Waterdrop Capital partner Dashan recently admitted in a Space that the four projects he invested in have been listed on Binance, yet none of them issued tokens to investors according to the original investment agreement. Despite the token issuance terms being clearly written in the contract, projects can arbitrarily modify the agreement after listing, with investors having almost no effective means of counteraction.
He stated that modifying the agreement is not the project's intention, but Binance's long-standing unwritten rule. Therefore, he does not blame the project teams, as they are also weak in the face of Binance. The current strategy is clear: to persuade and help truly high-quality project teams to skip token issuance and go directly to listing, seeking a relatively clean and regulated market to demonstrate their value.
The rights protection based on contracts in traditional VC investments does not have the same practical constraints in crypto token investment structures. Since token circulation rules are dominated by exchanges after listing, on-chain asset allocation is not immediately bound by traditional legal systems, and investment agreements often lose their enforceability at critical points. In the current market environment, a project's ability to gain access to top exchanges directly affects its overall survival, and the importance of agreement terms is marginalized in the face of practical interests. Projects must cooperate with exchanges' redesigns of release rhythm, lock-up rules, and token percentages to get listed, while investors fall into a de facto rights disadvantage lacking on-chain governance and circulation discourse power.
This statement reveals a deep-seated crisis currently facing the crypto VC investment system - a comprehensive failure of contract effectiveness, liquidity control, and exit mechanisms.
Power Imbalance: New Relationships between VCs, Projects, and Exchanges
In the past few years of industry development, the model of "project narrative construction - multiple VC financing rounds - top exchange Token Generation Event (TGE)/listing" has gradually become mainstream. The characteristic of this model is that early-stage projects rely on professional VC institutions' capital injection, resource connection, and reputation endorsement, completing financing through progressively elevated valuations, with the ultimate goal usually being the first issuance and circulation of tokens on large centralized exchanges, providing an exit channel for early investors.
In previous bull markets, crypto VCs, as core resources, controlled early financing and token issuance design, playing a crucial role in driving industry rapid expansion and project incubation. In the last bull market, project teams' positions improved, but VCs still maintained some initiative due to large capital volumes and liquidity enablement like Launchpad.
However, as the market enters a new adjustment cycle and speculative liquidity dries up, the interest structure between investors and project teams changes. Exchanges' power has risen unprecedentedly, becoming absolute controllers of the liquidity switch. Key links such as listing approval, token distribution, and circulation strategies are concentrated in exchanges' hands, placing project teams in an extremely weak negotiating position. Even with detailed investment agreements, project teams find it difficult to refuse exchanges' adjustments to circulation conditions, ultimately violating their original commitments to investors.
Exchanges have become controllers of scarce resources, with VCs gradually marginalized and their actual control capacity significantly reduced.
The "Prisoner's Dilemma" under Liquidity Contraction
The current predicament of "VC tokens" is not caused by a single factor.
After multiple financing rounds, projects' public market valuations at TGE are often already at high levels. This directly leads to high initial buying costs for secondary market investors and means early investors, including VCs, teams, and early supporters, hold many low-cost chips with strong potential selling motivation.
This expectation difference creates natural selling pressure after token listing, potentially forming a market consensus of "selling as the optimal strategy", triggering a negative feedback loop.
Furthermore, token economics itself is exacerbating the VC token crisis.
During bull markets, many projects' token issuance models followed high expected growth assumptions, such as continuously rising market value and sufficient liquidity to support gradual unlocking. However, in actual operation, many projects lack real income support. DeFi yields rely on Ponzi schemes, GameFi on subsidies, Non-Fungible Tokens on FOMO, with tokens completely losing intrinsic growth momentum.
Most critically, tokens previously invested by VCs could ultimately be sold to new retail investors in the secondary market, forming a complete escape path. But currently, new retail investors on-chain and on exchanges are extremely rare, incremental funds are depleted, and VCs dumping tokens on each other has become the norm.
Essentially, early investors, project teams, market makers, and early users have become a closed-loop zero-sum game, with exit becoming increasingly difficult.
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For VC institutions, traditional strategies relying on rapid TGE for high-multiple exits face challenges. Investment return realization cycles may lengthen, and uncertainty increases. This might prompt VCs to focus more on projects' long-term fundamentals, sustainable business models, reasonable valuations, and healthier token economic models. Their role may shift from early investment and listing promotion to deeper post-investment management, strategic empowerment, and ecosystem construction.
For project teams, they need to re-examine token issuance strategies and community relationships. After questioning high-profile approaches, exploring lower initial valuations, fairer issuance mechanisms, token economics designed to incentivize long-term holders, increased operational transparency, and stronger accountability might be more worthwhile.
From a macro industry development perspective, current challenges can be seen as an adjustment in the market's maturation process. They expose problems accumulated during rapid development and may drive the formation of a more balanced, sustainable financing and development ecosystem. This requires all market participants - VCs, project teams, exchanges, investors, and even regulators - to collectively adapt to changes and seek a new balance between innovative incentives and risk control, efficiency and fairness.
