The Scoop Tom Schmidt on why this cycle is different for venture
Jan 14, 2025
Tom Schmidt, a Partner at Dragonfly, shares his insights on the evolving cryptocurrency landscape. He discusses how crypto is becoming a legitimate institutional asset by 2025 and the unique challenges facing venture capital in this space. Schmidt highlights the shift from price-driven token models to application-based usage, emphasizing innovation over hype. He also explores new customer acquisition strategies and the potential recovery of the market, signifying a promising future for crypto startups.
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Crypto Funds' Evolution
- Early crypto funds acted like ETFs, providing crypto exposure by holding assets like Bitcoin and Ether.
- This structure changed as LPs gained easier access to major cryptocurrencies, making fund holdings a drag on performance.
Crypto Venture as a Separate Asset Class
- Crypto venture funds are now distinct from major crypto allocations, similar to how investors hold QQQ and invest in Sequoia separately.
- LPs expect earlier distributions from crypto venture compared to traditional venture funds.
Valuation Overhang
- High valuations in private crypto markets during bull runs can create an overhang, making later fundraising difficult.
- Teams that raised large sums at high valuations may struggle as investors prioritize companies with less baggage.