Crypto Startups Threaten VC Interest with Sky-high Valuations

Crypto startups are deterring venture capitalists with inflated valuations, according to Dan Tapeiro from 10T Holdings. He asserts such valuations (50-80x revenue) complicate investment decisions, leading to 200 rejected offers, including major names like FTX. While VCs prefer safer, realistic valuations, a PitchBook report highlights a surge in crypto investment value in Q1 2025. Pantera Capital’s CEO advocates for diverse investment strategies combining private equity and tokens.

Crypto startups seem to be off-putting venture capitalists (VCs) by sky-high valuations, often ranging from 50 to 80 times their revenue. Dan Tapeiro, the CEO of crypto-focused venture capital firm 10T Holdings, raised this point at a recent panel during the Consensus conference in Toronto on May 14. He highlighted that such inflated expectations make it tough for VCs to provide returns to their liquidity providers, leading many to pass on deals even if they appreciate the businesses themselves.

Tapeiro noted that 10T Holdings had declined investments in over 200 companies for such reasons, citing big names like FTX and BlockFi, which eventually went bankrupt. The firm generally favours crypto projects valued between $400 million and $500 million, ideally with a valuation-to-revenue ratio of 10x or under. VCs are more inclined to back lower valuations since they present a more favourable risk versus reward scenario.

He emphasised the importance of reasonable valuations for making future funding rounds more enticing for investors and easing exit strategies. “Valuation is very important,” he reiterated during the discussion, underlining the delicate balance startups need to achieve when seeking funding.

Interestingly, while Tapeiro points out these valuation issues, PitchBook data shows that crypto startups aren’t struggling to secure VC funds. In fact, the first quarter of 2025 saw a whopping 100% increase in the total value of crypto venture capital deals, which surged to $6 billion, although the number of individual deals only grew by 8.8%.

On a related note, Pantera Capital CEO Dan Morehead, also present at the panel, argued in favour of a diversified investment strategy. He suggested that VCs should consider a mix of private equity and tokens when putting money into crypto startups. He acknowledged the fluctuating nature of the market, where sometimes tokens soar in price while venture investments shrink, and vice versa.

Morehead’s firm has adopted a more aggressive investment strategy than 10T Holdings, reportedly achieving returns on 86% of the startups in which they’ve invested, with 22 of those reaching unicorn status—that is, companies valued at $1 billion or more. This showcases a significant success rate, hinting at the potential for savvy investors in the volatile crypto space.