AI Dominates VC Funding: Crypto Startups Struggle to Compete in 2025

AI’s Rapid Growth Puts Crypto Startups at a Fundraising Disadvantage

Artificial intelligence companies are leaving crypto startups struggling to keep up in the venture capital race, according to industry leaders. Paul Brody, former global blockchain lead at EY and now CEO of Nightfall Networks, told DL News that crypto teams face an uphill battle when raising capital.

The surge in AI adoption has drastically raised investor expectations for new startups. Brody explained that what was once considered strong early performance—around $2 million in first-year revenue—is no longer sufficient. Today, investors demand closer to $4 million in revenue within the first year.

"What used to be seen as strong early performance — around $2 million in first-year revenue — is no longer enough. Now, investors expect closer to $4 million."

This shift in expectations is making it increasingly difficult for crypto startups to compete for funding, Brody noted. However, he added a note of cautious optimism.

Is a VC Rebalancing Underway?

Brody pointed out that some venture capitalists are beginning to reconsider their heavy focus on AI. He said,

"The one silver lining is that at least some VCs are sitting back and saying, gee, we have an awful lot overcommitted to AI. Maybe we need a little bit of other things in our portfolio."

This Week’s Top Crypto Fundraising Rounds

Despite the challenges, crypto startups secured nearly $37 million in venture funding this week, according to data from DefiLlama.

BetHog Raises $10 Million in Series A Round

Edinburgh-based crypto casino BetHog closed a $10 million Series A funding round, bringing its total funding to $16 million. The round was led by Will Ventures and RockawayX, with participation from Bullpen Capital, 6th Man Ventures, and Advancit Capital.

The company was founded by Nigel Eccles and Rob Jones, the duo behind the successful sports betting platform FanDuel. The new funding will support the launch of Sentient Studios, a venture that enables casinos to use AI-powered virtual dealers instead of human staff.

Hata Secures $8 Million for Malaysian Crypto Exchange Expansion

Hata, a Malaysian cryptocurrency exchange, raised $8 million in its latest funding round. Bybit led the investment, with additional backing from global family offices.

This follows a $4.2 million seed round in 2025, also supported by Bybit. Hata holds regulatory licenses from Malaysia’s Securities Commission and the Labuan Financial Services Authority.

The platform has experienced rapid growth, now serving over 200,000 users, according to company reports.

KAIO Raises $8 Million for Blockchain Investment Infrastructure

Abu Dhabi-based KAIO secured $8 million in a recent funding round, bringing its total funding to $19 million. Tether, the stablecoin giant, led the round, with support from Laser Digital, Systemic Ventures, and Further Ventures.

KAIO develops blockchain infrastructure that enables regulated investment funds to be issued and traded on-chain. Its platform provides both retail and institutional investors access to major traditional funds, including those from BlackRock and Hamilton Lane.

About This Report

This article is part of The Weekly Raise, a DL News column covering fundraising deals in the crypto and DeFi sectors, powered by DefiLlama.

Lance Datskoluo is DL News’ Europe-based markets correspondent. Have a tip? Contact him at [email protected].