Crypto venture capital shifts to later-stage deals, leaving early-stage opportunities open
Crypto venture capital firms are increasingly focusing on later-stage companies, leaving a gap in early-stage funding that could hold the highest returns, according to Varun Datta, CEO of Truth Ventures.
In the first quarter of 2026, later-stage companies received 57% of all venture capital deployed in crypto, while pre-seed deals accounted for just 19% of transactions, per Galaxy Research. Datta argues this shift toward proven companies is a consensus trade disguised as discipline, as investors prioritize safety over early-stage risk-taking.
Shift in funding focus
Investors allocated about $1.1 billion to just eight new crypto venture funds in Q1 2026, the lowest quarterly fund count since Q3 2020. Capital has moved toward larger checks for fewer, more established companies, often those with demonstrated product-market fit. Meanwhile, early-stage startups—traditionally the focus of venture capital—are receiving less attention.
Why early-stage may still offer value
Datta suggests that the current caution in early-stage funding creates an opportunity. Many of crypto’s defining technologies, such as layer-2 networks and decentralized finance (DeFi) protocols, were funded before their markets were fully established. Investors who committed early captured significant value that diminished once the opportunity became widely recognized.
He advises looking for three key traits in early-stage projects: a real problem being solved, early signs of demand (even without revenue), and a sustainable model that can survive market cycles. These factors, he argues, are more important than short-term growth driven by incentives.
Broader market trends
AI has absorbed much of the venture capital attention, with OECD data showing AI companies attracted 61% of global venture capital investment in 2025. Despite this, crypto founders continue building infrastructure for digital finance, which may still hold untapped potential.
