As the industry enters a mature stage, how should crypto VCs respond?

Author: Sam Lehman, Symbolic Capital investor; Translation: Jinse Finance xiaozou

In the past few months, I have witnessed four well-known crypto funds either switch to pure liquidity management or quietly close. Many first-tier institutions are struggling to raise funds. Many investors I know have completely left the market - some have switched to the AI ​​track, and some have directly retired (not just because they have earned enough pensions from AI meme coins). This is by no means accidental, but the underlying logic of the industry is undergoing a qualitative change.

I think the crypto world is bidding farewell to its wild and unruly childhood and entering a steady maturity. The early chaotic order full of short-termism, speculation and VC arbitrage is giving way to a more mature and more organized new era. This transformation process will have many far-reaching impacts, and sadly, most Web3 venture capital institutions are not ready to meet it.

Venture capitalists always love to talk to entrepreneurs about the importance of "adaptability". Now, it's their turn to make changes themselves.

Here are my thoughts on the industry transformation: Why did the traditional crypto venture capital strategy fail? How will the new paradigm emerge? Which investors will stand out in the next stage.

1. Traditional Web3 VC Model

The old crypto VC model basically follows this routine:

• Look for projects that are about 1 year away from token issuance, and need to have connections with the top CEX (there used to be a fund raising that promoted the selling point of "management team from top exchanges", and its so-called value-added service was to be able to sniff out which projects can be listed in advance. If there are still funds promoting this rhetoric now, don't believe it...)

• Invest through SAFT agreement (and get a consultant title by the way)

• Sell to retail investors immediately after the project token is generated (TGE) - the lock-up rules at that time were much looser than the current standard "1 year lock-up period + 3 years linear release". In the bull market cycle, retail investors always have a gluttonous appetite for the Nth VC coin.

This set of gameplay condones a lot of bad behavior: First, many VCs raise 5-year funds - only half of the regular term of Web2 funds. This structure is doomed to fail to support long-term builders. How can a fund invest in a project that requires a 10-year development path when the fund's life span is only 5 years? On the other hand, founders who receive this type of funds are forced to accelerate liquidity within a limited timeline, often rushing to issue tokens before the product has verified market fit (PMF).

Fortunately, this model is dying out fast. In 2025, we saw an increasingly mature market with gradually clearer regulation and the re-entry of traditional financial institutions, and the industry's focus shifted to fundamentals, real utility, and sustainable business models.

2. Growth Appearance

The future crypto industry will require investors and entrepreneurs to have greater patience. Market maturity will bring the following significant changes:

• Longer lock-up period: Most CEXs adopt the new standard of "1 year lock-up + 2-3 years linear release".

• Fundamentals first: The proliferation of altcoins and the professionalization of retail investors force projects to break through with quality factors such as real income, moats, and profit paths.

• Diversified exit paths: The feasibility of crypto companies' IPOs has increased, and there are more M&A cases that can have a substantial impact, providing new liquidity channels independent of token issuance.

I dare say that most Web3 venture capital institutions find it difficult to adapt to the new normal. According to my observation, institutions that realize this have either left the market, turned to liquidity investment, or are raising structured funds that adapt to the new rules. And those institutions that can always support the new model will usher in a golden age.

Three. Winners in the change

Note: The new pattern means huge opportunities for many funds. Today, comprehensive institutions that can support the entire cycle of "seed round to IPO" will monopolize the blue ocean-currently, there are no more than 10 crypto funds that can lead A rounds and above. More importantly, institutions with the ability to guide IPOs are rare: How many funds pay attention to (and implement) formal corporate governance? Familiar with roadshow processes and investor relations? I am afraid there are only a handful... But for those funds that have always adhered to high standards and systematic operations, now is the magic moment for investment.

The role of early investors is also evolving. In the past, seed investors only needed to assist in community building and seize mind share to cash out before the product was formed. Now they must deeply participate in basic work such as product market matching and user research, rather than urging the project party to issue coins for cash.

It is worth mentioning that in 2023, Miles Jennings, general counsel of a16z crypto, called for "finding PMF first and then issuing coins", which caused controversy at the time. Fortunately, with the increasing emphasis on fundamentals, the industry is returning to rationality, which will give rise to more companies engaged in practical business (Note: the current experiment on "micro-scale coin issuance" is worthy of attention. This model allows the team to raise only necessary development funds, and its feasibility remains to be seen).

Fourth, embrace maturity

The maturity of the crypto industry is by no means a bad thing, but a necessary path for technology to move towards mainstream application. The projects currently being built are more practical, more focused on real problems, and more likely to create lasting value than before.

For venture capital firms, this is both a challenge and an opportunity. Those institutions that can adjust their strategies to adapt to long cycles, focus on fundamentals rather than hype, and provide real value-added services will flourish. Players who stick to old routines will eventually be abandoned by entrepreneurs who choose new paradigm foundations.

The crypto industry is growing. The question is: Can venture capitalists grow at the same time?