Author: Yi.PineappleLP No longer buying dreams, GPs must sell products. This article will attempt to divide current crypto fundraising products into three categories: Primary, Liquid, CeFi / DeFi Native Yield. The first part will focus on Primary: After VC blind pools lose their appeal, who is still at the table, and who must re-prove themselves? The answer is at the end, you can skip directly to it.
Note: This article aims to provide a landscape description of the entire crypto fundraising market. The first part mainly classifies and elaborates on the current market situation from the perspective of products, and the second part will analyze it from the perspective of LPs. Since the author is mainly in the Asian market, this article may have regional bias.
After losing the grand vision, most Crypto GPs who failed to earn excess returns in this cycle must be down-to-earth and launch a product with PMF, either by re-proving their ability to help LPs earn excess returns through some Niche Market, or by helping LPs / partners solve specific problems, in order to continue to survive. For most GPs, this market has long moved from the stage of “buying a future vision” to the stage of “buying a specific product.”
LPs have now lost patience, and no longer want to look forward to the grand vision, but want to see things and opportunities that can make money immediately, right away, and with relative certainty. Crypto LPs have lost trust in the market and are unwilling to easily believe in the story of the “next cycle.” What’s more, many people have not made easy money in this cycle, and once the way to make money becomes difficult, investment actions will tend to be more cautious and conservative. Most traditional LPs have also completed a round of learning and have passed the stage of listening to stories.
The bull market in 2020/2021 was the most FOMO time in the market. US dollar funds were cheap, and it was relatively easy for LPs to make money, and Crypto was in an explosive period. At that time, many people were willing to impulsively spend money for their dreams even if they had a superficial understanding of crypto; or they spent money to enter the market for learning out of strategic needs. The decline in AI and labor costs has also changed the GP’s ecological niche. The cost for LPs to learn, recruit people, look at data, do transactions, and make small direct investments is decreasing. The transformation of LPs into GPs is a general trend. If GPs only provide the vague ability of “I understand crypto,” their value will become increasingly dangerous.
As far as the storytelling track is concerned, unless it is a US fund with a strong brand, there is still a chance to tell stories and visions in some niche tracks based on their past track records. In Asia, this ecological niche is already very difficult, after all, whether it is a crypto project or a fund, to a certain extent, only white papers have the opportunity to tell stories.
This article divides crypto fundraising products into three major categories for discussion: Primary, Liquid, CeFi / DeFi Native Yield. Primary VCs can be roughly divided into blind pools and those with a clear pipeline in terms of transparency; in terms of liquidity, they can be roughly divided into primary and secondary. Liquid can be roughly divided into alpha-biased and beta-biased in terms of source of income; in terms of directionality, it can be roughly divided into directional and market neutral.
CeFi/DeFi Native Yield can theoretically be regarded as a type of income source within or spanning the crypto primary market and liquid market. The reason for singling it out is mainly because from the perspective of TradFi investors, they usually use the framework of traditional financial markets to understand crypto. However, there are indeed some gameplay and income mechanisms in crypto that do not fully correspond to those in traditional financial markets, such as mining, selling, points/airdrop farming, protocol incentives, and on-chain liquidity mining.
For many Crypto Native Investors, the entry point for them to first come into contact with and understand the financial market is not the traditional equity / bond market, but crypto-native scenarios such as exchange financial management, staking, DeFi lending, LP, points / airdrop farming, and basis trade. For Crypto Native LPs, accessing this part of the yield does not require a GP, at most a reliable major account manager. For Tradfi LPs, some institutions are now packaging this part of the yield into a fund and selling it to tradfi LPs.
From the perspective of the entire primary market, crypto VC is just a sub-track under the VC category. 2021 was a crazy year, and the real returns of that vintage were not good, whether it was crypto or non-crypto. As a cruel fact, LPs have learnt their lessons, and are tired of any products with ultra-long lock-up periods. Because if there is no hard lock-up, they at least have the opportunity to take out some of the money when the situation changes. Crypto is in some sense worse than traditional VC, because the entire vision has collapsed. It is not a new industrial revolution, but at most a revolution in financial infrastructure.
Investing in VC is like VC investing in projects, it is a power-law business, a lottery-like business. As long as there are still people willing to buy lottery tickets, this table will not disappear. The reasons why LPs invested in crypto VC in those years included: obtaining industry Beta, obtaining project access (Accessibility), obtaining judgment (Judgement), the ability to organize events, and reputation needs. But now, with the maturity of products such as ETFs, and the failure of GP performance to meet expectations, these reasons have been greatly reduced.
From the perspective of pure capital sources, the players who are most likely to continue to stay at the primary table are: funds that are large enough to enter the endowment/other similar long-term patient capital mandate; FO, companies, and HNW proprietary primary crypto investment that invest with their own money; a few funds that bet on treasures/bought BTC in this cycle and really earned excess returns for LPs; funds that have a clear ability to organize events and have ecological resources in their hands that can be used for interest swaps with LPs. For other players, if trust has been lost, it is better to start over with a new mindset and rebuild trust.
[Yi.PineappleLP]
Crypto Fundraising: From Vision-Driven to Product-Driven Investment
The crypto venture capital landscape is undergoing a profound transformation, moving away from the vision-driven exuberance of 2020-2021 toward a more pragmatic, product-focused investment approach. This shift reflects a maturation of the market and a fundamental change in Limited Partner (LP) expectations, with significant implications for token prices, market dynamics, and the future structure of crypto funds.
The End of an Era: Vision Investing is Dead
The article correctly identifies that LPs have lost patience with grand visions and “next cycle” narratives. This represents a critical turning point in crypto’s evolution as an asset class. During the 2020/2021 bull market, LPs were willing to accept ultra-long lock-ups and vague promises of future returns based on the revolutionary potential of blockchain technology. Today, capital is flowing toward products with demonstrable Product-Market Fit (PMF) and immediate value propositions.
This transition mirrors the evolution of other emerging technologies from speculative hype to practical application. While crypto still maintains unique characteristics, it is increasingly being evaluated through a traditional financial lens, particularly by institutional investors who have now completed their “crypto education” cycle.
The Three-Tier Fundraising Landscape
The article’s categorization of crypto fundraising products into Primary, Liquid, and CeFi/DeFi Native Yield frameworks provides a useful analytical lens for understanding the current market structure:
Primary Investments: The Lottery Continues, With Stakes Raised
Primary venture capital in crypto remains a power-law, lottery-like business, but with significantly higher barriers to entry and LP skepticism. The brutal reality is that 2021 vintage funds delivered poor returns across both crypto and traditional VC, eroding LP confidence.
The funds likely to survive in this space are:
– Large funds with access to long-term patient capital (endowments, pension funds)
– Family offices and high-net-worth individuals investing proprietary capital
– Funds that delivered exceptional returns in the current cycle
– Funds with unique ecosystem resources and deal flow advantages
For token prices, this means that early-stage funding will become more selective, potentially leading to:
– More rational valuation methodologies
– Greater emphasis on token utility and revenue models
– Pressure on projects to demonstrate clear paths to monetization
Liquid Strategies: Seeking Alpha in a Mature Market
Liquid strategies—ranging from alpha-biased to beta-biased approaches—are increasingly attractive to LPs seeking more flexible investment options with shorter time horizons. This trend reflects a broader demand for liquidity in crypto markets, as LPs become more risk-averse.
The performance of these funds will heavily influence market sentiment and token prices. Successful alpha generation could create a virtuous cycle, attracting more traditional capital. Conversely, poor performance might reinforce negative perceptions of crypto as an asset class.
CeFi/DeFi Native Yield: Crypto’s Unique Value Proposition
The CeFi/DeFi Native Yield category represents perhaps the most distinctive aspect of crypto’s financial ecosystem. These strategies—encompassing staking, yield farming, liquidity provision, and protocol incentives—offer returns mechanisms that have no direct equivalent in traditional finance.
For LPs, particularly traditional finance investors, these yield products present an attractive entry point to crypto exposure with potentially more predictable returns than early-stage venture investing. The packaging of these strategies into institutional-grade products represents a significant opportunity for funds that can:
– Manage smart contract and protocol risks
– Provide consistent, transparent yield reporting
– Navigate an increasingly complex regulatory landscape
Regional Disparities and Market Dynamics
The article’s acknowledgment of potential Asian market bias highlights an important consideration: crypto fundraising dynamics may vary significantly by region. Asian markets appear to have reached a more advanced stage of skepticism toward vision-based investing, creating a more demanding environment for GPs to demonstrate tangible value.
This regional divergence could lead to:
– Capital flowing toward regions with more favorable regulatory environments
– Different investment theses gaining prominence in various markets
– Increased competition among GPs to demonstrate unique value propositions beyond geographic access
The Future of Crypto GPs: Value Redefinition
As LPs become more sophisticated and technology lowers the barriers to entry, traditional GPs must fundamentally redefine their value proposition. The article correctly identifies that LPs can increasingly “become GPs themselves” through direct investment models and access to data.
For crypto GPs to survive and thrive, they must develop one or more of the following competitive advantages:
– Deep technical expertise in specific niches (e.g., ZK proofs, DeFi infrastructure, gaming)
– Unique access to deal flow in emerging ecosystems
– Superior operational capabilities for portfolio company support
– Proprietary data and analytics for investment decision-making
– Creative structuring of products that address LP needs for liquidity and returns
Implications for Token Prices and Market Structure
This shift in fundraising dynamics will have profound implications for token prices and market structure:
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Valuation Discipline: Tokens without clear utility or revenue models will face increased downward pressure as funding becomes more scarce.
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Infrastructure Focus: Projects enabling the broader crypto ecosystem (e.g., oracles, privacy tech, developer tools) may outperform consumer-facing applications.
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Liquidity Premium: Tokens associated with liquid, yield-generating protocols may command valuation premiums.
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Concentration of Capital: A smaller number of well-performing funds may capture an increasing share of deployable capital, potentially leading to:
- More concentrated investment theses
- Higher valuations for favored projects
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Increased pressure on GPs to demonstrate performance
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Regulatory Arbitrage: Projects and funds may increasingly position themselves in jurisdictions with favorable regulatory environments, creating pockets of innovation.
Niche Opportunities in a Maturing Market
Despite the challenges, several niche opportunities are emerging:
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Secondary Market Specialists: Funds focusing on liquid secondary trading of crypto assets may benefit from increased liquidity demand.
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Tokenized Real World Assets: Bridging traditional finance with crypto through tokenization of real-world assets.
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Regulation-Compliant DeFi: Developing DeFi products that navigate regulatory requirements while maintaining crypto-native value propositions.
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Cross-Chain Arbitrage: Capitalizing on inefficiencies between different blockchain ecosystems.
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TradFi Crypto Integration: Helping traditional financial institutions navigate crypto exposure, custody, and investment strategies.
Conclusion
The crypto fundraising market is undergoing a necessary maturation process, moving away from speculative vision-based investing toward a more product-driven, utility-focused approach. While this transition creates significant challenges for many established GPs, it also presents opportunities for those who can adapt to the new reality of LP expectations.
For token prices, this likely means a more rational pricing environment where fundamentals and utility increasingly drive valuations. The “crypto revolution” narrative has given way to a more pragmatic view of crypto as financial infrastructure, with investment decisions increasingly resembling those in traditional markets.
The funds that will thrive in this new environment are those that can deliver tangible products, generate consistent returns, and provide unique value beyond simple access to deals. The era of easy money in crypto venture capital is over; in its place emerges a more disciplined, demanding, and ultimately more sustainable market ecosystem.