Crypto startups have drawn in roughly US$100 billion of venture funding since the industry’s inception, after a recent pick-up in investment that coincided with a rally in bitcoin and other major tokens.

Data collected by DeFiLlama suggest the crypto sector’s fundraising haul stands at US$101 billion since 2014, while The Block Research has tallied more than US$95 billion of cumulative investment starting from 2017.

Fundraising in the form of venture capital deals and token sales has been a major propellant of the crypto industry’s growth, but the billions of dollars poured into startups have produced decidedly mixed results for investors.

Traditional exits in the form of landmark acquisitions and public listings have “definitely taken longer than I think you normally expect from traditional VC,” said Paul Veradittakit, managing partner at Pantera Capital, the US$4.7 billion crypto investment firm.

Coinbase Global Inc’s US$86 billion direct listing on the Nasdaq in 2021 during the last crypto bull market is a notable exception, he added, but exits in general have been scarce, largely limited to a smattering of trade sales.

Investors have also been scarred by outlandish blow-ups at once-vaunted crypto startups like Sam Bankman-Fried’s FTX and crypto lender BlockFi.

The likes of Tiger Global Management LLC and Temasek Holdings Pte have largely retreated from the sector since. Tiger Global notched just four crypto deals since the start of 2023, after an earlier flurry that saw the firm back dozens of startups, according to The Block Research data.

Temasek said last year it had no plans to invest in crypto exchanges after writing down a US$275 million stake in FTX to zero. Temasek declined to comment further while Tiger Global didn’t immediately reply to a request for comment.  

Fundraising by crypto startups dropped off sharply after the excesses of 2021 and 2022, in line with a broader decline in venture investment across fintech, which peaked at over US$110 billion globally in 2021 alone.

Helping to offset the challenges are tokens issued by startups, which venture capitalists often purchase as part of early-stage funding pacts. Typically listed on crypto exchanges, the tokens are another proxy for the value of projects.

Institutional backers that lost money on crypto bets did so because they arrived too late or were “lured into” investing in equity, according to Ray Hindi, chief executive officer of L1 Digital. “That was the wrong investment,” he said.

Tokens are a different story. While subject to certain lock-ups, sales of these volatile digital-assets are often possible relatively swiftly and can generate short-term returns. Many large crypto venture outfits, such as Polychain Capital, have in-house funds to help manage the tokens amassed through investments.

Kinjal Shah, general partner at Blockchain Capital, is among those taking a more old-school approach. “The way that we really position investing is still oriented around a venture style return,” she said. “So still fund lifecycles of five to 10 years and really orienting around what can be accomplished in a decade.”

For some, liquid tokens can cut the return cycle for venture investors down from five to 10 years to as little as two, according to Richard Galvin, co-founder of Digital Asset Capital Management.

  - Bloomberg