This article is from: Symbolic Capital Investor Sam Lehman

Translation by | Odaily Planet Daily (@OdailyChina)

Translator | Azuma (@azuma_eth)

In the past few months, I have witnessed four well-known cryptocurrency funds either shift to a pure liquidity management model or quietly close down. Several leading funds are also facing fundraising difficulties. Many investors I know have completely exited the market—some have turned to AI, while others have simply retired from the space (and not just because they made enough money to retire early).

This is not a coincidence, but rather a fundamental shift occurring in the industry.

If we compare the cryptocurrency industry to a growth story, I believe it is bidding farewell to its wild and unruly childhood and entering a stable late adolescence. The chaotic situation filled with short-termism, speculative frenzy, and VC gamesmanship is giving way to a more mature and orderly new phase. This transition is full of opportunities and will trigger many profound impacts—but frankly, I believe most Web3 venture capital firms are not prepared to face the upcoming changes.

VCs love to tell founders to improve their adaptability; now it's their turn to adapt.

The Old Era of Web3 Venture Capital

The old cryptocurrency venture capital model generally operated as follows:

• Identifying projects that are about one year away from token launch and have close relationships with leading exchanges—there were even funds that could raise capital solely based on the fact that "the partner is a former employee of an exchange or has deep connections." Their "value-added services" were merely sniffing out which projects could get listed on exchanges. If any fund is still promoting this pitch today, it's best to steer clear.

• Investing through SAFT agreements—while conveniently snagging a consultant title;

• Waiting for the project's token issuance (TGE) and immediately dumping it on retail investors—after all, the lock-up rules back then were much looser than today's mainstream "1-year lock-up + 3-year linear release." During bull market cycles, retail investors often have higher expectations for token valuations, so they are always eager to "cooperate" with VCs in this play.

This model has enabled many negative behaviors among investors:

• Short-sighted fund cycles: Most VCs raise 5-year funds—only half the cycle of traditional Web2 funds. This structure is destined to be unable to support long-term builders; if a fund must distribute assets to LPs after 5 years, how can it invest in projects that require 10 years to mature liquidity?

• Distorted pressure on founders: Founders accepting this type of investment are forced to accelerate monetization, often rushing to issue tokens before their product has validated market fit (PMF).

Fortunately, this model is rapidly dying out.

Entering 2025, as regulatory frameworks become clearer and traditional financial institutions re-enter the market, the cryptocurrency market is shifting towards a more rational phase that emphasizes 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 greater patience. Some tangible changes as the market matures include:

• Stricter lock-up mechanisms: Most CEXs are adopting "1-year lock-up, 2-3 years release" as standard rules for listing tokens;

• Fundamentals are king: The proliferation of altcoins combined with the upgrading of retail investor awareness forces projects to break through based on hard strengths—actual revenue, moats, and profit paths are replacing speculative narratives. This does not signify the end of token economics, but rather the demise of mediocre tokens;

• Diversified exit paths: For crypto companies, IPOs are becoming increasingly feasible, and industry mergers and acquisitions can create substantial exit opportunities; token issuance is no longer the only liquidity outlet.

I doubt whether most Web3 VCs can adapt to these new norms. From what I see, institutions that have realized this either have completely exited the industry, shifted to liquidity funds, or are raising new funds with different structures to adapt to the new rules of the game. In contrast, those 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 presents enormous opportunities for many funds. Those full-cycle investment institutions that can support founders from "pre-seed to IPO" can now shine in a market with almost no competition.

Currently, only about 10 cryptocurrency funds are capable of leading Series A and subsequent rounds; aside from financial strength, funds that can provide full support and resources for cryptocurrency companies through the IPO process are even rarer. How many funds truly value (and can implement) standardized corporate governance? How many are well-versed in the processes of roadshows, investor relations management, and other aspects? I believe not many… But for those funds that have consistently upheld high standards and systematic operations in a casino-like market, the golden age of investment is now upon them—while the market allows less professional fund managers to play the role of genius investors, you have quietly built your 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 get involved early, providing advice for community building and mind share growth, to exit before the product was fully formed. Now, I believe early investors must be better at helping companies find product-market fit (PMF), iterate products, and engage with users, rather than rushing to push projects to launch and monetize.

On this point, I have one final thought. I remember during a speech at CSX in 2023, someone suggested that projects should find PMF before launching tokens—unbelievably, this viewpoint was controversial in our industry at that time. Fortunately, with the increasing emphasis on fundamentals, this perspective is changing, which will encourage the industry to build more resilient real businesses. Notably, discussions and experiments around "micro" token issuance are currently on the rise, aimed at allowing teams to obtain only the necessary funding for infrastructure; I believe the feasibility of this path remains to be validated, but it is important to maintain an open exploratory attitude.

Embracing Industry Maturation

The maturation of cryptocurrency is by no means a negative trend. On the contrary, this pursuit of mainstream adoption and long-term development technology is undergoing a necessary evolution. The projects being built today have more substantive value than early enterprises—they are more focused on solving real problems and are more likely to create lasting value.

For venture capital institutions, this transformation is both a challenge and an opportunity. Those that can adjust their investment models to accommodate longer cycles, focus on fundamentals rather than hype, and provide real value beyond capital will thrive in the new landscape. Meanwhile, investors clinging to outdated strategies will increasingly be eliminated by the market—savvy entrepreneurs are choosing to collaborate with funds that best fit the new environment.

The cryptocurrency industry is maturing. The question left for venture capital institutions is: can you grow alongside it?

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