Venture Capital Funding in Crypto Startups

Venture capital funding for crypto startups has yet to rebound despite recent U.S. regulatory clarity and signs of recovery following President Trump’s election.

Underwhelming Performance

MV Global partner Tom Dunleavy stated that the crypto industry raised excessive capital compared to high-quality projects available. Venture firms prioritized short-term token gains over building long-term businesses in this emerging sector.

Dunleavy added:

> “We should be seeing the 21/22 type raises today as the industry now has a very clear long term trajectory but daily mark to market price action has destroyed sentiment.”

Average monthly VC funding fell from $3 billion in 2021 to $1.88 billion in 2022, continuing a downward trend to only $801 million in 2024. However, in December 2024, investment surpassed $1 billion for the first time since April, with $1.2 billion raised in January and $1 billion last month. Growth remains muted despite improving regulatory conditions in the U.S.

Failed Projects and Investor Skepticism

Mickey Hardy, chairman of Arcadia, agreed with Dunleavy’s viewpoint, noting many projects from peak fundraising years are now inactive. This has increased investor caution as past failures bred skepticism towards new crypto startups.

Nonetheless, Hardy believes venture capital activity will resume once the market stabilizes, pointing to Bitcoin’s (BTC) position as a recognized asset. Dunleavy also acknowledged potential funding resurgence but expects it to lag due to diminished investor sentiment from prior losses and changing risk appetite.