Does Web3 Still Need VC? The answer is: Yes, But Everything Is Changing

Voices about the death of venture capital in Web3 have been loud in recent months. However, the reality is more complex – this is not the end of VC, but rather the beginning of a drastic selection process reminiscent of the internet bubble of 2000. The industry is undergoing a transformation that will reshape the rules of the game under new, much more demanding conditions.

Two Realities: Face the Statistics

History shows an unavoidable cycle. After the euphoria of 2020-2021 driven by wild narratives and excess liquidity, the primary market was unrealistically inflated. When secondary market prices collapsed after the Luna crash in 2022, valuations of new projects remained paradoxically high – a anchoring effect that persisted for years. Those days are gone. Currently, even complete failures are hitting Asian funds hardest – leading institutions have been dissolved or frozen, and others are barely breathing, focusing on exiting existing portfolios rather than seeking new opportunities.

In Europe and the USA, mid-sized funds initially resisted the wave, but the second half of the year brought a clear change in strategy. More and more investment managers admit that “exiting investments” has become a chore. The 1011 crash was a catalyst – the faucet dried up, and altcoins became illiquid, extending institutional disbelief.

The largest funds remain relatively resilient, but the industry’s structure is fundamentally changing. We are shifting from a hierarchical pyramid to a “pin” formation – a more concentrated and elite model, resembling centralized exchange organizations.

Why VC Cannot Disappear – Despite All Wishes

The idea that the industry can do without venture capital is an illusion. Who would fund ideas at the seed stage when the foundation is just the word of two founders and PowerPoint slides?

ICOs and KOL rounds are later marketing stages, not the embryo of a project. In careful screening, a fund might select only 40 out of 1000 initiatives worth investing in – half of these will fail. If all 1000 decided to do an ICO, would retail investors be able to conduct such analysis?

Most of what is perceived today as “shit-coins” have already passed multiple filters. The phenomena of recent rounds – Uniswap, AAVE, Solana, OpenSea, Ethena – almost without exception had VC backing from the outset. Hyperliquid is a rare gem that grew differently, but we waited a long time for its emergence.

VCs will exist because the industry needs them. But conditions are changing drastically.

New Standards: When Web3 Grows Up

The transformation is multidimensional and affects all participants in the ecosystem.

Projects: We have moved from a phase where a whitepaper was enough to raise capital, through an era where TVL and narratives were sacred, to now, where real users and revenues matter. Polymarket and Hyperliquid demonstrate this paradigm: the former built a genuine user base over years before tokenization, the latter attracted users with the promise of airdrops, but most importantly – the product was good enough that people didn’t leave after the TGE. 99% of revenue is allocated to token buybacks.

When projects have real users (and farmers) and measurable revenues, then TGE and listings will make sense. This is a requirement that American exchanges have long imposed.

VCs: Reputation, capital, professionalism. For developers, it’s not how famous a fund is on Twitter, but whether its support opens the right doors, whether partners understand the ecosystem, and can help in critical moments. Competition will be ruthless – “the strong get stronger.”

Talents: Web3 attracts the intellectual elite – nearly half of the 1000 projects encountered recruited founders from Ivy League schools, in China – almost exclusively from Tsinghua, Peking University, sometimes Shanghai Jiao Tong. Concentration of high IQ in one place, even driven only by the motivation of wealth, generates value. This will not change.

Future Directions: From Easy to Hard

We are gradually approaching the standards of the American market. Stablecoins, perpetual futures, asset tokenization, prediction markets, agent economy – all these directions have a clear product-market fit.

Good founders and good VCs will create something valuable. Most projects will not survive – that’s a fact. But those that do will have strong fundamentals.

For ordinary people, Web3 remains a place where you can go from “nobody” to “somebody” faster than in Web2. The difficulty level has risen from Easy to Hard, but opportunities exist.

In conclusion: pessimists are always right, but optimists always move forward. The selection process continues – this is not the end of VC, but its rebirth.