Varun Datta, Truth Ventures CEO – Web3’s Funding Boom Is Over. That Could Be Good News for Founders

It would be difficult to describe crypto venture capital as being in a funding drought. Investors deployed approximately $5.7 billion into crypto and blockchain companies during the second quarter of 2026, according to Galaxy Research, an increase of 31% from the previous quarter. What has changed is where that money is going and what founders increasingly have to demonstrate to get it. Nearly 80% of the capital invested during the quarter went to later-stage companies. Crypto startup valuations have also fallen sharply from their highs in the final quarter of 2025, while raising new crypto venture funds remains difficult. Galaxy recorded only five new funds during Q2, the lowest quarterly number for several years. September continued the mixed picture. FinDaS recorded $1.05 billion across 48 Web3 funding rounds, compared with a preceding 12-month monthly average of $2.01 billion and almost 67 rounds. Capital is clearly still available, but what appears to be disappearing is the assumption that a promising Web3 company should be able to raise it easily. I think that could ultimately produce better companies. Varun Datta, venture capitalist and CEO of Truth Ventures, explores why tougher fundraising conditions may be forcing Web3 companies to build stronger businesses. There have been periods in Web3 when the strength of a market narrative could compensate for weaknesses elsewhere in a business. A compelling technology, experienced founders and a convincing token model could attract significant capital before there was much evidence of who the eventual customer would be or whether that customer was willing to pay. Some excellent companies were funded during those periods, so I would not dismiss what abundant capital made possible. It allowed founders to experiment with technologies and business models that conventional investors may not have financed, and some of today’s infrastructure emerged from exactly that environment. But easy money also allowed companies to postpone difficult questions around who needed the product, why the technology was better than the existing alternative, how the company would make money and whether the business would still work if token prices fell and incentives became less attractive. Those are questions I think investors are increasingly asking earlier. I have argued previously that crypto VC risks mistaking consensus for discipline when investors retreat towards companies and categories that have already been validated. Selectivity sho