Is VC "dead"? No, the brutal reshuffling of Web3 has just begun.

Original author: Lao Bai

As a former VC investor, how do you view the current "VC is dead" narrative on CT?

This is a paid question, so I'll answer it seriously. I actually have quite a few thoughts about this narrative.

Let me start with the conclusion -

1. It is an undeniable fact that some VCs are indeed dead

2. Overall, VCs will not die; they will continue to exist and drive the industry forward

3. VCs, like projects and talent, are entering a phase of "clearing out" and "survival of the fittest," somewhat similar to the internet bubble of 2000. This is the "debt" from the last bull run; after a few years of paying it off, the industry will enter a new, healthier growth phase, but the threshold will be much higher than before

Next, I'll elaborate on each point

1. Some VCs are dead

Asian VCs are probably the worst hit this round. Starting this year, most of the top ones have either shut down or disbanded. The few remaining hardly make any investments for months, focusing on the exit of their current portfolio, and raising new funds is also quite difficult.

European and American second- and third-tier VCs were relatively okay in the first half of the year, which is related to their LP structure and capital scale. But in the second half, especially in the past month or two, they've started to show some of the same trends as Asian VCs: investment frequency is dropping, some have stopped investing altogether, or have transformed into pure Liquid Funds. Some investment managers/partners have even told me on TG, "It's too hard, can't exit." The 1011 crash had a fatal impact on altcoin liquidity, and now this is starting to affect VC confidence.

The top-tier VCs in Europe and the US seem to be less affected, at least on the surface.

Actually, this VC "bear market" is a "delayed effect" from the Luna crash in 2022. The secondary market turned bearish at that time, but the primary market—whether in terms of project valuations or the amount of capital VCs raised—wasn't much affected. Many new VCs were even established after the Luna crash (such as ABCDE). The logic at the time wasn't wrong: Defi Summer's star projects like MakerDAO and Uniswap were built during the 2018-2019 bear market, and the VCs from that period made a killing in the 2021 bull run. So, do VC in the bear market, invest in good projects, and when the bull comes, you'll be set!

But reality is harsh, for three reasons:

First, the 2021 narrative and liquidity injection were too crazy. In 2018-2019, the difference between investing in good and bad projects wasn't that big—everything soared, and any project could go up dozens or even hundreds of times. This also meant that even in the 2022-2023 bear market, new projects in the primary market still had relatively high valuations and fundraising amounts due to anchoring effects, not much affected by the secondary market. This is what I meant by the "delayed effect" of the primary market bear.

Second, the four-year cycle has been broken. There was no so-called "altcoin season" in 2025. There are macro reasons for this, too many altcoins, insufficient liquidity, people becoming disillusioned with narratives, no longer buying in just because of a PPT or VC endorsement, the AI boom, and the siphoning effect of "real value investing" in US stocks on crypto funds... Anyway, the previous pattern is not repeating, and it's impossible to replicate the dream of investing in good projects in 2019 and exiting at 100x in 2021.

Third, even if the four-year cycle repeated, 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 two or three years. Even if they TGE, they have to lock for a year, then release over another two or three years. A project invested in 2023 might not get its last batch of tokens until 2028-2029, spanning one and a half cycles. In crypto, how many projects can survive and thrive across cycles? Very few.

2. VCs as a whole will not die

This really isn't something to worry about. As long as the industry survives, VCs will survive. Otherwise, who will provide resources for new ideas, new technologies, and new directions? We can't rely entirely on ICOs or KOL rounds, right?

ICOs are more about bringing in some retail investors and the community, and generating hype. KOL rounds are mainly for spreading the word—these are things that happen in the mid-to-late stages of a project. In the very early stage, when it's just one or two founders and a PPT, only VCs can truly understand and provide funding. At ABCDE, I talked to over 1,000 projects in two years and only invested in 40. Of those carefully selected 40, probably 20 or 30 will still fail. Many of the projects you see in the market and think are "trash" have already been filtered many times and are relatively "premium." Otherwise, if all 1,000+ projects did ICOs or KOL rounds, could retail investors or even KOLs really tell them apart?

Just think about the phenomenal projects from the last cycle to this one. Except for rare cases like Hyperliquid, which one didn't have VC backing? Whether it's Uniswap, AAVE, Solana, Opensea, PolyMarket, or Ethena... No matter how anti-VC the sentiment is, the industry still relies on founders and VCs working together to move forward.

A few days ago, I talked to a prediction market project that is completely different from most Polymarket/Kalshi copycats on the market—very differentiated. I recommended it to some VCs and KOLs, and everyone thought it was interesting and wanted to chat. See, good projects don't die, and neither do good VCs.

3. The bar for VCs, projects, and talent will rise, trending toward Web2

VCs - Reputation, capital, and professionalism are clearly entering a "winner takes all" phase.

The most important thing for a VC's reputation and brand is not how famous you are among retail investors, but whether developers or founders are willing to take your money, and why they choose you over another VC. That's the real moat for VCs. This round, VCs are clearly becoming more like CEXs, shifting from a pyramid structure to a thumbtack structure.

Projects - We've moved from the previous cycle of focusing on narratives and whitepapers (or not even reading whitepapers, like in 2017 when Li Xiaolai could raise 100 millions with just an idea), to the last cycle of looking at TVL, VC endorsements, narratives, transactions... to this cycle of looking at real user numbers and protocol revenue... It finally feels like we're gradually approaching the direction of US stocks.

Jeff from Hyperliquid once said in an interview that the only business model for most crypto projects is selling tokens, because at TGE there's nothing—just a mainnet, no ecosystem, no users, no revenue... so they can only sell tokens. Imagine if a US stock company went public with just a company entity and a bunch of employees, maybe a factory or workshop, but no customers and no revenue—there's no way Nasdaq would let you list! Why can we just TGE or list directly in Web3?!

This round, Polymarket and Hyperliquid set the best example: one spent years building a large base of real users and revenue, even creating a new sector, then considered issuing tokens. The other used token airdrop expectations as incentives to attract early users, but their product is unbeatable, so even after token issuance, people keep using it, and the project itself is a cash cow, with 99% of revenue used to buy back tokens. When projects have real, non-farmer users and real revenue, then we can talk about TGE and listing. Only then will our industry truly be on the right track.

Talent - One big reason I always have faith in Web3 is because this industry gathers some of the smartest people in the world. As I wrote before, of the 1,000+ projects I've talked to, nearly half of the founders and core teams are Ivy League graduates. In China, founders are almost all from Tsinghua or Peking University, with the occasional Zhejiang, Shanghai Jiao Tong, or Xiamen University (all top schools).

Of course, it's not just about academic credentials—I myself didn't go to a top school. But statistically, with so many high-IQ people gathered here, even if it's just for the wealth effect, they're bound to come up with something useful or fun.

So as I said before, even though the market is bearish, the entrepreneurial directions this round are actually quite clear: stablecoins, Perp, on-chain everything, prediction markets, Agent Economy—all have clear PMF. Good founders + good VCs can definitely create truly great things. Polymarket and Hyperliquid have set the best examples, and I believe we'll see more star products emerge in the next year or two.

For ordinary people, Web3 is still the most promising place to go from nobody to somebody—of course, that's compared to the hellish difficulty of the hyper-competitive Web2 world. Compared to previous cycles, the difficulty has gone from Easy to Hard.

So in the end, it's still the same saying—pessimists are always right, but optimists always move forward

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