VCProjects

Venture capital investment in the crypto sector has dropped to levels reminiscent of the 2023 bear market, signaling a shift in funding strategies. Unlike previous years, where mass VC-backed project launches dominated, capital is now flowing through private deals. February’s total funding is on track to fall below $500 million unless a major last-minute investment changes the landscape. While December 2024 saw a surge in VC activity, setting high expectations for 2025, the momentum has since waned. Investor interest in the traditional VC-backed model has struggled to recover, reflecting broader changes in the industry.

Recent data suggests a modest increase in the number of funding rounds by the end of the month, with approximately 132 deals securing $795 million in investment—marking a 30% decline from previous peaks. One of the largest rounds in recent weeks was Reservoir’s $14 million raise. The downturn in funding also highlights a shift in market narratives, with investors prioritizing blockchain infrastructure, DeFi, and service-based projects. Seed rounds continue to represent around 30% of deals, with most securing between $1 million and $3 million. However, the total number of VC-backed deals remains significantly lower, with February recording just 92, a figure not seen since the worst periods of 2023.

Another notable trend is the decline of U.S.-based VC dominance in crypto investments. Despite the "Made in USA" narrative gaining traction, U.S. firms have fallen behind in undisclosed funding rounds. While the country secured 67 deals last month, totaling over $8.1 billion, private funding rounds globally exceeded $10 billion. This shift challenges expectations of a strong growth year for crypto funding in 2025, which was projected to attract up to $18 billion in new capital. The recent slowdown also aligns with declining market performance, as December’s surge in crypto prices was accompanied by increased VC investment, only for funding to retreat when Bitcoin and altcoins lost momentum.

The broader trend indicates that crypto funds are becoming increasingly selective, with many major investment firms struggling to break even. As of February 2025, only Coinbase Ventures remains near profitability, while other insider funds report cumulative losses dating back to mid-2024. The prolonged downturn in altcoin prices and investor fatigue from token unlocks have further pressured the market. As a result, new projects are exploring alternative financing methods, including airdrops, smaller token sales, and even potential IPOs, as the traditional VC-backed model loses its appeal.
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