Theta Capital's $200M Blockchain Bet Defies AI-Driven Capital Flight from Crypto VC

Theta Capital Management, an Amsterdam-based investment firm, is seeking to raise $200 million for its latest blockchain fund-of-funds, Theta Blockchain Ventures V, targeting a net internal rate of return (IRR) of 25%. The fund aims to allocate capital across 10 to 15 venture firms specializing in digital assets, continuing the firm’s focus on early-stage blockchain opportunitiestitle1^[1]. This initiative marks Theta’s sixth fund in its blockchain series and follows a prior $170 million fundraising round in May 2025title2^[2]. The firm, which manages approximately $1.2 billion in assets, has established a strong track record in the space, with its previous blockchain funds generating a net IRR of 32.7% from January 2018 through December 2024title3^[3].

The fundraising occurs amid a subdued crypto venture capital landscape. Data from Galaxy Digital reveals that just $1.7 billion was allocated to 21 crypto-focused venture funds in Q2 2025, a fraction of the inflows seen during prior bull marketstitle1^[1]. Analysts attribute this trend to shifting investor priorities, with artificial intelligence (AI) and institutional products like spot ETFs and treasury offerings drawing capital away from venture capital. Despite these challenges, Theta Capital’s managing partner and chief investment officer, Ruud Smets, emphasized the long-term potential of blockchain venture capital. “Specialist managers can outperform generalist investors in early-stage funding rounds,” Smets stated, highlighting the firm’s strategy of backing managers with deep expertise in blockchain technologytitle2^[2].

Theta’s blockchain portfolio includes prominent venture capital firms such as Pantera Capital, Polychain Capital, and Dragonfly, which have historically focused on decentralized finance (DeFi), blockchain infrastructure, and token-based startupstitle1^[1]. The firm’s approach prioritizes active management and specialization, creating a competitive edge in a sector where dedicated crypto VCs have compounded experience over time. This model has led to barriers for less focused investors attempting to enter the space. Theta’s latest fund will continue this strategy, with the firm noting that the experience of its portfolio managers has been a key differentiator in capturing value from early-stage projects.

The broader crypto venture ecosystem faces structural headwinds. Galaxy Digital reported a 54% year-over-year increase in VC funding to $4.8 billion in Q1 2025, but this growth was accompanied by a 39.5% decline in deal volume to 670 transactions. PitchBook data further underscores the sector’s fragmentation, with capital increasingly directed toward trading platforms, asset management, and crypto financial services. For instance, $2.55 billion flowed into 16 deals in Q1 2025, while infrastructure and development firms raised $955 million across 30 dealstitle2^[2]. These trends highlight the sector’s evolving dynamics, where institutional investors are diversifying their exposure beyond traditional venture capital into more mature segments of the crypto market.

Theta’s expansion into blockchain venture capital reflects its long-term commitment to the sector. Founded in 2001, the firm shifted its focus to digital assets in 2018, positioning itself as an early adopter in the traditional finance space. Its strategy aligns with broader industry observations that blockchain-native infrastructure, particularly stablecoins, is gaining traction as the backbone of global digital payments. The firm’s upcoming Legends4Legends blockchain conference in Amsterdam, themed “Blockchain Goes Mainstream: Stablecoins & Beyond,” will further explore these developments, featuring insights from leading experts in the fieldtitle3^[3].

The success of Theta’s fundraising efforts will depend on its ability to navigate a competitive and evolving market. While macroeconomic uncertainty and AI’s rise pose challenges, the firm’s emphasis on specialization and early-stage investing could position it to capitalize on long-term gains. As the crypto VC landscape matures, Theta’s track record and strategic focus on dedicated managers may provide a critical advantage in a sector where expertise and active management are increasingly valued.