market matures:
Stricter lockup mechanisms: Most CEXs are now establishing "1 year lockup, 2-3 years release period" as standard rules for token listings;
Fundamentals reign supreme: The proliferation of Altcoins and retail investors' upgraded awareness are forcing projects to break through with hard capabilities - actual revenue, moats, and profit paths are replacing speculative narratives. This is not the end of token economics, but the end of mediocre tokens;
Diversified exit paths: For crypto companies, IPOs are becoming increasingly feasible, and industry mergers can create large-scale exit opportunities, with token issuance no longer being the sole liquidity exit.
I doubt most Web3 VCs can adapt to these new norms. From what I've seen, institutions that realize this have either completely exited the industry, shifted to liquidity funds, or are raising new funds with different structures to adapt to the new rules. Conversely, companies that have consistently supported this new model will thrive in this new paradigm.
Who Will Succeed in This Changing Market?
Undoubtedly, this new landscape provides enormous opportunities for many funds. Full-cycle investment institutions that can support founders from pre-seed to IPO can now excel in an almost competition-free market.
Currently, only about 10 crypto funds have the ability to lead Series A and subsequent rounds. Beyond financial strength, funds that can provide comprehensive IPO support and resources for crypto companies are extremely rare. How many funds truly prioritize (and can implement) proper corporate governance? How many are well-versed in roadshow processes and investor relations management? I don't think there are many... But for funds that have always maintained high standards and systematic operations in this casino-like market, now is the golden age of investment - while the market allows unprofessional fund managers to play the role of genius investors, you have quietly built your moat.
In the early stages of the VC market, the role of pre-seed and seed investors is also changing. In the past, many pre-seed and seed investors only needed to intervene early, provide advice for community building and mindshare growth, and could exit before the product was fully formed. Now, I believe early investors must be better at helping businesses find product-market fit (PMF), iterate products, and engage with users, rather than rushing to monetize the project.
One final thought on this. I remember at a CSX conference in 2023, someone suggested that projects should find PMF before launching tokens - incredibly, this viewpoint was controversial in our industry at the time. Fortunately, with the increasing focus on fundamentals, this perception is changing, which will encourage the industry to build more robust and genuine businesses. It's worth noting that discussions and experiments around "micro" token launches are emerging, aimed at allowing teams to obtain only the necessary basic construction funds. I believe the feasibility of this approach remains to be verified, but we should maintain an open and exploratory attitude.
Embracing Industry Maturation
The maturation of cryptocurrency is by no means a negative trend. On the contrary, this technology pursuing mainstream adoption and long-term development is undergoing necessary evolution. Projects built today have more substantive value than early enterprises - they are more focused on solving real-world problems and are more likely to create lasting value.
For venture capital firms, this transformation is both a challenge and an opportunity. Institutions that can adjust their investment models to adapt to longer cycles, focus on fundamentals rather than hype, and provide real value beyond capital will thrive in the new landscape. Investors clinging to outdated strategies will be increasingly eliminated by the market - savvy entrepreneurs are increasingly choosing funds that best fit the new environment.
The crypto industry is moving towards maturity. The question for venture capital firms is: can you grow with it?
