Crypto VC funds struggle to capture money as startup fundraising rebounds in 2025

Crypto enterprise capital (VC) companies are experiencing operational pressure and consolidation, whilst project-level fundraising features momentum. 

Within the first quarter, crypto startups raised $5.85 billion, already accounting for practically 61% of the capital raised all through 2024, according to DefiLlama. 

Varys Capital head of enterprise Tom Dunleavy shared that, regardless of this inflow, fewer lively funds are deploying capital, and plenty of companies launched over the last market cycle are not constantly collaborating in offers.

He attributed the pullback to dwindling capital reserves and an absence of significant returns and described the scenario as “large consolidation coming in crypto VC.”

Dunleavy famous that many funds raised in 2021 and 2022 are “shadow bancrupt,” out of capital however nonetheless nominally lively. He projected that many non-brand-name companies, and even some established names, shall be functionally closed by 2026.

Crypto VC funds vs. startups

Galaxy Analysis information reveals that whereas startup fundraising is recovering, enterprise capital funds are elevating much less cash to spend money on crypto initiatives. 

Moreover, the variety of new crypto VC funds peaked in 2022 at greater than 300 however has steadily declined yearly. Solely round 50 new funds had been launched in 2024, and only a fraction of that quantity entered the market within the first quarter of 2025. 

The variety of repeat traders has additionally shrunk. DefiLlama data reveals that of all lively funds up to now 180 days, solely 67 made multiple funding, which is lower than half.

Dunleavy cited a number of causes, together with the absence of distributions to paid-in capital (DPI), an absence of headline funding wins to resume consideration from capital allocators, and slower inflows from ultra- and high-net-worth people. 

He added that institutional traders stay hesitant regardless of latest regulatory progress throughout jurisdictions.

Contraction in enterprise capital

The fundraising facet doesn’t mirror the contraction seen with enterprise companies. The rise within the first-quarter fundraising volumes means that curiosity in crypto startups is rising. Nevertheless, capital flows from a narrower base of repeat members and bigger allocators.

Consequently, enterprise exercise is changing into extra concentrated. Capital is not extensively distributed throughout many generalist funds however is as an alternative targeted inside a smaller group of lively gamers with enough dry powder and differentiated theses. 

Dunleavy believes this new panorama is probably going an enormous constructive growth for the trade, as enterprise capital funds are a lot sharper with whom they deploy capital, leading to higher corporations thriving.

The crypto fundraising panorama is coming into a bifurcated section. Whereas startups proceed to lift cash sooner than final yr, crypto VC funds battle to justify their relevance, elevate new capital, and stay lively in a leaner, extra disciplined market.