I’ve been a Web3 VC for nine years: Asian funds are entering a “hell mode.”

Author: Joe Zhou, Foresight News

A large number of Asian Crypto VCs have disappeared.

In the past week, I contacted more than twenty investor friends in my contacts, and more than half have already left. Some shifted to AI, some stepped into entrepreneurship personally, and some funds have completely stopped investing.

If we turn back to 2021 or 2024, the Web3 investment market was once crazy enough to see a dozen or even nearly twenty funding news in a single day, with millions of dollars in funding becoming commonplace. Back then, many believed that Crypto would experience explosive growth. VCs desperately raised funds, projects issued tokens frantically, and entrepreneurs raced wildly.

But by the second half of 2025, the entire industry cooled rapidly. Today’s Web3 market often sees only one funding news per day. The number of VCs actively on the front lines and still continuously betting on Web3 has become increasingly small.

In this cycle, what exactly has Crypto VC experienced? During the investigation, I found several investors still active on the front lines of Web3. Jocy, founder of IOSG, revealed: “We still invest in 15 Web3 projects each year, with 30% leading the rounds, even in a bear market. Just in the first half of this year, we completed three primary investments.”

Nine years, three bull and bear cycles, they have witnessed the industry’s craziest, most bubble-like times, and have also repeatedly trudged through the industry’s lowest valleys. In this bear market, Jocy told me that his biggest feeling is: the logic of Crypto VC has completely changed.

Below is a self-report from IOSG founder Jocy.

I’ve been in Web3 VC for nine years, experiencing three bull and bear cycles

I’ve been doing Crypto VC for nine years.

Since founding IOSG in 2017, we’ve gone through three cycles of boom and bust, investing in nearly a hundred projects in total. Back then, the industry was still very small. Bitcoin had just broken through $1,000, Ethereum was less than $10, and most people didn’t even know what “blockchain” was.

At that time, about 80%-90% of our positions were allocated to early-stage primary projects.

But now, with the changing crypto environment, over the past two years, we’ve gradually adjusted our investment strategy, continuously increasing allocations to Post-TGE (projects that have officially issued tokens) and OTC (over-the-counter) projects. Currently, our portfolio roughly consists of 50% primary, 30% Post-TGE, and 20% OTC.

For us, the early primary market remains the core source of alpha. But increasingly, we find that some Post-TGE and OTC assets are significantly misvalued, and secondary markets are beginning to present opportunities with better cost-effectiveness than primary.

Meanwhile, this strategy also gives us better liquidity management space, providing LPs (investors) with clearer DPI (realized return) exit paths. I believe the future pattern is: the top 20% of VCs that can clearly explain DPI exit paths to LPs will take 80% of the market funds, while the remaining funds share the leftover 20%.

Our current team has over a dozen people, distributed across Asia and the US. Our strategy has always been global, so we can keenly sense the industry’s temperature changes worldwide. The current market is actually very cold, with excellent projects extremely scarce. Looking at Silicon Valley’s Web3 startup scene, the number of newcomers doing pure Crypto is decreasing, as many talents have shifted to AI tracks.

The entire market remains in a somewhat pessimistic phase, and this pressure won’t end in the short term.

Every few years, the crypto industry undergoes a brutal reshuffle—institutions exit, projects go to zero, sentiment drops from frenzy to silence, then restarts. For us, now is actually the best time to rebuild industry order and redefine value.

Every bottom in the industry is often the best time for nurturing great projects.

Many think VC is just about investing money. But in fact, the institutions that truly stay long-term are those capable of helping entrepreneurs solve problems. One of our biggest accumulations over the past nine years is post-investment capabilities. Additionally, we’ve been building an ecosystem—covering Infra, DeFi, Consumer, and the intersection of AI and Crypto. We’ve always been working on creating a complete ecological map.

We hope different projects can form synergies. This is something we have always valued deeply.

Crypto VCs are entering “Hell Mode”

At the peak of the last bull market, how crazy was the industry? A seed-stage project could be finalized in 3 days, with five institutions fiercely competing for allocations, and even the same project could have three different valuations at the same time.

We’ve never participated in this game. That’s not investing.

Now that the market has cooled, it actually provides opportunities for truly research-driven institutions. We can finally sit down and do DD (due diligence). We can spend three weeks instead of three days to thoroughly evaluate a project.

So, this cycle is actually a structural opportunity for research-driven funds. Because less money is flowing in, good projects will actively seek institutions that can provide real non-financial value, rather than blindly offering high valuations to any institution. Our alpha comes from deep judgment, not from speed in grabbing allocations.

Looking around, the entire industry’s capital is shrinking.

Recently, a16z raised a $2.6 billion fund—still huge, but smaller than their previous fund. Benchmark and other big institutions are also reducing their scale.

The US fund model is quite different, often with a 10-year cycle. In the last cycle, their big gains didn’t necessarily come from investing in top-tier applications in the primary market, but from heavy holdings in major coins like Bitcoin. They used their strong dollar reserves to push market valuations to the ceiling, but didn’t point the industry toward real on-the-ground paths.

During the deflation phase of the bubble, US funds still have ample dry powder and many options. But Asian funds, after being pushed to high points together, fell and found themselves with no way out.

In the past year, the entire Asian VC funding market has been disastrous. Most VCs find it very difficult to raise funds. Almost no LPs say they must allocate to Crypto VCs.

So, for Asian funds, this is an extremely painful hell mode.

But from another perspective, this also means Asian funds must be more precise. Because bullets are limited, every shot must hit. Internally, we emphasize: don’t do mid-tier projects. Either invest in the top 1 or top 2 in the industry, or don’t invest at all. Because in a bear market, mid-tier projects are the most likely to collapse.

The biggest problem in the Crypto industry: TOKEN and value are disconnected

In this cycle, we are firmly avoiding several types of projects: infrastructure that only talks narrative (storytelling) but lacks PMF (product-market fit), over-redundant projects without cash flow, and projects that rely solely on ideas and empty promises. The market has become completely immune to “high FDV, low circulation” infrastructure tokens. Now, if you’re doing Infra, institutions prefer to invest in equity rather than tokens.

For a long time, a major stubborn disease in Crypto has been the long-term disconnection between tokens and real value.

In the past, many project teams played a “turtle escape” trick—real revenue-generating core business income and equity are tightly locked in the real-world company; tokens issued are merely used as interest-free financing tools, liquidity exits, or even market manipulation chips.

In short, protocols earn real money on-chain, but token holders get nothing—no share of the value created. This extreme misalignment of interests has caused many investors to lose everything in past cycles. Because what they bought was never a “real asset,” but just an empty symbol without rights.

After several brutal reshuffles, the industry is finally waking up: Good tokens must be able to carry real value.

High-quality projects are actively seeking transparency, clearly binding tokens to protocol benefits, which will become a key differentiator in the next cycle. Projects like Uniswap, Hyperliquid, Polymarket, and our investment Morpho are pushing this trend hard.

Take Morpho as an example: they publicly promise that the value generated by the protocol will be directly accumulated into the token through programmed mechanisms, never flowing to independent companies or equity. Similarly, after regulatory easing in the US, Uniswap is also adjusting in this direction; Hyperliquid demonstrates the power of “token buybacks” with real actions.

Frankly, buybacks are not a perfect indicator of value binding, but from a structural perspective, they truly give the token core support. By continuously reducing circulating supply and establishing long-term interests with token holders, along with transparent, programmed buyback rhythms, projects can forge a solid price floor for their tokens. For long-term holders, these tokens are undergoing a fundamental transformation—they are increasingly like bonds or income-generating assets, with scarcity and intrinsic value steadily increasing over time.

Only tokens with genuine value capture mechanisms, buyback capabilities, and bottom support can cross bull and bear markets and become long-term financial assets, not just gambling chips.

Perhaps it’s precisely because the industry has hit its most painful bottom that Crypto can truly begin this “deception elimination and genuine evolution.”

Every time the industry hits its most pessimistic point, the truly great projects are born

In recent years, Crypto has undergone a massive “falsification” process—exposing which products lack real demand, which narratives are fundamentally unsustainable, and which directions can’t surpass Web2.

This process of falsification has buried countless funds and top talents, but it has also gradually clarified the answers. For VCs, investment logic must change fundamentally—no longer betting on industry beta or cycles, but returning to the core of business itself.

We no longer see Crypto as an isolated island, but as “digital finance.” The industry finally realizes that what truly matters is never the illusory “big numbers,” but the real value behind them. When evaluating projects now, we must dissect down to very granular details: obsess over retention, CAC, and LTV of consumer projects; break down the ARR (annual recurring revenue) of token projects to extract sustainable real income.

As Crypto transitions from a storytelling alternative circle to a genuine financial industry, the opposite of frenzy, a huge value gap appears.

Currently, people are more willing to pay for intangible “imagination,” while undervaluing projects with real income, users, and cash flow. Examples include Morpho, Sky, and even Uniswap, which recently abandoned IPO plans and stuck to its token ecosystem. These veteran protocols, having gone through full bull and bear cycles, lost attention during the deep retracement of the bear market, but their fundamentals haven’t worsened—in fact, they’ve become healthier as industry conditions and revenue capacity improve.

This is why we are now allocating about 50% of our positions to these projects with real revenue and issued tokens. We focus our firepower mainly on two directions:

• Real revenue and financial infrastructure: including stablecoin payments, clearing and settlement, neo-banks, on-chain lending. For example, Ether.fi, Morpho, Centrifuge, and RedotPay—all with very clear user needs and positive cash flows.
• The intersection of AI and Crypto: we reserve 20% to 30% of our capital, not investing in general-purpose large models, but focusing on native crypto AI infrastructure (such as data training and collection).

Faced with this disorderly and violent reshuffle, VCs themselves must evolve. Now, every team member has an AI bot to handle tedious data backtesting and cross-timezone collaboration. But human interaction and fundamental human judgment remain our moat that can’t be replaced.

Nine years in, my biggest feeling is: truly great companies are rarely born during the hottest times, but during times when many think the industry is finished.

In this cycle filled with layoffs, disillusionment, and confusion, many are leaving or even doubting whether Web3 still has a future. But only in the lows do you get forced to think: what do users really need? What can survive long-term?

I still believe that the truly important things in this industry are just beginning. After the bubble deflates, the part that remains will truly determine what the next world will look like.