Say goodbye to "storytelling" for funding: What kind of projects can survive beyond 2026

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Author: Nikka / WolfDAO (X: @10xWolfdao)

1: The Dramatic Shift in VC Investment Logic

Wintermute Ventures' data in 2025 reveals a harsh reality: this top-tier market maker and investment firm reviewed about 600 projects throughout the year, ultimately approving only 23 deals, with an approval rate of just 4%. Even more striking, only 20% of those projects entered the due diligence stage. Founder Evgeny Gaevoy openly states that they have completely abandoned the “spray and pray” approach of 2021-2022.

This shift is not unique to Wintermute. The entire crypto VC ecosystem saw a 60% drop in deal volume in 2025, decreasing from over 2,900 deals in 2024 to about 1,200. While capital still flows—global crypto VC investments reached $4.975 billion—these funds are increasingly concentrated in a few projects. Late-stage investments account for 56%, while early seed rounds are compressed to historic lows. Data from the US market illustrates this further: deal numbers fell by 33%, but median investment size grew 1.5 times to $5 million. This indicates that VCs prefer to heavily back a few projects rather than spread their bets widely.

The root cause of this dramatic change lies in highly concentrated market liquidity. The crypto market in 2025 exhibits an extreme “narrow band” characteristic: institutional funds account for up to 75%, but these funds are mainly locked in large-cap assets like BTC and ETH. OTC trading data shows that although BTC and ETH's share decreased from 54% to 49%, the overall share of blue-chip assets increased by 8%. More critically, the narrative cycle for altcoins plummeted from 61 days in 2024 to 19-20 days in 2025, leaving no time for capital to spill over into small and medium projects. Retail investors are no longer frantically chasing cryptocurrencies; instead, they shift their attention to AI and tech stocks, leading to a lack of incremental capital in the crypto market.

The traditional “four-year bull cycle” has been completely dismantled. Wintermute's report clearly states that the recovery in 2026 will not come as naturally as before; it will require at least one strong catalyst: either ETF expansion to assets like SOL or XRP, BTC breaking the $100,000 psychological barrier to trigger FOMO, or a new narrative reigniting retail enthusiasm. In this environment, VC cannot afford to gamble on projects that only “tell stories.” They need projects that can prove their ability to survive from seed stage and access institutional liquidity.

This is why investment logic has shifted from “invest in 100 projects to find 1 with 100x returns” to “only invest in 4 projects that can survive to listing.” Risk aversion is no longer about conservatism but about survival. Top funds like a16z and Paradigm are reducing early-stage investments and shifting toward later rounds. Projects that raised high-profile funding in 2025—Fuel Network, which fell from a $1 billion valuation to $11 million; Berachain, which plummeted 93% from its peak; Camp Network, which lost 96% of its market cap—are telling the market in stark terms: narratives are dead, execution is king.

2: The Deadly Requirement for Seed-Stage Self-Sustainability

Under this extremely precise aesthetic, the biggest challenge for startups is: seed rounds are no longer the starting point for burning money but the critical threshold to prove self-sustainability.

Self-sustainability first manifests in rigorous validation of product-market fit (PMF). VCs are no longer satisfied with beautiful pitch decks or grand visions; they want real data: at least 1,000 active users or monthly revenue exceeding $100,000. More crucially, user retention—if your DAU/MAU ratio is below 50%, it indicates users are not engaged. Many projects fail here: they have exquisite whitepapers and cool tech architectures but cannot produce evidence of actual user engagement or willingness to pay. Among the 580 projects rejected by Wintermute, many failed at this stage.

Capital efficiency is the second critical threshold. VCs predict that in 2026, many “zombie profitable” companies will emerge—those with ARR of only $2 million and annual growth of 50%, unable to attract Series B funding. This means seed teams must achieve a “default survival” state: monthly burn rate not exceeding 30% of revenue or even early profitability. While this sounds harsh, in a market with depleted liquidity, it’s the only way forward. Teams need to be lean—under 10 people, prioritize open-source tools to cut costs, and even supplement cash flow through side businesses like consulting. Projects with large teams and high burn rates in 2026 will struggle to secure the next round.

Technical requirements are also rapidly escalating. Data from 2025 shows that for every dollar invested by VCs, 40 cents flow into crypto projects working on AI—double the proportion in 2024. AI is no longer optional but essential. Seed projects need to demonstrate how AI helps shorten development cycles from six months to two, or how AI agents drive capital transactions or optimize DeFi liquidity management. Compliance and privacy must be embedded at the code level. With the rise of RWA (real-world asset) tokenization, projects need to use zero-knowledge proofs and similar technologies to ensure privacy and reduce trust costs. Projects ignoring these requirements will be seen as “lagging behind.”

The most lethal requirement is liquidity and ecosystem compatibility. Crypto projects must plan their listing pathways from seed stage, clearly defining how to access institutional liquidity channels like ETF or DAT. Data shows that in 2025, institutional funds account for 75%, and the stablecoin market surged from $206 billion to over $300 billion, while projects driven solely by narratives—especially altcoins—face exponentially rising fundraising difficulties. Projects need to focus on ETF-compatible assets, establish early cooperation with exchanges, and build liquidity pools. Teams thinking “raise money first, list later” will likely not survive past 2026.

All these requirements mean seed rounds are no longer just testing waters but a comprehensive exam. Teams need interdisciplinary composition—engineers, AI experts, financial specialists, compliance advisors. They must use agile development for rapid iteration, let data speak instead of storytelling, and pursue sustainable business models rather than just fundraising to survive. 45% of VC-backed crypto projects have failed, 77% generate less than $1,000 monthly revenue, and 85% of token projects launched in 2025 are underwater—these figures tell us that projects lacking self-sustainability will not reach the next funding round, let alone list on exchanges.

3: Warnings and Strategic Shifts for Investment Institutions

For strategic investors and VC firms, 2026 is a watershed: adapt to new rules or be eliminated. Wintermute’s 4% approval rate is not bragging about being selective but warning the entire industry—those still using the old “spray and pray” approach will suffer heavy losses.

The core issue is that the market has shifted from speculation-driven to institution-driven. When 75% of funds are trapped in channels like pension funds and hedge funds, retail investors flock to AI stocks, and altcoin rotation cycles shrink from 60 days to 20 days, VCs still casting wide nets on storytelling projects are actively handing over capital. GameFi and DePIN narratives declined over 75% in 2025, and AI-related projects fell an average of 50%. The cascade of $19 billion in leveraged liquidations in October underscores this: the market no longer pays for narratives, only for execution and sustainability.

Institutions must change direction. First, fundamentally revise investment standards: shift from “how big can this story be” to “can this project prove self-sustainability at seed stage.” No longer scatter large sums early; instead, either concentrate on a few high-quality seed projects or shift to later rounds to reduce risk. Data shows that late-stage investments in 2025 already account for 56%, reflecting market voting with their feet.

More importantly, redefine investment tracks. The integration of AI and crypto is not a trend but a reality—by 2026, investment in AI-crypto crossover fields is expected to exceed 50%. Institutions still investing in purely narrative-driven altcoins, ignoring compliance and privacy, or neglecting AI integration will find their projects unable to access liquidity, list on major exchanges, or exit profitably.

Finally, evolve investment methodologies. Outbound sourcing should replace passive waiting for business plans; due diligence must accelerate, replacing lengthy evaluation processes; responsiveness should replace bureaucratic delays. Explore emerging market opportunities—AI Rollups, RWA 2.0, cross-border stablecoin payments, fintech innovations in emerging markets. VC must shift from a “bet for 100x returns” gambler mindset to a “carefully select survivors” hunter mentality, using a 5-10 year long-term perspective rather than short-term speculation.

Wintermute’s report is essentially a wake-up call for the entire industry: 2026 is not a natural extension of the bull market but a battlefield of winners-take-all. Those who adapt early with precise standards—whether entrepreneurs or investors—will dominate when liquidity returns. Those still clinging to old models, old thinking, and old standards will find their projects failing one after another, tokens going to zero, and exit channels closing one after another. The market has changed, the game rules have changed, and the only constant is that only projects with real self-sustainability and the ability to reach listing deserve capital in this era.