How has VCs’ interest in crypto evolved?

In the early days of crypto venture capital, around 2012 to 2017, the landscape was defined by a sense of both wild optimism and uncertainty. VC firms were drawn to the untapped potential of blockchain technology, often investing in networks that promised transformative solutions but lacked substantial frameworks to bring these visions to life.

At this stage, investors frequently prioritized projects based on their potential for explosive growth, overlooking business metrics or the viability of the technology they were producing. The due diligence process was relatively minimal, leading to heightened volatility and, in some cases, project downfalls, even those that garnered substantial funding.

Market excitement led to a culture of speculation, where investments were sometimes made on a gut feeling rather than a thorough analysis of the technology stack or market fit.

This environment attracted not just seasoned VC funds and investors but newcomers eager to participate in what seemed like a gold rush. As a result, projects and networks emerged with ambitious whitepapers and unrealistic promises. Yet few had the expertise and guidance to deliver on their claims. 

As the markets matured, the shortcomings of early VC strategies became clear. To save face, many marquee VC firms that had only dipped their toes into blockchain quickly pulled out of the industry altogether. However, this paved the way for a more cautious and strategic approach focusing on real-world applications, infrastructure, and emerging technologies that provided a sense of stability and sustainability to the crypto market. 

This shift reflects a broader trend in VC funding where investors increasingly evaluate what a project and network can provide beyond a concrete product or solution. Societal and environmental impact are becoming more important to VCs as they aim to support blockchain projects that bring communities together.

As organizations and industries try to balance profitability with changing social values and pressures, initiatives and movements rooted in corporate social responsibility have also shifted the way VC funds engage with startups.

Now more than ever, VCs aim to support projects and networks that address global challenges and foster communities of users motivated by more than just financial gains. The blockchain industry isn’t exempt from this.

For example, web3 VC firm DFG has supported the Ethereum network since 2017 and has remained deeply rooted across its ecosystem by employing holistic strategies and investments in early-stage projects. Recently, the firm shared a report highlighting its widespread dedication to helping Ethereum (ETH) and its community and how its strategy has evolved throughout the years. 

In essence, it’s pulling back the curtain on how a web3-native fund refuses to remain stagnant. While DFG has invested in notable Ethereum projects advancing development in sectors such as layer-2 scaling, NFTs, proof-of-stake, automated liquidation, and infrastructure—social impact has become a key area of focus. This includes partnerships with NGOs like UNICEF to explore how to leverage blockchain technology for positive global initiatives related to education and economic development.

Community involvement has also become a major focal point for VC firms as they recognize the importance of fostering collaboration within the ecosystem. VCs that are drawn to community-focused web3 projects look for inspiration in community-driven and decentralized operations, offering a refreshing contrast to traditional tech startups. 

Financial gains are important, but they’re not everything. VC funds in blockchain are still alive and kicking, but now they’re helping create a more sustainable and responsible landscape, ensuring that the transformative potential of blockchain technology is also harnessed for the greater good.