The Funding: Are crypto treasury deals hurting general startup raises?

The Block

Aug 11, 2025 07:25:56

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In recent months, almost every large crypto fundraise has been a digital asset treasury (DAT) play — and VCs have been piling in, as I wrote recently. These deals now dominate the market, while traditional crypto startup rounds are noticeably fewer. So far in 2025, crypto startup VC rounds excluding DAT deals and token sales total 856, down from 1,933 in the same period last year — a 56% drop, based on The Block Pro data from my colleague Ivan Wu. Total funding has fallen from $8.13 billion in January–August 2024 to $8.05 billion this year, but that figure is flattered by Binance’s $2 billion raise in March. Strip that out, and funding for traditional rounds drops to $6.05 billion — about 26% lower year-over-year.

VCs say DATs are commanding attention and capital because they offer instant mark-to-market pricing, quicker liquidity than traditional ventures, and — when trading at a premium to net asset value (mNAV) — the ability to raise more, buy more crypto, and boost NAV per share. mNAV measures the market price of a DAT’s shares relative to the per-share value of the crypto it holds. When a DAT trades at a premium to mNAV, investors are paying more than the underlying assets are worth, giving the company room to raise additional capital, buy more crypto, and keep the growth flywheel going. For now, liquid funds are the most active players, while some VCs use DATs to park idle capital until the right venture deal emerges, as Hack VC’s co-founder and managing partner Ed Roman noted. The short-term appeal is clear, but as Neoclassic Capital co-founder Michael Bucella pointed out, the real test will be how mNAV multiples hold up in both bitcoin- and altcoin-focused DATs.

A sharper focus on fundamentals is also slowing early-stage venture activity. Investors now want revenue-generating protocols with clear value capture, not just narratives. Bucella and Roman both said projects like Hyperliquid — which funnels significant revenue back to token holders — have set the standard, raising the bar for new startups. Pantera Capital general partner Cosmo Jiang called the capital destruction in “fundamentally valueless tokens” a healthy reset, forcing VCs to abandon the old “vaporware token game” of backing projects with no real product, usage, or revenue in the hope that hype alone would lift token prices. “The pendulum has simply swung back toward equity and revenue, and away from 'launch a token and figure it out later,'” said Diogo Mónica, general partner at Haun Ventures.

Beyond DATs and the fundamentals shift, VCs point to broader market frictions limiting early-stage funding. Fundraising for smaller crypto funds itself has become much harder since the 2021 boom, leaving founders with fewer potential backers. Jed Breed, founder and general partner of Breed VC, said limited partner appetite for backing small VCs has cooled, reducing overall “dry powder” for early-stage deals. Hack VC's Roman pointed to a “Series A crunch” driven by the limited number of firms available to lead those rounds and by exchanges being conservative with token listings — a dynamic similar to late-stage capital drying up in web2 when IPO windows close.

While capital availability has tightened, several VCs said the quality of dealflow has improved. Mónica said weaker “spray-and-pray” pitches have been replaced by teams with revenue, compliance, and distribution in place, often in stablecoin-related projects. Bucella noted that better valuations for strong founders are giving investors more room to negotiate.

Underfunded opportunities still exist. Mónica and Roman pointed to DePINs — decentralized physical infrastructure networks — as a sector with long-term potential but few projects with strong fundamentals. "The idea is enticing, but no one’s cracked it yet," Mónica said. Roman also sees value in DeFi protocols with proven revenue models, even if public valuations are currently depressed. Breed highlighted zero-knowledge tech for bringing off-chain data on-chain, while Ray Hindi, co-founder and managing partner of L1D AG, said some fundamentally solid projects with live tokens in liquid markets are struggling to find capital. Others flagged bigger plays: Bucella sees on-chain intellectual property, capital markets, and contrarian bets like gaming and decentralized social as bigger opportunities, while Digital Asset Capital Management’s executive chairman and CIO Richard Galvin believes crypto–AI convergence is still underappreciated.

Most VCs agree that DATs are here to stay, but expect a sharp shakeout. Bucella sees NAV premiums compressing to roughly 1.03–1.07x for Bitcoin treasury firms and about 1.1x for Ethereum treasury firms, with 95% of trading volume concentrating in a small set of vehicles. Jack Platts, founder of Hypersphere Ventures, said the key question is “when (not if) most DATs trade at discounts to mNAV” and how many will bounce back. “I foresee there being two or three large-scale DATs for the major assets (BTC, ETH, SOL) and perhaps one or two for the other large-cap assets over time,” said Pantera’s Jiang, adding that most smaller DATs will be consolidated over time. Others, like Arrington Capital’s CIO Ravi Kaza, warn that the current cycle has already produced many "me-too" DAT strategies and could see a "dramatic shakeout in the next crypto downturn."

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