Venture capital (VC) firms have become much more selective with the crypto projects they invest in, representing a shift from the previous cycle due to market maturation, according to Eva Oberholzer, the chief investment officer at VC firm Ajna Capital.
“It's harder because we have reached a different stage in crypto, similar to every cycle we have seen for other technologies in the past,” Oberholzer told Cointelegraph.
She added that market maturation has slowed down pre-seed investing, as VCs pivot their attention to established projects with clear business models. Oberholzer said:
“It's more about predictable revenue models, institutional dependency, and irreversible adoption. So, what we see right now is that crypto is not driven by any memecoin frenzies or other trends, but it's more about institutional adoption.”
The shift in VC activity reflects the broader trend of institutional crypto investment and the focus on revenue-generating digital asset businesses, as opposed to the price speculation that drove investment during previous crypto cycles, including the 2021 bull market.
Related: VC Roundup: Bitcoin DeFi surges, but tokenization and stablecoins gain steam
The traditional financial world demands yield and revenue-producing crypto businesses
Traditional financial investors, including Wall Street firms, venture capitalists, and institutional funds, are increasingly demanding crypto projects that provide established, predictable revenue streams.
VC firms are concentrating on stablecoin projects and investing in other forms of payment infrastructure that can generate fees, Oberholzer said.
Real-world asset tokenization (RWA) platforms are also on the radar of VC firms due to the revenue models associated with minting and managing tokenized RWAs onchain.
Matt Hougan, the chief investment officer (CIO) at investment firm Bitwise, recently told Cointelegraph that the quest for yield is driving Wall Street investment in Ether (ETH).
“If you take $1 billion of ETH and you put it into a company and you stake it, all of a sudden, you're generating earnings. And investors are really used to companies that generate earnings,” Hougan said.
The smart contract layer-1 blockchain hosts the majority of the stablecoin, RWA market, and decentralized finance (DeFi) activity that generates stable revenues through fees and other forms of financial rent for its owners.
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