Crypto winter shows market maturity from previous downturns, says Electric Capital GP

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Welcome to Chain Reaction, a podcast that unpacks and dives into the latest crypto trends, drama, and news with some of the biggest names in the industry to break things down block by block for the crypto curious.

For this week’s episode, Jacquelyn interviewed Maria Shen, general partner of the investment team at Electric Capital, an early-stage venture capital firm focused on crypto, blockchain, fintech and markets.

Prior to Electric Capital, Shen was CTO and co-founder of Bambify, which helped small and medium-sized businesses create more efficient supply chains with manufacturers around the world. Before that, she worked at Microsoft.

In March 2022, the company announced that it had closed $1 billion for a pair of crypto funds: a $400 million vehicle to invest in startups and a $600 million fund to invest directly in crypto tokens. Its website currently features a portfolio of around 75 investments with crypto startups, including Magic Eden, ConsenSys, and Bitwise, to name a few.

Earlier this year, Electric Capital released a report indicating that the number of blockchain developers in the United States has declined every year since 2017, from 40% in 2017 to 29% last year. We took a look at what this report really means and how it will affect developer growth domestically and internationally.

Many founders have already left the United States or are considering leaving the United States, Shen said. It also means that when we consider investing, we are increasingly looking outside the United States for exciting opportunities and founders.

We also discussed which crypto sectors she’s watching for investments, why she’s betting big on NFTs, and the general VC market sentiment amid a fragile crypto market. She thinks the current bear market will last for some time and it will be increasingly difficult for companies to raise funds.

When it comes to venture capitalists, the macro environment has changed so much and companies are raising less capital and deploying less capital. Many companies are nearing the end of the life of their funds.

Overall, Shen said the crypto fundraising environment is likely to worsen next year. But on a positive note, she sees the current bear market in a better light compared to the previous one in 2018, when prices fell off a cliff. This market cycle looks completely different, she said. A lot of things that we really dreamed of and theoretically talked about have been shipped now.

Today, the crypto ecosystem has Ethereum-focused scaling solutions, more stable options, decentralized finance, on-chain governance and NFT, Shen noted. These things didn’t exist in 2018, 2019, so it’s interesting to see the market mature beyond passing tokens or money to each other.

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