How much money do VC firms focusing on the primary market still have?

Original | Odaily Planet Daily (@OdailyChina)

Author | Azuma (@azuma_eth)

Who knows the current state of the crypto primary market best? Naturally, it’s the VCs who are still actively operating in the market.

In recent days, multiple investors from Pantera Capital, Crucible Capital, Blockworks, and Varys Capital have taken part in a small discussion on X about the industry’s primary market situation. While there are some differences in how each side views the market, their debate may help us understand the state of the primary market even more closely.

Counterintuitive Reality: VCs Aren’t Short of Money, But There Aren’t Many Good Investment Opportunities

On the evening of April 20, Crucible Capital partner and GP Meltem Demirors posted a short article on X explaining why the number of financing deals in the crypto industry has dropped significantly.

Demirors believes that, overall, the “supply side” of early founders and projects in the crypto industry is not as large as in other high-growth sectors. Over the past 4 years, this gap has become increasingly obvious—this is also why the VC has started shifting its focus away from the crypto market.

Venture capital activity in the crypto market has been developing for 10 years, but the directions that have truly been validated and are able to generate “VC-level returns” are actually only a handful—stablecoins/payments, exchanges, and financial products. For VC investors and front-line founders, there are fewer breakout hits in this industry now, and cycles are longer—so the industry’s requirements for understanding, resilience under pressure, and long-termism are higher than before, which means the bar from seed round to A round is also rising.

Although there are still some “epoch-defining” founders in the industry building companies that define categories (VCs’ job is to find them and win the opportunity to invest in them), the reality is that there is a clear gap between the “stories founders tell” and what “VCs can reasonably invest in.”

After Demirors published the short article, it sparked discussions among many VC peers on the topic.

Several investors in the replies below agreed with Demirors’ view. Among them, Blockworks co-founder Mippo followed up with a summary, stating that they agree with Demirors: the problem in the current primary market is a shortage of excellent founders and projects. In fact, on the VC side there is already enough capital to invest—yet at the same time, VC capital in early rounds is oversupplied, while VC capital focused on later-stage growth is still clearly insufficient.

Local Differences: Where Exactly Is the Capital Concentrated?

Regarding whether VC capital is concentrated in the early discovery phase or in the later growth phase, the views of Pantera Capital investor Mason Nystrom and Varys Capital VC head Tom Dunleavy are completely opposite. The two sides then launched a heated debate on the issue.

Dunleavy went first, saying he disagreed with Mippo’s view that “early-stage capital is excessive and late-stage capital is insufficient”: “I will hold a completely opposite view. There is actually a lot of mid-to-late stage crypto VC capital right now—mostly from recently raised and currently fundraising funds, such as Paradigm, Multicoin, Pantera, Dragonfly, and others. This doesn’t even include those traditional VCs that have some exposure to the crypto market—in fact, what’s underfunded is seed-stage and earlier-round capital that’s focused on the industry even earlier… As long as you haven’t completely shifted to AI, there are many interesting projects you can invest in.”

But as an insider at Pantera (one of the later-stage VCs Dunleavy listed), Nystrom strongly rebutted Dunleavy’s claim. He believes that today’s VC capital is more concentrated in earlier stages, not in A rounds, B rounds, or even later.

Nystrom did some calculations: if a fund wants to focus on A rounds or B rounds financing, it needs to invest in at least 20-25 projects, and each project requires a large amount—about $15 million for an A round, and about $40 million for a B round—which means a fund focused on A rounds needs an AUM of at least $300 million, while a fund focused on B rounds needs at least $800 million. This doesn’t even include reserved capital; such capital usually needs to hold 10% - 50% in cash on hand—how many funds in the industry meet that requirement?

So the current situation is that there may be at least 50 funds with AUM of less than $100 million, but funds with AUM above $400 million may be only around 15. True “big players” that can participate in B rounds and beyond are extremely few. There might indeed be more B-round and later-stage funding in fintech (such as stablecoins), but these projects have already “graduated” into the traditional VC system and can no longer be simply viewed as primary-market crypto projects.

However, Dunleavy was not convinced. In his response, he attached Galaxy’s Q1 primary market financing report and noted that while the total number of financing deals across the industry in this Q1 decreased year-on-year by 49%, the average deal size increased by 76% (about $36 million)—the total funding amount for seed rounds and earlier rounds was only $268 million; A rounds were $370 million; B rounds were as high as $1.1 billion; and later rounds were as high as $2.72 billion (mainly from Kalshi and Polymarket).

Dunleavy’s rebuttal was that the data proves: in 2025, more than 50%+ of industry investment flows into later stages (already a historical high), and by 2026 it has reached 80%+.

In the end, Dunleavy estimated the current capital availability in the primary market—available funds for A rounds and later stages are approximately $6 billion to $7 billion, concentrated in 5 to 6 large institutions; available funds for seed rounds and earlier stages are approximately $1 billion to $2 billion, spread across dozens of smaller, more dispersed funds.

Nystrom then replied again, saying that in the data Dunleavy shared, most of the later-stage investment actually comes from “graduated” fintech projects. These projects have long entered the traditional VC view and obtained investment, and should not be counted as part of the industry itself.

Nystrom then continued to argue against Dunleavy’s conclusion—“only 5-6 funds can do A rounds and later, but there are dozens of funds that can do seed rounds”—“This means that if you can’t persuade just 1 of those 6 funds, you basically have no chance; but in the early stage, as long as 1 of the dozens of funds is willing to invest, you can survive. The ‘accessibility’ of the two is completely unequal.”

In addition, funds like Pantera Capital that are capable of investing in later-stage rounds actually also invest in seed rounds—but the reverse is not true. On top of that, more and more VCs are turning into liquidity funds, so the real pool of capital that can participate in later-stage rounds is far smaller than what the numbers suggest.

Compared with “whether there is money,” the real question is “where the money is—and whether you can get it”

In the end, neither side could fully convince the other. But based on the direct confrontation between two front-line investors, we can further glimpse the real face of the crypto primary market—“whether there is money” doesn’t seem to be the core issue; “where the money is, and whether it can be accessed” is.

From the surface data, industry capital still appears abundant, and even shows a high level of concentration in later rounds. But from real-world experience, both VCs and founders are facing a market that is becoming more “structurally tight”—early-stage capital may look dispersed, but competition is intense; mid-to-late-stage capital may look sufficient, but the entry barriers are extremely high. This also means that the rules of the primary market game are changing. The era when you could complete the funding loop simply by relying on narratives, traffic, and short-cycle cash-outs is rapidly fading; what replaces it is a financing environment that depends more on actual business progress, long-term capabilities, and a path to deterministic growth.

For VCs, this is a cycle of “fewer investments but heavier judgment”; for founders, it is a survival test that requires crossing longer cycles and higher thresholds.