Shed a tear for venture capitalists. After years of riding high, the Silicon Valley crowd is dragging their tails as an abrupt change in the macroeconomy, most notably rising interest rates, has wiped out their hometown bank and has left seeking funds while investors look elsewhere for high-yield bets. . It's tough, but no one is having a tougher time than crypto VCs, as they a new Fortune report reveals.
Our own Leo Schwartz teamed up with crack finance reporter Anne Sraders to see how crypto VCs are faring at a time when token prices continue to fall and the broader economy looks very different than the bull market of years ago. two years. The pair spoke to venture capitalists in the trenches and found that when it comes to crypto funds, they face a unique set of challenges.
First, crypto VCs have nowhere to hide. In the case of traditional venture capital, companies can carry a bunch of dogs in their portfolio for some time without having to admit that valuations have gone down. It's a different story when your portfolio doesn't consist of private stocks that are rarely traded, but rather tokens that are bought and sold on public blockchains at all hours.
This transparency was not an issue during the go-go times two years ago, when companies like MultiCoin and Polychain Capital were posting staggering returns of 10x or more as tokens went to the moon. Now, however, most token projects are down the toilet, and market accounting rules and transaction frequency require venture capitalists to deliver bad news to limited partner investors immediately.
The job of crypto VCs has become even more thankless, as many of those LPs are unfamiliar with the roller coaster cycle of cryptocurrency and reluctant to hang in there until the market turns. As Delta Blockchain Fund founder Kavita Gupta said Fortune, “We have to continually educate family offices that are, like, a Vietnam shipping family industry. They're like, 'What the hell did you do? You were 6 times up!'”
While the crypto VCs interviewed for the report suggested that the headwinds they face are very real, they also expressed confidence that market conditions would improve and remain committed to the long game. VCs are always a bullish bunch, at least in public, so who knows when (or if) their token portfolios will perk up. But for now, let's give them credit for betting on an emerging industry and hope their luck turns.
jeff john roberts
jeff.roberts@fortune.com
@jeffjohnroberts
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"Only to be made resistant by Goldman and Apple":
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