Original Author: 1912212.eth, Foresight News
In the last cycle, it was truly the golden age of crypto VCs. a16z and Paradigm sat atop the pyramid commanding the wind and rain, Multicoin Capital became famous through Solana, and during the peak of 2021 to 2022, it was no exaggeration to say that every two or three days, a project in the DeFi/Non-Fungible Token/gaming fields would receive VC funding, with Web3 revolution cries flooding social networks. The Block Pro financing data shows that VCs invested $29 billion in startups and projects in 2021, rising to $33.3 billion in 2022. Many VCs made a fortune in public chains, DeFi, and Non-Fungible Tokens. From seed rounds to listings, they even earned jaw-dropping returns of nearly tens or even hundreds of times.
However, everything has changed now. VCs invested approximately $13.7 billion in crypto and blockchain startups in 2024, a 28% increase from $10.7 billion in 2023. However, funding remains far below the peak of the last cycle.
In this cycle, crypto VCs' returns have been disappointing. Many projects were overvalued, token prices crashed in secondary markets, VCs were criticized by communities and retail investors, and exit channels were blocked. BTC rose from a cycle low of $15,000 to nearly $110,000, an increase of about 734%, with an annualized return of approximately 94.28% from 2022 to 2025. How many funds have outperformed BTC? Recently, Du Jun stated that ABCDE has stopped investing in new projects and raising a second fund, rethinking how to participate in the industry's development.
So what are the reasons behind VCs' current difficulties and losses?
Unlocking Mechanism Still Imperfect
Unlocking to some extent deeply binds VC and project party interests together. However, the crypto market is very timing-sensitive. Crypto VCs may have entered at low costs in seed and A rounds, but many project tokens are often in a bear market during the actual VC unlocking period. VCs' exits mainly depend on secondary market trading after token listing, but market volatility is high and liquidity is insufficient. Many projects experience selling after airdrops or unlocking, with token prices plummeting, and VCs' book gains vanishing.
LD Capital founder Jack Yi stated, "Investors generally face a strict '1+3' lockup period, while exchanges, project parties, market makers, and KOLs are not subject to this limitation. In a crypto environment that may experience 10 narrative changes in 4 years, this unequal mechanism puts investors at a clear disadvantage."
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