Crypto Venture Capital (VC) companies are experiencing operational burdens and integration, even as project-level fundraising has gained momentum.
In the first quarter, Crypto startup raised $5.85 billion, already accounting for almost 61% of the capital raised throughout 2024. According to To Defilama.
Principal of Varys Capital Benture Tom Dunleavy Share Despite this influx, there is little aggressive capital deploying capital, and many companies launched during the last market cycle have not been consistently involved in trading.
He described the situation as “a massive integration coming in Crypto VC” with a pullback to the decline in reserves in the capital and lack of meaningful benefits.
Dunleavy noted that much of the funds raised in 2021 and 2022 were “Shadow Ionstolvent,” and while not capitalized, they were nominally active. He predicted that many non-branded companies, and even several established names, would be functionally shut down by 2026.
Crypto VC Funds vs. Startups
Galaxy’s research data shows that venture capital funds are raising less money for investments in crypto projects while startup funding is recovering.
Additionally, the number of new Crypto VC funds peaked at over 300 in 2022, but is steadily decreasing every year. In 2024, only about 50 new funds were launched, and a small portion of that number entered the market in the first quarter of 2025.
The number of repeat investors has also shrunk. Defilama data Of all active funds over the past 180 days, 67 have made multiple investments. This is less than half.
Dunleavy cited several causes, including the lack of distribution to payroll capital (DPI), the lack of victory in headline investments to renew attention from capital allocators, and the slow inflows from the ultra-rich people.
He added that institutional investors are hesitant despite recent regulatory advances across the jurisdiction.
Venture capital contraction
Fundraising parties do not reflect the shrinkage that is seen as a venture company. The increase in funding volume in the first quarter suggests increased interest in crypto startups. However, capital flows from a narrower base of repeat participants and larger allocators.
As a result, venture activities are becoming more concentrated. Capital is no longer widely distributed among the funds of many generalists, but instead focuses on small groups of active players with ample dry powders and differentiated papers.
Dunleavy believes this new landscape is likely a major positive development for the industry. This is because venture capital funds will deploy capital and better companies will flourish.
The code fundraising situation is now in a branched stage. While startups continue to raise funds earlier than last year, Crypto VC Funds struggles to justify their relevance, raise new capital and continue to operate in a more lean and disciplined market.
