DeFi and the Road Ahead for Crypto Adoption

One thing we’ve repeatedly said about the crypto winter and the collapses of 2022 is that it burned away a lot of the schemers and grifters, and gave investors better tools for evaluating risks than they employed when the market seemed unstoppable. Techcrunch pulled together a half dozen venture capital investors working in the crypto space. What they generally agreed upon is that DeFi is now the primary focus in the crypto VC field, accounting for anywhere from 20% to 50% of crypto-related pitches they’re seeing.

The crypto venture capital industry has become more selective thanks to the general market downturn and wavering trust caused by a slew of scandals and market disruptions, but investors at major firms are still writing checks in the space.

Amid market volatility, decentralized finance, or DeFi, is an area that continues to be in focus in both the crypto VC world and across the community as new use cases, protocols and projects arise.

Anywhere from 20% to 50% of crypto-related pitches today are DeFi-focused, several investors we surveyed said. That shows there’s a vast number of DeFi projects looking for funding.

“To stand out in this crowded space, founders should focus on highlighting unique technology and a clear advantage for a specific use case, as well as a defensible moat,” Alex Marinier, founder and general partner at New Form Capital said.

Ultimately, DeFi is a mirror reflection of traditional finance (TradFi), and founders who have deep sector expertise in TradFi, coupled with a fundamental understanding of blockchains will stand out from the other teams, Paul Veradittakit, general partner at Pantera Capital, shared.

Last year, the crypto world faced a handful of massive industry-changing events like the Terra/LUNA ecosystem collapse in May and the cryptocurrency exchange FTX collapsing in early November. Both events brought down a lot of smaller startups and big players who intermingled with those now defunct market players.

As the market looks toward the future, some venture capitalists are revamping their investing strategies, while others are holding to their current plans, with perhaps a small tweak or two. Read on to find out how active investors are thinking about DeFi, how they’re advising their portfolio companies amid the lack of funding, the best way to approach them and more.

Read on for the full Q&A with Michael Anderson, co-founder, Framework Ventures; Alex Marinier, founder and general partner, New Form Capital; Samantha Lewis, principal, Mercury; Paul Veradittakit, general partner, Pantera Capital; David Gan, founder and general partner, OP Crypto, and Mike Giampapa, general partner, Galaxy Ventures.