Crypto VCs Shift to Late-Stage Projects, Dragging Down Returns

Crypto venture capital firms are directing more money to late-stage projects in an effort to reduce investment risk, but the shift is increasing market risk and depressing returns, according to a critique.

CoinDesk columnist Varun Datta wrote on Sept. 2 that 57% of crypto VC funding deployed in the first quarter went to late-stage investments in projects with proven revenue and performance.

By contrast, only 19% of the capital went to very early-stage projects, including idea-stage ventures. The concentration is reducing the flow of funding to new projects, Datta wrote.

Multiple VC funds are crowding into the same late-stage companies, pushing valuations unnecessarily higher, he added. That is raising entry prices and reducing future investment returns.