I’m still recovering from Fortune’s Future of Finance conference in Midtown Manhattan last Thursday, a revival of a series that has been dormant since the pandemic, with the last confab hosted in Montauk in 2019.

One frequent topic of discussion at Thursday’s event was whether crypto has much of a role in finance’s future, particularly given the ignominious past couple of years in the blockchain world. Many of the panelists agreed that January’s approval of Bitcoin ETFs—and the dominance of these new investment products by giants like BlackRock and Fidelity—meant that crypto had completed its transformation from a disruptive sector run by iconoclasts to an established industry run by suits. 

And yet, much of the money that greases the wheels of crypto’s megafunds— the limited partners representing relatively conservative institutions like sovereign wealth funds and endowments—seem hesitant to jump back in after the scandals of 2022. Thanks to the idiosyncrasies of token trading and the pain of watching their holdings dramatically marked down in real-time, many of these LPs now want assurances that they’ll actually get returns and not just lose their precious money to scammy vaporware. Other than SEC, there are three letters that I keep hearing over and over from venture sources: DPI. 

Distributed to paid-in capital, which is venture speak for the amount of cash distributions that LPs receive relative to what they invested, has become the new gold standard for top firms, and it’s something that crypto VCs are uniquely capable of providing. In contrast to traditional venture capital firms, whose equity positions in startups can be difficult to exit, crypto VCs tend to hold investments that are liquid. It’s easy to cash out of Bitcoin, Ethereum, and Solana—all of which have soared in value in recent months—if a firm wants to distribute capital to its LPs.

An LP in the crypto venture firm Blockchange recently shared an email with me from late March, where the VC announced its first fund had just completed two distributions totaling over $530 million, and over $860 million since inception, which the email claimed made Blockchange the second-highest “realizing” venture fund since 1999—it started at just $30 million. And earlier this month, Bloomberg reported that Polychain, a top firm run by Coinbase alum Olaf Carlson-Wee, began distributing 44% of one of its funds to investors, as well as half the value of its first fund earlier this year. 

I caught up with the president of another top crypto fund on the sidelines of Future of Finance, who told me that DPI is the hottest topic of discussion among crypto venture firms. As they start to raise new funds, they need to prove to LPs that crypto continues to be a lucrative opportunity—even if the volatile sector causes endless headaches. 

Distributions come with their downsides. For one, LPs put their money into venture funds because they want them to make venture-style investments and receive venture-style returns, and not just plow their capital into Solana and Bitcoin. Anyone can do that. As one LP told me, they back crypto funds because they’re bullish long-term—not for short-term gains. “Pulling out based on where you are in the cycle is stupid,” they told me. “If you’re going to redeem out of these funds, then you’re basically saying you don’t believe the space will exist in 10 years.”

The managing partner of another top crypto fund had a different view. DPI, the partner told me, was a way to keep the sector palatable amid the reputational overhang, especially for the more institutional, less crypto-native investors, like university endowments. “A lot of these investment teams probably feel like if they don’t get DPI out soon, it’s just harder and harder to justify.” 

And one last managing partner of a crypto fund had, perhaps, the most succinct take: With crypto prices ripping again, everyone wants to feel like they’re making money, even if exiting out of token positions isn’t the most rational way to manage a venture fund. As they told me, “Let them see the green.”

Leo Schwartz
Twitter: @leomschwartz
Email: leo.schwartz@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- PayHOA, a Lexington, Ky.-based developer of software for HOA boards, raised $27.5 million in Series A funding from Elephant VC. 

- Bedrock Materials, a Chicago, Ill.-based producer of materials for sodium-ion batteries, raised $9 million in seed funding. Trucks Venture Capital, Refactor Capital, and Version One Ventures led the round and were joined by Hanover Technology Investment Management, SpaceCadet Ventures, Brainstorm Capital, Evergreen Climate Innovations, Expansion VC, and others.

- Malted AI, an Edinburgh, Scotland-based developer of smaller AI models designed to perform better with specialized tasks, raised £6 million ($7.6 million) in seed funding. Hoxton Ventures led the round and was joined by Creator Fund and angel investors. 

- Metropolis took SP+, a Chicago, Ill.-based parking network and provider of mobility services for aviation, commercial, hospitality and institutional clients, private for $54 per share. 

IPOS

- Rapport Therapeutics, a Boston, Mass.-based developer of medicines for patients with central nervous system disorders, filed to go public on the Nasdaq. ARCH Venture Partners, Cormorant, Johnson & Johnson, Fidelity, Capital Research and Management Company, Third Rock Ventures, and Sofinnova Venture Partners back the company.

- Telix Pharmaceuticals, a North Melbourne, Australia-based developer of therapeutic and diagnostic radiopharmaceuticals, filed to go public on the Nasdaq. The company posted $385 million in revenue for the year ending March 31, 2024.