This article is reposted from Chaincatcher.
Original Author: Lao Bai (X: @Wuhuoqiu)
As a former VC investor, what do you think about the current discourse on “VC is dead” in the CT community?
Regarding the payment issue, I will answer seriously. I actually have quite a few thoughts on this discourse.
Let’s start with the conclusion –
- It is an undeniable fact that some VCs have died.
- Overall, VCs will not die; they will continue to exist and drive the industry forward.
- VCs are actually entering a phase of “clearing out” and “survival of the fittest,” similar to the internet bubble in 2000. This is the “debt” of the last bull market, and after a few years of repayment, we will enter a new phase of healthy growth, but the threshold will be much higher than before.
Next, let’s elaborate on each point.
1.Some VCs have died.
Asian VCs are probably the hardest hit in this round. Since this year, the top few have either shut down or disbanded, and the remaining ones may not even make a move for months, focusing instead on exiting their current portfolios. Raising new funds has also become quite difficult.
In Europe and the US, the second and third-tier VCs have been relatively okay in the first half of the year, which is related to their LP structure and capital size. However, in the second half of the year, especially in the last month or two, there has been a noticeable decline in activity among Asian VCs, with investment frequency decreasing and some simply not investing anymore or transitioning to pure Liquid Funds. Some investment managers/partners have started telling me on TG, “It’s too hard, it’s difficult to exit.” The impact of the 1011 disaster on the liquidity of copycats is fatal, and it is now beginning to affect VC confidence.
The few leading firms in Europe and the US seem to be less affected, at least on the surface.
In fact, this round of “bear market” for VCs is a “delayed effect” following the Luna crash in 2022. At that time, the secondary market was bearish, but the primary market, whether in terms of project valuations or the amount of capital raised by VCs, was not significantly affected. Many new VCs were established after the Luna crash (e.g., ABCDE). The thinking at that time was not wrong; several star projects in DeFi Summer, like MakerDAO and Uniswap, were built during the bear market of 2018-2019. The VCs from that wave made a fortune during the bull market of 2021. Doing VC during a bear market, investing in good projects, and then enjoying the bull market was the plan!
But ideals are often rich, while reality is stark, and there are three reasons for this.
First, the narrative and the influx of capital in 2021 were too crazy. The difference between good and bad projects for VCs in 2018-2019 was not significant; everything was skyrocketing, and any project could see dozens or even hundreds of times returns. This has led to the valuations and financing amounts of new projects in the primary market remaining relatively high during the bear market of 2022-2023 due to anchoring effects, without being significantly impacted by the secondary market. This is what I referred to as the “delayed effect” of the primary market bear market.
Second, the four-year cycle has been broken. There has been no so-called “copycat season” in 2025. This is due to macro reasons, an excess of copycats, insufficient liquidity, a gradual disenchantment with narratives, and a reluctance to pay for PPTs and VC endorsements, as well as the explosion of AI and the siphoning effect of “true value investing” in the US stock market on crypto funds… Anyway, the previous patterns are no longer repeating. It is impossible to replicate the dream of investing in good projects in 2019 and achieving hundredfold exits in 2021.
Third, even if the four-year cycle were to repeat, the terms for VCs this round are completely different from the last. Some of our portfolios invested in early 2023 still haven’t issued tokens after 2-3 years. Even if there is a TGE, there will be a one-year lock-up, followed by another two to three years of release. A project invested in 2023 may not see the final batch of tokens until 2028-2029, directly crossing over a full market cycle. In the crypto space, how many projects can survive a cycle and still do well? Very few.
2.VCs as a whole will not die.
There is really nothing to worry about here; as long as the industry doesn’t die, VCs won’t either. Otherwise, who will provide resources to realize new ideas, new technologies, and new directions? We can’t rely solely on ICOs or KOL rounds, can we?
ICOs are more about bringing some retail investors and communities on board and creating momentum, while KOL rounds mainly handle dissemination. These are all things that happen in the later stages of a project. In the very early stages, with just one or two founders and a PPT, only VCs can truly understand and provide funding. In my two-plus years at ABCDE, I have discussed over 1,000 projects and ultimately invested in only 40. Out of these carefully selected 40, probably 20-30 will still fail. Many of the projects you see in the market that you consider “garbage” have already been filtered through many rounds to be relatively “premium”; otherwise, how could all these 1,000 projects launch ICOs and KOL rounds, and how could retail investors and even KOLs discern them?
Just think about the phenomenal projects from the last round to this round; aside from a few exceptional cases like Hyperliquid, which one is without VC backing? Whether it’s Uniswap, AAVE, Solana, Opensea, or PolyMarket, Ethena… No matter how anti-VC the sentiment is, the industry still relies on the collaboration between founders and VCs to move forward.
A few days ago, I spoke with a prediction market project that is completely different from most Polymarket/Kalshi copycats, extremely differentiated. I shared it with some VCs and KOLs, and the feedback has been very positive, with many wanting to discuss further. You see, good projects won’t die, and good VCs won’t either.
3.The thresholds for VCs, projects, and talent will increase, trending towards Web2.
VCs – Reputation, capital, and professionalism have clearly entered a phase where the strong get stronger.
The reputation and brand of a VC are not primarily measured by how famous they are among retail investors, but rather by whether developers or founders are willing to take their money and why they choose to take it from them instead of another VC. This is the true moat for VCs. This round has clearly seen VCs becoming similar to CEXs, transitioning from a pyramid structure to a more pin-like structure.
Projects – We have transitioned from evaluating narratives and white papers (or even not looking at white papers, like during 2017 when Li Xiaolai raised over a hundred million with just an idea) to evaluating TVL, VC endorsements, narratives, and transactions in the last round, and now to evaluating real user numbers and protocol revenues in this round… It feels like we are finally getting closer to the direction of the US stock market.
Jeff from Hyperliquid once mentioned in an interview that the vast majority of projects in the crypto space have only one business model: selling tokens. Because at the time of TGE, there is nothing—just a mainnet, no ecosystem, no users, no revenue… So they can only sell tokens. Imagine if a company listed on the US stock market had only a corporate entity and a bunch of employees, maybe some factories and workshops, but no customers and no revenue—how could that possibly get listed on Nasdaq?! Why can we in Web3 directly go for TGE or listing?!
This round, Polymarket and Hyperliquid have set the best examples: one spent years building a large number of real users and revenue, even supporting a new track, before considering issuing tokens. One did indeed use token airdrop expectations to incentivize early users, but their product is unbeatable, and after issuing tokens, everyone continues to use it. The project itself is a cash cow, and 99% of the revenue is used for token buybacks. When a project has real users and real revenue beyond just farmers, then we can talk about TGE and listing; that’s when our circle will truly be on the right track.
Talent – One of the main reasons I have confidence in Web3 is that this industry attracts some of the smartest people in the world. I have previously written that among the over 1,000 projects I have discussed, nearly half of the founders and core teams are Ivy League graduates. Domestic founders are almost exclusively from Tsinghua and Peking University, with a few from Zhejiang University and Shanghai Jiao Tong University.
Of course, this is not to say that only academic credentials matter; I myself am not from a prestigious school. But it is undeniable that from a statistical perspective, having so many high-IQ talents gathered here, even if just due to the wealth effect, will definitely lead to the creation of some useful or interesting things.
So, as I said before, although the market is bearish, the direction for entrepreneurship this round is actually quite clear: stablecoins, perpetuals, everything on-chain, prediction markets, and agent economy are all directions with confirmed PMF. Good founders and good VCs can definitely create truly great products. Polymarket and Hyperliquid have set the best examples, and I believe we will see more star products emerging in the coming years.
For ordinary people, Web3 remains the most promising place for you to transform from nobody to somebody—of course, this promise is in stark contrast to the hellish difficulty of the already saturated Web2. Compared to the previous rounds or cycles, this difficulty has shifted from Easy to Hard. I remember seeing a tweet from a Web3 VC partner a few days ago, saying they received over 500 resumes for a junior intern position within a few days, many from prestigious schools, which scared them into closing the job posting.
So, in the end, it’s still that saying – pessimists are always right, while optimists always move forward.
Disclaimer: This article is reposted content and reflects the opinions of the original author. This content is for educational and reference purposes only and does not constitute any investment advice. Digital asset investments carry high risk. Please evaluate carefully and assume full responsibility for your own decisions.
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