VC allocators believe in the team first, then the product. If founders fit the stereotype, then capital is free-flowing. Because they are innately blessed with the “right” stuff, a small percentage of teams will figure out product-market fit after blowing a few hundred million dollars, and the next Ethereum will be born. Since most teams fail, the VC allocator’s decision matrix goes unquestioned because they only backed founders who everyone agrees are the type expected to succeed.

It’s immediately clear that crypto acumen is a distant afterthought in terms of selecting which teams to fund. This is where the disconnect starts between the VC funding the project and the ultimate retail bag holder. VC muppets want to stay employed. Retail punters want to stop being broke-ass plebes by buying a coin that pumps 10,000x. 10,000x returns were possible back in the day. If you bought Ether at ~$0.33 in the presale, you are up 9,000x at current prices. However, the current crypto capital formation process renders it almost impossible to generate those types of returns.

VC investors make money by passing the hot potato of dogshit illiquid SAFTs (sale of future token agreements) from fund to fund and, at every turn, increasing the valuation. By the time the stinking turd of a crypto project makes it to a CEX for a primary listing, its FDV is often north of $1bn. To generate a 10,000x return requires the FDV to grow to a big fucking number. A number so big that it’s larger than the entire value of all fiat-denominated assets combined … and we are talking about only one project. This is why retail would instead roll the dice on a $1mm market cap memecoin than a $1bn FDV project backed by the most “esteemed” cohort of VCs. Retail is behaving in an expected return-maximizing fashion.