In 2024, the crypto and blockchain sector saw renewed investor enthusiasm. Venture capital (VC) funding is pouring in approximately US$13.7 billion, a 28 per cent rise from the US$10.7 billion secured the previous year.

While this uptick in capital signals a revival of interest following the market downturns of prior years, new findings challenge the assumption that VC support guarantees the success of any crypto project.

Contrary to popular belief, a crypto project backed by a well-known VC is not necessarily destined for prosperity. In collaboration with Storible, Chainplay released its latest research, revealing that 56.72 per cent of VC-backed crypto projects ultimately fail.

Alarmingly, nearly half (45.34 per cent) of these ventures are categorised as “dead,” meaning they have ceased operations entirely. Even among the survivors, performance remains underwhelming: 77.45 per cent generate less than US$1,000 in monthly revenue, highlighting significant underperformance in a sector often touted for its disruptive potential.

Prestigious VC firms are typically regarded as kingmakers in the crypto ecosystem. Their backing often serves as a stamp of legitimacy for early-stage crypto projects. Yet our data paints a more sobering picture. Of all crypto projects supported by Tier 1 VCs, 37.45 per cent have failed and 34.56 per cent are completely defunct.

Moreover, 33.41 per cent of these ventures struggle to earn even US$1,000 per month, underscoring the gap between funding prestige and operational success.

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Two prominent names exemplify the trend. Polychain Capital, once seen as a leading force in decentralised finance, shows a staggering 44 per cent of its projects are now defunct, with 76 per cent generating negligible revenue. Yzi Labs (formerly Binance Labs) fares no better, with a failure rate of 72 per cent, despite its deep integration within the broader crypto industry.

These numbers reflect a structural issue in the VC approach to the crypto sector: high bets are often placed on experimental ideas that fail to translate into sustainable businesses.

Angel investors are not immune either

Tier 1 angel investors also struggle to pick winning ventures. Notably, Balaji Srinivasan, former CTO of Coinbase and a General Partner at Andreessen Horowitz, has a 57 per cent dead-project rate among his backed crypto startups. This illustrates that even experienced operators with deep sector knowledge are vulnerable to the market’s volatility and execution challenges inherent in the space.

Despite the bleak data, there is a silver lining: the amount of capital raised does appear to influence outcomes. Projects that raised over US$50 million were markedly more resilient, showcasing much lower failure rates. These better-funded ventures can often weather crypto’s turbulent cycles, build robust teams, and navigate regulatory hurdles more effectively.

Conversely, crypto projects that raised less than US$5 million fared significantly worse. Over 33 per cent failed outright, and nearly one in five were classified as dead.

Interestingly, projects without VC backing had a death rate four times higher than those with institutional investment. This suggests that while VC support is far from a guarantee of success, it does offer a level of resilience, access, and credibility that bootstrapped startups often lack.

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