a16z invested $500 million in one month, while small funds are shutting down in droves: Where is the crypto VC money flowing?

Original Author: Ben Lakoff, CFA

Original Translation: TechFlow

TechFlow Introduction: Carta's latest report is titled "VC is Back", but what's recovering is only the paper valuation (TVPI), while the actual cash (DPI) hasn't returned to LPs yet. This monthly funding report breaks down the respective situations of GPs and LPs in H2 2026: who's making money, who's holding on, and what this logic looks like when applied to crypto VCs. Author Ben Lakoff is a licensed CFA specializing in early-stage crypto investments, offering direct opinions and high data density. The end of the article includes all crypto funding transactions and hackathon results for June.

Gm!

Welcome to the June Deal Flow Digest, a snapshot of all the crypto funding I tracked last month.

This month's feature article dives into VC fund performance. Carta released the Q1 2026 VC Fund Performance Report, headlined "VC is Back". But the paper value is returning much faster than cash. Let's break down what TVPI and DPI actually mean, what GPs and LPs will face in H2 2026, who the real winners are, and what this logic looks like specifically for crypto VCs.

Don't forget to check the table at the end, which includes all June deals, plus recent hackathon and Demo Day results (in the links).

Carta tracks 2,775 funds holding approximately $119.3 billion in assets. The data shows that the median fund valuation for almost every recent vintage has increased, fundraising pace has accelerated, and the overall outlook for venture capital has significantly improved.

From 2017 to 2024, the median TVPI for almost every vintage has been climbing, and it has been climbing for six consecutive quarters. TVPI (Total Value to Paid-In) measures what a fund is worth now, including unrealized book value. The valuation reset that crushed everyone's books in 2022 and 2023 is essentially over.

That's the good news. But the key part of the story is: the paper value is back (paper gains), but the cash isn't.

Venture Capital is Recovering, but Only the Unrealized Paper Value (TVPI) is Rising

Let's start with the truly positive part. The median TVPI for the sample is starting to move up and to the right for almost every recent vintage. Valuations stopped falling, then started recovering, and funds holding these assets mechanically became more valuable.

Figure Note: The median TVPI of funds from various vintages has rebounded for six consecutive quarters.

Source: Carta Q1 2026 Report

What's driving this up? Primarily the top performers.

Valuations at the 90th percentile for every stage are soaring, and most of it comes from one sector. Carta's Private Markets Companion Report shows that AI has consumed a record share of every venture dollar invested. If your fund has AI exposure, the book value looks healthy. If you are in the infrastructure "pick-and-shovel" business or betting on something other than the narrative, your "recovery" will be much weaker.

So this rising tide hasn't lifted all boats. It has basically only (significantly) lifted the boats carrying foundational models. Not surprising.

This determines how you should read that headline number. High TVPI doesn't mean a good fund. It's a snapshot reflecting what someone somewhere would theoretically be willing to pay, not the money actually hitting LP accounts.

No One Has Actually Gotten Paid (DPI)

This is the part the recovery story skips. DPI (Distributions to Paid-In) measures the actual cash a fund has returned to LPs, and this number is still very low.

For the 2019 and 2020 vintages, the median DPI is only slightly above zero. More than half of these funds haven't returned a single penny to LPs yet. These are funds that are five or six years old.

Figure Note: The median DPI for funds from 2019 and 2020 vintages is only slightly above zero. Over half have not yet returned any cash.

Source: Carta Q1 2026 Report

The older funds, which should be better, are actually worse. Funds from the 2017 and 2018 vintages are nearly a decade old, in the second half of their lifecycle, when distributions should be occurring. Yet less than 20% of these funds have reached a 1x DPI, meaning they've returned the LPs' initial capital.

The problem is the J-curve refuses to complete its second half. Funds go negative IRR early on while investing, and then as valuations rise and exits materialize, the curve is supposed to bend upwards. Now valuations are rising (as TVPI has proven), but exits aren't materializing. The IPO window is only slightly ajar for a select few names, M&A is choosy, and the rest are marked at high prices, stuck and unable to move.

PitchBook, Preqin, NVCA, Wellington — their assessments for 2026 all point to the same thing: liquidity is the bottleneck, plain and simple. Everyone is measuring the antidote as the secondary market: continuation vehicles, GP-led deals, and LPs selling their stakes for cash instead of waiting for traditional exits. This will move from niche to much more common quickly.

For GPs, the signal is uncomfortable but straightforward. A fund with great TVPI and near-zero DPI will start getting asked tough questions over the next 12 to 18 months. LPs have been very patient throughout the entire reset. They want to see cash before they reinvest. Whoever can proactively manage a liquidity path (partial exits, secondaries, continuation funds) will have an advantage over those who only send out reports with pretty paper numbers.

Venture Capital is a Power Law Game, and the Gap is Enormous

Regardless of the recovery, dispersion is a permanent feature within VC.

For almost every vintage, the net IRR at the 90th percentile exceeds 20%, while the 75th percentile is still below 15.5%. The distance from the "top quartile" to the "top decile" is massive. Most funds are crammed into the "okay" bracket.

And these gaps compound. For reference: 20% annualized growth over 10 years is 6.2x, while 10% annualized growth over 10 years is 2.6x.

Figure Note: Distribution of net IRRs for funds from various vintages. The 90th percentile generally exceeds 20%, showing a stark difference from the 75th percentile.

Source: Carta Q1 2026 Report

Venture capital is not only the asset class with the highest returns, but also the one with the highest dispersion.

Translating for LPs: Picking a manager isn't just one input among many; it *is* the input. If you index the entire asset class, you get the median, and the median VC fund is at best a slow, illiquid 2.6x return.

The Middle Tier is Being Squeezed Out

The last piece, perhaps the most structural, and a theme I've discussed repeatedly in recent articles: money is concentrating.

Figure Note: Capital is concentrating towards top-tier funds.

Source: Carta Q1 2026 Report

Funds over $100 million captured 57% of all venture capital fundraising in 2025. Eight years ago, this figure was 31%. Most newly formed funds are still small funds under $25 million, but the large funds are absorbing a larger share every year.

Figure Note: While small funds under $25 million still account for the majority in number, total fundraising amounts are skewed towards larger funds.

Source: Carta Q1 2026 Report

This is a barbell structure. Mega-funds raise capital on their balance sheets and brand. Truly differentiated micro-funds raise capital on their niche strategies. The undifferentiated middle tier is where you go to die in fundraising. Playing VC managers are heading back. The crossover capital and generalist money that flooded into private tech during the 2021 highs are retreating back to their core businesses.

Overall fundraising is stabilizing (Carta recorded 86 new funds and $3.9 billion in Q1, the strongest start since 2022), but "stabilizing" doesn't mean "distributing evenly". This money is flowing towards those with a track record, and away from everyone else.

My Key Takeaways

Boiled down to the simplest, there are four points:

Paper value has recovered, cash hasn't. TVPI is a story about sentiment; DPI is the only number LPs can actually spend.

The power law is alive and well. A few funds win big, most are mediocre, and the distance between them is the entire game.

Liquidity is the next dominant narrative. Funds that can engineer distributions, not just report paper gains, will win the next fundraising round.

The trend of capital concentration. Be big, be sharp, don't be stuck in the middle.

Carta doesn't break out crypto separately, so none of this is "our" numbers. But the physics are the same, just amplified in crypto.

Crypto VC is more dispersed, more concentrated, and more reflexive than the broader market. The hobbyists fled here earliest and hardest. That suits me fine: at the pre-seed stage, the only durable advantage is picking the right person before the crowd shows up. The data keeps confirming this; the median is a trap, the action is in the tails.

Okay, now for the rest of the June crypto and web3 funding rounds :)

Top Ten Crypto Fundraising Rounds in June

Securitize | SPAC Merger / PIPE | RWA Tokenization | ~$400M | 2026-06-26

This tokenization leader, backed by BlackRock, is going public on the NYSE (ticker SECZ) through a merger with Cantor Equity Partners II, with gross proceeds of ~$400 million, including an oversubscribed $225 million PIPE. Clients include Apollo, KKR, Hamilton Lane, and VanEck. Securitize is also helping the NYSE build its own tokenized securities platform. This is a public listing, not a private VC round, so it's placed at the top with an asterisk, but it's also the cleanest milestone for "tokenization going mainstream" this year. The transaction is expected to close around July 1st.

Digital Asset | Strategic Round | Institutional Infrastructure / L1 | $355M | 2026-06-11

a16z crypto led the month's truly largest crypto fundraise at a $2 billion valuation. The list of co-investors reads like a Wall Street roll call: Citadel Securities, an Abu Dhabi Investment Authority entity, BNP Paribas, HSBC, Apollo, Optiver, Tradeweb, CME Ventures, S&P Global, SBI, SoFi, Coinbase Ventures, and Polychain. Digital Asset builds Canton, a privacy-enhanced public L1 blockchain for regulated capital markets, which already underpins ~$6 trillion in tokenized asset issuances with users including JPMorgan, DTCC, and Visa. If you need a data point for "TradFi choosing its rails", this is it.

Morpho | Strategic Round | DeFi Lending | $175M | 2026-06-09

Co-led by Paradigm, Ribbit Capital, and a16z crypto, with participation from Apollo Funds, Circle's venture arm, and VanEck, at a valuation of up to $2 billion. Reportedly the largest DeFi round ever. Morpho allows anyone to "build their own Aave", creating customizable lending markets. Its client list (Coinbase, Kraken, Anchorage, Galaxy) explains why institutional capital is suddenly willing to underwrite on-chain credit. The thesis that "DeFi is the backend of Fintech" just got funded.

Fomo | Series B | Consumer Trading | $75M | 2026-06-22

Led by Index Ventures at a $550 million valuation, with participation from Union Square Ventures and angels like Mark Pincus, Kevin Hartz, and Humam Sakhnini. Fomo is a non-custodial social trading app that abstracts away wallets, gas, and bridging. It takes about 30 seconds to onboard, fund, and buy a token, with built-in leaderboards and social feeds. With over 625,000 users and $4 billion in trading volume, it's the standout consumer fundraise this month.