35 "Death" Crypto VC Projects "Autopsy" Report: Over $1.1 Billion in Funding, Highest Failure Rates in DeFi, NFT, and Gaming

Author: Nancy, PANews

On July 30, Starknet's derivative DEX ZKX claimed it would cease operations due to severe imbalances in income and expenditure, facing skepticism and condemnation from the community, especially considering that the protocol had announced a strategic financing of $7.6 million just over a month ago. In reality, the survival index of crypto projects has skyrocketed due to multiple challenges such as tightening funding, liquidity risks, and industry downturns, even for those once favored by capital. According to a report by CoinGecko earlier this year, since 2024, there have been 14,039 "deaths" of cryptocurrencies, accounting for over 50%, with most projects emerging during the bull market from 2020 to 2021. During the last bull market alone, about 70% of the 11,000 crypto projects ceased operations.

This article by PANews compiles 35 "exiting" projects that have raised over $5 million in funding from last year to the present, including many that were once highly regarded by well-known capital or backed by giants, mainly involving NFT, DeFi, and gaming sectors. Among these shut-down projects, there are both veteran projects in decline and newcomers that collapsed suddenly, with most facing issues such as financial problems, market downturns, regulatory pressure, and low product adoption rates.

Shut-down projects raised over $1.1 billion, DeFi, NFT, and gaming face survival challenges

Although the crypto market has entered a phase of capital "control," relying solely on financing does not guarantee a smooth passage through the bubble cycle. According to incomplete statistics from PANews, since 2023, 35 projects in the crypto market that raised over $5 million have shut down, with a total funding amount of nearly $1.17 billion, averaging about $34 million per project. Among them, the three projects with the highest funding are Voice, Prime Trust, and LINE NFT, which collectively raised over $600 million.

"The windfall is momentarily pleasant, but the aftermath is a cremation ground." Despite the existence of numerous success stories in navigating industry risks, the investment market is inherently cruel. From the perspective of the sectors these failed projects belong to, DeFi, NFT, and gaming are at the forefront, being the main narratives for capital bets. The failure rates for these three sectors are 22.8%, 11.4%, and 8.5%, respectively, with funding amounts of approximately $170 million, $530 million, and $35 million, accounting for about 62.8% of the total funding for shut-down projects.

Behind this high amount of funding are many star-level VCs, such as Coinbase Ventures, Paradigm, Binance Labs, Sequoia China, Circle Ventures, Galaxy Digital, a16z, Polychain, as well as the now-bankrupt Alameda Research and Three Arrows Capital. Notably, Coinbase Ventures, Alameda Research, Three Arrows Capital, and Polychain are frequent "landmine" investors, participating in at least three or more failed projects, which is closely related to their high-frequency investment activities.

Additionally, from the timeline of establishment, projects launched between 2020 and 2021 have the highest failure rates, accounting for about 61.7% of the total statistics, with over $430 million in funding. Among them, 16 failed projects originated in 2021, primarily in DeFi and NFT.

In the wave of crypto failures, these factors are the main triggers

In the rapidly changing environment of the crypto market, the failure cases of these crypto projects undoubtedly serve as a wake-up call for the industry. Overall, the vast majority of projects are related to market cooling, financial difficulties, tightening regulations, and insufficient product penetration.

The level of industry prosperity is a crucial factor affecting the survival and development of projects, especially under the "winter" environment, where successfully "surviving" has become a challenge for many projects. According to statistics from PANews, at least five projects had to cease operations due to market conditions.

Taking the NFT market as an example, it is well-known that the NFT market has continued to show a downward trend after the hype subsided, with market demand increasingly sluggish. According to a recent report from the data tracking platform CryptoSlam, the current monthly sales in the NFT market have dropped to $393 million, marking the lowest monthly sales since November 2023. Under such a significant contraction in trading, the NFT market inevitably faces a wave of shutdowns, even among those with strong backing and substantial funding.

For instance, LINE NFT, an NFT market under Japan's communication giant LINE, terminated its services after just two years of operation despite raising about $150 million; NAEMO Market, backed by Bithumb's metaverse company Bithumb Meta, also ceased operations due to continuous losses since its inception, resulting in a loss of approximately $7.3 million for its investors, including major Korean companies like LG's subsidiary LG CNS, CJ's subsidiary CJ OliveNetworks, and SK Group's investment company SK Square; the NFT brand experience platform Recur, which raised $55 million, also closed down after over two years of operation due to unforeseen challenges in the NFT market and changes in the business landscape.

At the same time, while financing can alleviate certain "bottlenecks" in project survival and development, lacking a viable and sustainable survival model makes it difficult to secure ongoing operational space. In PANews' statistical data, at least seven projects closed due to expected revenues failing to cover expenditure costs or even exceeding the funding amounts.

For example, ZKX raised a total of $12.1 million in two rounds of financing but still chose to cease operations due to an inability to find an economically viable path. According to its founder, the decision to stop operations was based on several key factors, including extremely low user participation and unmet expectations for TGE; the platform's revenue was barely enough to cover salaries and other basic operational costs, and the current token value could not sustainably support the protocol. Of course, this situation is related to the current "resistance" of retail investors against VC tokens; in fact, the massive selling pressure from tokens awaiting unlocking has caused VC tokens to gradually lose "public support" in this bull market, and this investment background has become an "invisible shackle" hindering the development of crypto projects.

The same issues have also arisen for the liquidity staking platform ClayStack, which announced a gradual shutdown in May this year after over three years of continuous operation and more than six product audits, as well as $5.2 million in seed round financing, due to resource scarcity and insufficient product-market fit; the cross-chain liquidity aggregation protocol Via Protocol, which raised $1.2 million, also chose to terminate cooperation due to an inability to bear server costs.

Moreover, financial difficulties have significantly eroded project value, even leading to bankruptcy risks. Among the aforementioned failed projects, five faced survival dilemmas due to funding issues. For instance, Jet Protocol, which raised $11.6 million from Paradigm and others, the DAO creation platform Superdao, and the blockchain game project Ascenders all fell into financial difficulties and chose to shut down.

Additionally, regulatory compliance is a significant challenge facing crypto projects. In fact, as the crypto market continues to grow, global regulatory scrutiny has intensified, with compliance requirements becoming increasingly stringent, and the pressure of regulation and scrutiny on related projects has expanded. In the statistics, at least five projects ultimately closed due to regulatory factors. For example, the privacy protocol Nocturne, established in 2023, decided to gradually shut down in June this year after receiving $6 million in support from investors including Bain Capital Crypto, Polychain, Bankless Ventures, Hack VC, Robot Ventures, and Vitalik Buterin, following the earlier closure of a privacy protocol established last year due to regulatory pressure. Similarly, the crypto investment application Pillow, despite raising $21 million, was forced to sink into the historical tide of crypto due to regulatory uncertainties.

Of course, some projects also faced closure due to black swan events such as core team disappearance, hacking attacks, and investment failures. Among these 35 shut-down projects, many closed without warning, with some token projects causing significant losses for investors. For example, the metaverse game ecosystem DeHorizon and the metaverse project Pax.world did not issue any announcements, and their tokens have nearly gone to zero or have not even been listed on centralized exchanges.

It is worth mentioning that despite closing for various reasons, some voluntarily shut-down projects provided positive follow-up solutions compared to those that directly rug-pulled. For instance, ZKX closed all market positions and refunded all funds to each user's trading account, while LINE NFT returned all assets for sale after shutting down.