Times are hard for venture capital investors right now. But for VCs who’ve raised billions of dollars to invest in the crypto space, things are looking even tougher. 

The way that crypto VC operates is full of quirks, one being that the presence of coins like Ethereum, Solana, and countless projects’ tokens has added a liquid, and public, element to venture. Investors who bought into crypto tokens saw massive returns for their funds when those tokens were going to the moon—but as they came crashing back down to earth over the last year, those once-juicy returns are looking a little less ripe. The trouble is, for the unaccustomed limited partner, that can be a jolting ride.

My colleague Leo Schwartz and I teamed up for a new deep dive on the state of crypto venture capital in 2023. And what we found paints a fairly bleak picture.

As Robert Le, a crypto analyst at PitchBook, put it to us: “There’s no way to hide behind the opaqueness of the private markets for a crypto fund with token holdings.” Case in point: 

Kavita Gupta, the founding managing partner at the crypto-focused Delta Blockchain Fund, told Fortune that at the height of the bull market, her fund was up 600%, buoyed by its token investments. Today, it’s up just 18%. Like many crypto-native VCs, Gupta said she’s not concerned.

“If you believe in those projects and you hold them long enough, there’s going to be a bull market again,” she told Fortune…The tricky part is convincing LPs to remain calm. Gupta’s investors include crypto founders, but also high net-worth individuals, family offices, and institutions—and not all of them are accustomed to the cyclical whiplash of the industry. 

“We continuously have to educate the family offices who are, like, a shipping family industry from Vietnam,” she said. “They’re like, ‘What the hell did you do? You were 6x up!’”

Even mega hedge fund Tiger Global is now contending with what to do with crypto tokens. In late 2021, the firm invested in crypto-powered recruitment platform Braintrust—but instead of equity, Tiger received tokens. We reported Tiger has been selling those tokens since early 2023: 

For Tiger, the broader meltdown translated into hefty losses in its venture investments, prompting the firm to reportedly look into selling some of its holdings to pacify LPs. Ordinarily, this would entail seeking buyers for its shares on the secondary market, a laborious process compared to dumping tokens. In the case of Tiger’s BTRST tokens, however, the firm could simply sell them directly on crypto exchanges as soon as a lock-up period expired.

According to on-chain data reviewed by Fortune, Tiger wallets have been dumping Braintrust tokens since January, tapping institutional investment firm FalconX to sell hundreds of thousands of tokens, which contributed to the price slumping over 20%. Tiger declined to comment. 

Cratering token prices creates a dilemma for venture investors: Unlike private companies, where a decline in valuation isn’t immediately apparent during a bear market, losses at token-based projects like Braintrust can be seen by everyone right away.

Meanwhile, many VCs are moving onto other buzzy areas like A.I. as the crypto and Web3 space lost much of its allure for more generalist VCs following the spectacular collapse of FTX late last year. Even crypto-native VC firms like Paradigm began this month to downplay their crypto emphasis on their website, but one LP told us they hadn’t communicated changes to their investors. (Alana Palmedo, Paradigm’s COO, told us in a statement that “We remain as excited and committed to crypto as ever.”)

Ever-optimistic VCs still see plenty of signs for hope and a rebound—even for token strategies (Bitcoin and Ethereum, meanwhile, are on the upswing in recent months). I’ll let you dive into the whole story here, but suffice to say, investors in crypto need a strong stomach. 

See you tomorrow,

Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- CoreWeave, a Roseland, N.J.-based cloud provider, raised an additional $200 million in funding from Magnetar Capital. 

- Hostaway, a Toronto and Helsinki-based vacation rental software and management system, raised $175 million in funding led by PSG.

- Lightmatter, a Boston-based photonics company, raised $154 million in Series C funding. SIP Global, Fidelity Management & Research Company, Viking Global Investors, GV, HPE Pathfinder, and others invested in the round. 

- Magic, a San Francisco-based wallet-as-a-service provider, raised $52 million in funding. PayPal Ventures led the round and was joined by Cherubic, Synchrony, KX, Northzone, and Volt Capital. 

- Carrum Health, a San Mateo, Calif.- based health care spend platform, raised $45 million in Series B funding. OMERS Growth Equity led the round and was joined by Revelation Partners, Tiger Global, Wildcat Venture Partners, Cross Creek, and SpringRock Ventures. 

- Swing Education, a San Francisco-based online marketplace connecting schools and substitute teachers, raised $38 million in Series C funding co-led by funds advised by Apax Partners and Reach Capital. 

- Cortex, a San Francisco-based internal developer portal, raised $35 million in Series B funding. IVP led the round and was joined by Craft Ventures, Sequoia Capital, Tiger Global, and YCombinator. 

- Sana, a Stockholm-based learning and knowledge platform, raised $28 million in funding. NEA led the round and was joined by Workday Ventures. 

- Beem, a Nantes, France-based energy management company, raised €20 million ($21.27 million) in Series A funding. Alter Equity, 360 Capital, BNP Paribas Development, and Cathay Innovation. 

- Hyro, a New York-based conversational artificial intelligence platform, raised $20 million in Series B funding. Macquarie Capital led the round and was joined by Liberty Mutual Strategic Ventures, Black Opal Ventures, K20, Hanaco Ventures, Spero Ventures, and Mindset Ventures. 

- Vartana, a San Francisco-based B2B sales closing and financing platform, raised $20 million in Series B funding. Activant Capital led the round and was joined by Mayfield and Audacious Ventures. 

- Atly, a New York- and Tel Aviv-based social mapping platform, raised $18 million in funding. Target Global, Tal Ventures, and FKA Brands invested in the round.

- Sami, a São Paulo-based health insurance company, raised $18 million in Series B funding. Redpoint Ventures and Mundi Ventures co-led the round and were joined by Alumni Ventures, Endeavor Catalyst, Digital Horizon, and Tau Ventures. 

- Deep Sentinel, a Pleasanton, Calif-based live video monitoring security provider, raised $15 million in funding. Intel Capital led the round and was joined by Shasta Ventures, Slow Ventures, UP2398, and The Syndicate.

- Predibase, a San Francisco-based machine learning platform for developers, raised $12.2 million in Series A extension funding led by Felicis. 

- Alcion, a Santa Clara, Calif.-based data management startup, raised $8 million in seed funding. Walden International chairman Lip-Bu Tan, Postman CEO and founder Abhinav Asthana, DataRobot CEO Debanjan Saha, and investor Amarjit Gill invested in the round.

- Aplós, a Miami-based non-alcoholic spirits company, raised $5.5 million in Series A funding led by McCarthy Capital.

- UpCodes, a San Francisco-based code compliance platform, raised $3.5 million in Series A funding. Building Ventures led the round and was joined by PlanGrid’s cofounders, CapitalX, and Bragiel Bros.

- Hybr1d, a Singapore-based workforce management platform, raised $3.2 million in pre-seed funding. Global Founders Capital, MS&AD, 468 Capital, and 1982 Ventures invested in the round.

- UpdateAI, a Los Angeles-based customer success platform, raised $2.3 million in funding. IdealabX led the round and was joined by Stage Venture Partners, Zoom Ventures, A16z’s scout fund, and Howard Morgan. 

- Riverse, a Paris-based decarbonization platform for the European industrial sector, raised €1.5 million ($1.6 million) in funding. Speedinvest led the round and was joined by Techstars Berlin, Evolem, and other angels. 

- Grapefruit Health, a Chicago-based patient engagement platform, raised $1.3 million in pre-seed funding. Antler, GoAhead Ventures, Hustle Fund, Litquidity, LongJump Ventures, SUM Ventures, Sweater, The Fund Midwest, and others invested in the round.

PRIVATE EQUITY

- Axcel Learning, the education platform of Alpine Investors, acquired Dion Training, an Orlando-based IT certification exam prep company. Financial terms were not disclosed. 

- Tech24, backed by HCI Equity Partners, acquired Total Mechanical Repair Services, a Brookhaven, Miss.-based repair services, preventative maintenance, and installation provider for commercial kitchens. Financial terms were not disclosed. 

- Trinity Hunt Partners acquired a majority stake in Centricity Research, a Columbus, Ga.- and Toronto-based clinical research services provider. Financial terms were not disclosed.

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OTHER

- RIBBIT acquired ValidiFI, a Boca Raton, Fla.-based fraud, compliance, and risk mitigation solutions provider. Financial terms were not disclosed.

SPAC

- Schmid Group, a Freudenstadt, Germany-based advanced electronics manufacturing techniques provider, agreed to go public via a merger with Pegasus Digital Mobility Acquisition Corp., a SPAC. The deal values the company at $640 million including debt. 

FUNDS + FUNDS OF FUNDS

- Integrum, a New York-based investment firm, raised $1.1 billion for a fund focused on companies in the financial and business services sectors.

PEOPLE

- CoVenture Management, a Miami-based alternative asset management firm, hired Joe Iraci as managing director and CCO. Formerly, he was with Adherence.

- Stonepeak, a New York-based alternative investment firm, hired Michael Leitner as a senior managing director. Formerly, he was with BlackRock.