Warning: Crypto Startups’ Sky-High Valuations Scare Away VCs

Are crypto startups pricing themselves out of opportunities? According to a leading voice in the space, many are doing just that by demanding sky-high valuations that make venture capitalists think twice.

Why High Crypto Valuations Are a Problem for VCs

Dan Tapeiro, CEO of crypto-focused venture capital firm 10T Holdings, shared a blunt assessment at the recent Consensus conference. He stated that many crypto founders and CEOs are seeking valuations that are 50 to 80 times their revenue. This practice significantly hinders the ability of VCs like 10T Holdings to generate returns for their investors.

Tapeiro explained, “For some reason, founders and CEOs think that they should be raising capital at 50 to 80 times revenue. So that makes it very hard for us to make a return for our liquidity providers.” As a result, many promising deals are automatically rejected, even if the underlying business is appealing, simply because the initial price isn’t reasonable.

10T Holdings has reportedly passed on over 200 companies for similar reasons, including notable names that later faced issues, such as FTX, BlockFi, and Celsius.

Venture Capital: Why Realistic Pricing Matters

From a venture capital perspective, valuation is crucial. VCs typically prefer lower entry valuations because they offer greater potential for upside and carry less initial risk. Realistic valuations also make it easier to attract investors for subsequent funding rounds and simplify the eventual exit process, whether through acquisition or IPO.

Tapeiro highlighted 10T Holdings’ own criteria, stating they look for crypto projects with valuations exceeding $400 million to $500 million, but with a valuation-to-revenue ratio of 10x or less. This benchmark underscores the significant disconnect Tapeiro sees with startups demanding 50-80x multiples.

Is Crypto VC Funding Still Flowing Despite Valuation Issues?

Despite the concerns raised about excessive crypto valuations scaring away some investors, the broader picture for crypto VC funding appears complex. A PitchBook report from May 13 indicated a significant surge in the total value of crypto venture capital deals in Q1 2025, rising over 100% quarter-on-quarter to $6 billion. Interestingly, the number of deals increased by only 8.8%, suggesting that while fewer deals are happening, the ones that close are larger.

This data presents a paradox: VCs are pumping more money into the space, but selective firms like 10T Holdings are walking away from numerous deals due to price. This could indicate that the large funding rounds are concentrated in a smaller number of highly valued (perhaps justifiably so, or perhaps part of the problem) projects, while many others struggle to attract investment at their desired valuations.

Boosting Crypto Investments: Diversification is Key

Adding another layer to the discussion, Pantera Capital CEO Dan Morehead, who also spoke at the Consensus conference, offered a different perspective on maximizing crypto investments. Morehead advocates for VCs receiving a mix of private equity and tokens when investing in crypto startups.

He noted that the relative value of tokens versus traditional equity swings widely, making a diversified approach beneficial. “Each one has their pros and cons, and then they go in these wild pendulum swings where sometimes tokens are really expensive and ventures cheap. Sometimes it’s the opposite,” Morehead said. He advises investors to invest across a wide spectrum of tokens and ventures.

Pantera Capital has historically taken a more aggressive investment stance than 10T Holdings and has seen considerable success, reporting a return on 86% of its startup investments, with 22 of those reaching unicorn status ($1 billion valuations).

Summary

The crypto investment landscape presents conflicting signals. While overall VC funding value saw a significant jump in Q1 2025, experienced firms like 10T Holdings are actively passing on deals due to what they deem excessively high valuations sought by crypto startups. The tension between ambitious founder expectations and VC return requirements remains a critical factor. Meanwhile, firms like Pantera Capital highlight the potential benefits of diversified investment strategies across both traditional equity and native tokens in the evolving crypto market.