Crypto Venture Capital (VC) companies experience operational tension and consolidation, even as project level fundraising wins.
In the first quarter, crypto startups raised $ 5.85 billion, already accounting for almost 61% of the capital that will be collected in 2024, according to To Defillama.
Capital Head of Venture Tom Dunleavy varies shared That, despite this inflow, use less active funds capital, and many companies that are launched during the last market cycle no longer consistently participate in deals.
He attributed the withdrawal of capital reserves and a lack of meaningful returns and described the situation as “mass consolidation that came in Crypto VC.”
Dunleavy noted that many funds in 2021 and 2022 are ‘shadow insolvent’, from capital but are still nominal active. He projected that many non-brand name companies, and even some established names, will be functionally closed by 2026.
Crypto VC funds versus startups
Data from the Galaxy research shows that while starting up the start -up, venture capital funds raise less money to invest in crypto projects.
In addition, the number of new Crypto VC funds peaked in 2022 at more than 300, but it has fallen steadily annually. Only about 50 new funds were launched in 2024 and only a fraction of that number came on the market in the first quarter of 2025.
The number of repeated investors has also shrunk. Defillama facts Shows that of all active funds in the past 180 days, only 67 have made more than one investment, which is less than half.
Dunleavy mentioned various causes, including the absence of distributions on paid capital (DPI), a lack of headline investment profits to extend the attention of capital allocators and slower inflow of ultra and high-net value individuals.
He added that institutional investors hesitate, despite recent regulatory progress between jurisdictions.
Risks’ contraction
The fundraising side does not reflect the contraction that is seen with venture material. The increase in fundraising volumes of the first quarter suggests that interest in crypto startups is growing. However, capital flows from a narrower basis of repeated participants and larger allocators.
As a result, venture activity is more concentrated. Capital is no longer widely spread over many generalist funds, but instead focuses within a smaller group of active players with sufficiently dry powder and differentiated propositions.
Dunleavy believes that this new landscape is probably a huge positive development for industry, because risk capital funds are much sharper with whom they use capital, resulting in better companies that bloom.
The crypto -fundraising landscape comes in a split phase. While startups continue to raise money faster than last year, Crypto VC funds are struggling to justify their relevance, attract new capital and stay active in a leaner, more disciplined market.
