Venture crypto investing down 75%, but ‘native-VCs’ continue staying course

Crypto investing by Venture Capitalists (VC) fell 75% in Q4 2022 versus the same period in the prior year, according to Bloomberg.

The dramatic plunge in activity was driven by general VC tech firms, whose risk appetite for digital asset investing has diminished amid the many recent scandals that have plagued the industry.

However, driven by a belief that blockchain technology has more to offer, crypto-specific VCs are staying the course.

Crypto VCs sticking around

Reporter Hannah Miller said investment appetite for high-risk industries had shifted dramatically among investors. Part of the reason boils down to a divide between general VCs and crypto-specific VCs, with the former having withdrawn significantly in recent times.

“We had a lot of big named venture capitalists who are very established, they are known for investing in a broad array of tech companies, and they came into crypto, started backing companies like FTX, and now those generalist VCs are starting to pull back.”

“Crypto-native” VCs remain faithful to the cause as they continue stumping up billions of dollars of investments, despite the scandals and general lull in price action.

There are still people who see potentiality with blockchain technology, said Miller. While the FTX scandal was a massive blow across the board, Miller pointed out an acknowledgment that this was unrepresentative of the industry as a whole.

“People still see use cases for blockchain. They think that the full potential of this technology hasn’t been realized.”

Change of tack

Two years ago, during peak mania and sky-high valuations, VC firms were doing all they could to secure the bag. In some cases, this meant skipping out on conducting appropriate due diligence.

“Venture capitalists were suffering from fear of missing out (FOMO,) and they were maybe willing to set aside some of their typical due diligence practices.”

But now, following the wake-call dished out by recent scandals, Miller said there has been a reset in the FOMO mentality, leading to a more prudent, cautious investment approach.

The knock-on effect of this is a dramatic slowdown in the pace of deals completed.