How has VCs’ interest in crypto evolved?

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In the early days of crypto venture capital, between 2012 and 2017, the landscape was defined by a sense of both wild optimism and uncertainty. Venture capital firms have been intrigued by the untapped potential of blockchain technology, often investing in networks that promise transformative solutions but lack the critical frameworks to bring these visions to life.

At this stage, investors often prioritized projects based on their explosive growth potential, ignoring business metrics or the viability of the technology they produced. The due diligence process was relatively minimal, resulting in increased volatility and, in some cases, project disruption, even for projects that raised significant funds.

Market excitement has led to a culture of speculation, where investments are sometimes made on instinct rather than a thorough analysis of the technology stack or market fit.

This environment has attracted not only experienced VC funds and investors, but also newcomers eager to participate in what appears to be a gold rush. The result is projects and networks with ambitious white papers and unrealistic promises. But few had the expertise and guidance to make good on their claims.

As markets matured, the shortcomings of early venture capital strategies became apparent. To save face, many prominent VC firms that had only dipped their toes in Blockchain quickly withdrew from the industry altogether. However, this has paved the way for a more cautious and strategic approach focusing on real-world applications, infrastructure and emerging technologies that provide a sense of stability and sustainability to the crypto market.

This shift reflects a broader trend in VC financing where investors are increasingly considering what a project and network can deliver beyond a tangible product or solution. Social and environmental impact is becoming more important for venture capitalists as they aim to support blockchain projects that bring communities together.

As organizations and industries try to balance profitability with changing societal values ​​and pressures, initiatives and movements based on corporate social responsibility have also changed the way VC funds engage with startups.

Now more than ever, VCs aim to support projects and networks that address global challenges and foster user communities motivated by more than financial gains. The blockchain industry is not immune to this.

For example, web3 VC firm DFG has been supporting the Ethereum network since 2017 and continues to establish deep roots in its ecosystem using holistic strategies and investments in early-stage projects. Recently, the firm shared a report highlighting its widespread commitment to helping Ethereum (ETH) and its community, and how its strategy has evolved over the years.

Essentially, this pulls back the curtain on how the web3 native fund refuses to remain stagnant. While DFG has invested in key Ethereum projects that advance development in sectors such as layer 2 scaling, NFTs, proof of stake, auto-liquidation, and infrastructure, social impact has also become a key area of ​​focus. This includes partnerships with NGOs such as UNICEF to explore how to leverage blockchain technology for positive global initiatives related to education and economic development.

Recognizing the importance of fostering collaboration within the ecosystem, community engagement has also become an important focus for venture capital firms. Venture capitalists interested in community-driven web3 projects are looking for inspiration in community-driven and decentralized operations, which offer a refreshing contrast to traditional technology startups.

Financial gains are important but not everything. VC funds in blockchain are still alive and thriving, but now they are helping to create a more sustainable and responsible environment and ensuring that the transformative potential of blockchain technology is also used for the greater good.