Venture capital in the crypto sector is experiencing a significant hangover from the previous bull market, according to Tushar Jain, Managing Partner at Multicoin Capital. In a recent discussion at Messari’s Mainnet conference, Jain emphasized that the industry has yet to fully adjust to the realities following the last market downturn.
“I would say the market still has a bit of a hangover to work through,” Jain stated. He pointed out that this issue is not confined to crypto but affects all areas of venture capital. There was a substantial influx of funds into the venture asset class during 2021 and 2022, and many investors are reluctant to face the consequences.
During 2021, investors contributed approximately $33 billion to crypto startups, representing 5% of global venture funding across all sectors. At the height of the pandemic-driven bull run, various crypto firms, including the NFT platform OpenSea and the now-defunct BlockFi, reached unicorn valuations. Jain cautioned that these valuations may have been significantly inflated.
“We are not seeing that many down rounds,” Jain noted, referring to situations where private companies raise funds at lower valuations. However, he acknowledged that this hangover extends beyond venture capital.
“There's so much hype and excitement, yet we’ve seen a stagnation in prices,” Jain explained. He pointed out that many major token launches have significantly decreased in value over the past year, amid uncertainty surrounding current political situations.
Despite these challenges, Jain maintains a positive outlook on the crypto industry. “I still fundamentally believe in the core principles that underpin the industry, and we've been through these cycles before,” he asserted. Jain described the crypto sector as possibly the most cyclical industry in capitalism's history, noting that people's emotions often mirror price movements.
In 2022, Multicoin successfully raised $430 million for its Venture Fund III, which Jain confirmed is still being deployed. He mentioned that the firm is not seeking additional funding at this time and acknowledged that some investments may not have yielded positive results.
“We've made plenty of mistakes, and we'll make mistakes in the future, too,” Jain admitted. He concluded with a thought-provoking statement: “If your venture fund doesn't have any zeros in it, then you're not taking enough risk.”
