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Compound managing partner Michael Dempsey said crypto venture capital has been nearly dead for two years, speaking in an October 13 Empire interview. His point of comparison is stark: in 2021, tech entrepreneurs flocked to crypto, while today AI attracts most of them.
Why it matters
Dempsey framed the slowdown as a talent problem as much as a capital one. Crypto needs more builders and better token incentive design, he argued, because tokenization can undermine long-term alignment rather than reinforce it.
There is one offsetting signal in his read: some fully distributed tokens are beginning to show real value, giving investors a way to assess fundamentals rather than narratives alone. Even so, he noted that few founders are pursuing new ideas beyond perpetual futures DEXs, pointing to a narrow opportunity set.
Market impact
For allocators, the interview is a caution on early-stage crypto deployment: with deal flow concentrated in a single niche and top talent migrating to AI, the pipeline of investable teams is thinner than the 2021 cohort. The counterweight is a maturing liquid market, where distributed tokens with trackable fundamentals let investors underwrite without waiting on a venture cycle.
What to watch is whether token incentive structures evolve enough to pull builders back. Until they do, Dempsey's assessment implies crypto venture stays a buyers' market with limited new competition for deals.
Frequently asked questions
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Why does Michael Dempsey say crypto VC is nearly dead?
In an October 13 Empire interview, the Compound managing partner said crypto venture capital has been nearly dead for two years, with AI now attracting most of the tech entrepreneurs who flocked to crypto in 2021.
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What does Dempsey say about token incentives?
He argued crypto needs more talent and better token incentive design, because tokenization can undermine long-term incentives rather than align builders and investors over time.
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Are any positive signals emerging in crypto markets, per Dempsey?
Yes. Some fully distributed tokens are beginning to show real value, allowing investors to assess fundamentals rather than narratives alone.
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Which crypto sectors are founders actually building in now?
Dempsey noted that few founders are pursuing new ideas beyond perpetual futures DEXs, leaving the venture opportunity set narrow.
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What would draw talent back to crypto from AI?
Per Dempsey's argument, crypto needs better token incentive structures and a broader set of new ideas; until then, AI continues to attract most departing tech entrepreneurs.
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