Reading · Deal Flow Digest

Gm!

Please enjoy the January Deal Flow Digest, a monthly newsletter recapping recent Crypto / web3 funding rounds.

Be sure to check out the Airtable below with ALL the deals, and the recent hackathon/demo day results (in the links).

Buckle up—volatility, change, and chaos are here.

What a month. Sometimes time can unfold…. very rapidly. “There are decades where nothing happens, and there are weeks where decades happen” - Lenin.

Here’s Travis Kling’s summary of the highlights in January which sums it up nicely.

In addition to all of the highlights mentioned above, AngelList’s 2024 State of U.S. Early-Stage Venture & Startups report was released earlier last week, and as always, I love diving into these.

Yes, we often operate in our own "crypto bubble," but there are clear trends from traditional venture capital (TradVC) that spill over into CryptoVC.

Key Takeaways from the Report

Seed valuations are back at 2022 peaks – The median seed valuation has doubled from $10M in 2020 to $20M in 2024.
DPI-to-TVPI ratio is at a historic low – Down from 16% in 2019 to just 11% in 2024, indicating that while funds show high paper returns, actual liquidity remains weak.
Fundraising activity is at a multi-year low – Many startups that raised massive rounds in 2021 either don’t need or simply can’t raise additional capital.
Artificial Intelligence. AI continues to dominate the narrative—and the pitch decks. Nearly a third of seed and pre-seed startups now carry the "AI" label, though many stretch the definition…

Keep in mind with reports like these that averages are tricky. Or as Howard Marks says: “Never forget the 6-foot-tall man who drowned crossing the stream that was 5 feet deep on average.” With venture, power laws are hyper prevalent. In fact, a few winners drive the majority of returns.

In general for VC returns, as Mike Maples from Floodgate says: “Venture is HARD, but not COMPLICATED.” Your goal as a VC is to find outliers that can deliver 100x returns. You only get a finite number of shots on goal - and typically only a few investments drive most of the value. With Venture Math - in a portfolio of 25 investments, the top-performing deal must deliver 64% of the fund’s total returns to achieve a 5x return on a fund.

Another Mike Maples quote is that “Your Fund size is your strategy” which is highly relevant. A smaller $50M fund can succeed with $100M exits, while a much larger $1B+ fund needs billion-dollar exits to move the needle. The biggest mistake in venture is assuming you can pick more winners than you actually can. The truth is, loss ratios are consistent—the difference between a 3x fund and a 10x fund is the magnitude of its winners, not the number of wins.

Despite the broader venture slowdown, early-stage startups continue to command high valuations. Median pre-seed valuations hit $10M, while seed deals now hover around $20M. That’s a significant jump from 2023 ($8.3M pre-seed and $17M seed).

This is largely driven by:

AI Fervor – No investor wants to miss out on the next breakthrough, and AI startups are attracting an outsized share of funding.
Multistage Funds Moving Earlier – With massive capital reserves, large VC firms are writing bigger seed checks, driving up valuations across the board.

Funds launched in 2021–2023 are underperforming due to high entry valuations and low markup rates. Many of these funds are sitting on paper markups but struggling to generate exits. The challenge now is liquidity—how do funds return cash to their LPs when IPOs and acquisitions remain sluggish?

GPs and LPs may push for liquidity through creative solutions, even if it means accepting less than what their capital account statements currently show. There also may be positive legislation around this topic that helps.

An emerging trend perhaps is that several of the best early-stage startups are being preemptively offered Series A/B rounds but are declining because they simply don’t need the money.

Why?

They’re keeping teams lean while still growing at venture scale.
Building is cheaper than ever – Cloud, AI, and open-source tools are reducing startup costs, allowing companies to scale without heavy fundraising.

This creates a challenge for large, multi-stage funds: How do they deploy capital effectively when money is no longer the main carrot for founders? The days of "spray and pray" VC investing are fading. To stay competitive, investors need more than just capital—they need real value propositions like:

Distribution & go-to-market expertise
Deep industry networks
Technical support & AI infrastructure

VCs who can’t provide meaningful value beyond money will struggle to win deals.

The trends from 2024 suggest a strong year ahead for early-stage funding - in both TradVC and CryptoVC.

After a brutal 2023, the good news is that things didn’t get worse in 2024. While we’re not seeing a roaring comeback, stability itself is a positive sign. The industry is still dealing with the overhang of capital deployed during the pandemic boom, but we may be entering a more sustainable investment cycle.

AI excitement is at an all-time high, and while later-stage startups may struggle with liquidity, seed-stage companies remain in demand and (IMO) are poised to deliver great returns.

“Venture is HARD, but not COMPLICATED.” Our job as investors is to find outliers—founders & startups that can return 100x returns. It’s never been about picking more winners, but about finding the right ones. As an investor, keep doing the things…investing in the best founders you can find… at reasonable prices.

2025 is shaping up to be a fascinating year. Let’s see where it takes us.

Phantom | Series C | Infrastructure | $150.00M | 2025-01-15

Phantom, a consumer crypto wallet company, has raised $150 million Series C funding round co-led by Sequoia Capital and Paradigm at a $3 billion valuation, with participation from existing investors including a16z crypto and Variant.

Komainu | Series B | CeFi | $75.00M | 2025-01-19

Komainu, a regulated digital asset services provider and custodian, backed by Laser Digital, a Nomura company, announces it has raised $75 million in strategic investment from Blockstream Capital Partners.

VOOX | Undisclosed | CeFi | $50.00M | 2025-01-13

VOOX Exchange, an AI-driven cryptocurrency platform, has secured $50 million from Pinnacle Capital. This partnership aims to enhance VOOX's infrastructure, security, and market reach, solidifying its position at the forefront of the cryptocurrency trading landscape.

Fold | SAFE | $30.00M | 2025-01-01

Fold, a bitcoin financial services company, has announced that it has closed a $20 million convertible note financing from ATW Partners. Since its launch in 2019, Fold has become the “leading Bitcoin rewards debit card.”

D3 Global | Web3 | $25.00M | 2025-01-28

D3 Global raised $25.00M in a financing round on Jan 29, 2025. The round was backed by Paradigm, Coinbase Ventures. D3 is a DomainFi network aiming to tokenize 362M+ existing and future domains as real-world assets.

SOON (Solana Optimistic Network) | Infrastructure | $22.00M | 2025-01-21

The Solana Optimistic Network, often referred to as SOON, raised $22 million through an NFT sale as it prepared to launch its mainnet. SOON is building the highest throughput stack that allows for any SVM L2 to be deployed on any L1.

Humanity Protocol | Web3 | $20.00M | 2025-01-26

Humanity Protocol, which uses cutting-edge palm recognition technology alongside zero-knowledge proofs to ensure user privacy and security has secured a fully diluted valuation of $1.1 billion after raising $20 million. The round was co-led by Pantera Capital and Jump Crypto.

Dfns | Series A | Infrastructure | $16.00M | 2025-01-13

Dfns, a leading wallet-as-a-service platform for crypto assets, has successfully closed a $16 million Series A, led by Further Ventures. This round also saw participation from historic investors such as White Star Capital, Hashed, Semantic, Techstars, and Bpifrance.

Sign Protocol (Formerly: EthSign) | Web3 | $16.00M | 2025-01-27

Sign Protocol (Formerly: EthSign) raised $16.00M in a Undisclosed financing round, backed by YZi Labs (Formerly: Binance Labs), Hack VC, Amber Group and others. Sign Protocol is an omni-chain attestation protocol that allows users to create, store, and verify attestations digital assertions of facts or data across multiple blockchain networks.

SoSoValue | $15.00M | 2025-01-08

SoSoValue seeks to provide users with comprehensive crypto market data. The Singapore-based startup announced today that it has raised an additional $15 million in funding led by HongShan, SmallSpark, Mirana Ventures, and SafePal. The round values the company at $200 million and brings its total funding raised to nearly $20 million.

Cryptio | Series A | CeFi | $15.00M | 2025-01-28

Cryptio has raised $15 million in an extension to its Series A funding round from June 2022. Cryptio's aim is to provide TradFi entities with back-office operations and infrastructure that allow them to offer digital asset products.

VCs are continuing to announce their new raises… As a reminder, if you are interested in learning more about Bankless Ventures Fund 2, please fill out this form and we will be in touch!

2024-12-27: Tether Supports Arcanum Capital's Fund II. Arcanum Capital announced today that Tether, the issuer of the world’s largest stablecoin, has made a novel venture capital fund investment, into Arcanum Emerging Technologies Fund II, a $50M fund closed-end fund dedicated to nurturing the next generation of decentralized technologies.
2025-01-17: Plume launches $25M RWAfi Ecosystem Fund to support teams building the future of tokenized assets.
2025-01-23: AgileGTM Blockchain Fund secures $2M in first close of $10M Pan-European VC Fund. AgileGTM Blockchain Fund, a pan-European VC investing Pre-Seed B2B blockchain startups announced the first $2 million close of a new $10M fund, which will start deploying capital this month. The fund will initially invest in between three and six companies — over 500 candidates were sourced for possible support from the fund.
2025-01-24: VarrockVC announces oversubscribed $30M fund. VarrockVC will be investing $600-900k in pre-seed and seed crypto founders, and is backed by large institutions and family offices.
2025-01-29: Sei Foundation launches $65 million DeSci venture fund 'Sapien Capital'. Sei Foundation has launched Sapien Capital, a $65M venture fund to back DeSci startups building on its Layer 1 Sei blockchain. The foundation has fully committed the $65 million, with no external capital involved, Justin Barlow told The Block.
2025-01-30: DPI Capital to Launch Tokenized Venture Fund on Chintai Platform. DPI Capital will be launching its flagship crypto-focused venture fund on Chintai's tokenization platform. The $30 million fund leverages Chintai's white-label infrastructure to provide enhanced liquidity options and secondary trading capabilities for limited partners.