Factor Capital Update - October 2025

I had a chance to go to Singapore last week and give a keynote speech at LW3 Singapore, attended by several other GPs and allocators. The annual Token2049 event coincided with LW3, and walking those halls crystallized something I've been thinking about since returning back to the US. It showcased the reality that two parallel crypto ecosystems are being built in the world that happen to share the same infrastructure.

The Stable Side

Stablecoins are the biggest topic and have become completely mainstream, to the extent that it's hard to keep listing all the companies announcing stablecoin strategies these days. One I will focus on briefly is Cloudflare, however. Cloudflare announced their stablecoin, “NET Dollar” to enable content publishers to both gate and monetize content accessed by bots and AI scrapers.

What is important here is the infrastructural validation of the fact that the future of agentic payments are likely to run on crypto rails. Because Cloudflare already intermediates a large fraction of web traffic, it has the unique ability to tie monetization (micropayments, access rights) directly to content access, bot control, and API usage. With NET Dollar providing instant, programmable settlement, it closes the loop: every access event can be priced, paid, and enforced in real time, without human intermediation.

This move shifts the Internet away from ad-led economics and toward a composable, value-based web, anchored by native payments rails that support autonomous agents. It is directionally very closely aligned with Coinbase’s x402 standard, which Google announced they’re partnering on through AP2, their agentic payments solution.

We're only scratching the surface, and I believe this area will explode in the months and years ahead. Our portfolio company Nevermined is one of many exciting companies executing in this space.

The Unstable Side

For those who attend US-based crypto conferences, events like Consensus and Permissionless have become venues for serious financial infrastructure discussions over the past few years. The attendees are executives from traditional finance, compliance officers, and institutional allocators. The conversations center on settlement rails, tokenized funds, and regulatory frameworks. This is the crypto that Stripe, Circle, BNY, Blackrock, and our portfolio companies like Dinari and Plural are building for.

Token2049 showed me the other world. Three levels of exhibition space filled with niche regional exchanges, perpetual futures platforms, and copy-trading apps—all laser-focused on the retail speculator. Companies I'd never heard of had erected elaborate booths complete with ziplines, DJ stations, and even tattoo parlors. The energy was pure casino floor, and the crowds of young attendees were eager to learn about the next 100x opportunity. It felt like being at a gambling convention and I was surprised not to see slot machines

Here's what makes this particularly interesting: both worlds are being built on the same rails. The institutional infrastructure we're excited about in the US - faster settlement, programmable money, composable financial primitives - is the same infrastructure that enables a teenager in Seoul to leverage trade a memecoin at 2am. Solana doesn't discriminate between a multimillion-dollar tokenized Treasury fund and a dog-themed token. This creates a tension the industry hasn't fully resolved: you can build infrastructure for institutional finance, but you've simultaneously built infrastructure for retail speculation.

It would be easy to dismiss the Token2049 crowd as a speculative sideshow, but I don't think that's accurate or wise. What I witnessed is representative of a generation whose economic lives are fundamentally online. They've watched traditional paths to wealth - real estate, stable careers, diversified portfolios of high growth public companies - become less accessible. So they've built their own playbook around online communities, influencers sharing trading strategies, and markets as participatory entertainment.

Fifteen years ago, when Amazon acquired Twitch for nearly $1 billion, many were baffled, questioning why would anyone pay to watch someone else play video games? But Twitch was serving a generation for whom entertainment meant participatory, interactive, community-driven content. The crypto speculation ecosystem represents a similar shift in economic participation, and it feels just as foreign to traditional finance as Twitch felt to television executives.

The Venture Parallel

At the events I went to, another parallel dynamic emerged worth mentioning which I focused on during my talk in Singapore. This is the one that’s developed in the early stage venture capital landscape. There exists a fundamental divide between large platform VCs and smaller firms, each playing by different rules driven by different incentives.

In the past a venture manager would have been minted if they backed a single billion dollar company, given the fact that that often would return whole funds or many multiples of these funds. Today, for the behemoth multi-stage managers operating $5Bn+ individual funds and $20Bn+ in AUM, $1Bn exits of companies they backed at seed are essentially uninteresting.

It doesn’t move the needle when even owning 20% (in and of itself a stretch today) fails to return more than 5% of your fund and with hundreds of millions of dollars in fees each year the urgency of one’s carry is diminished. That asymmetry for them forces them to push for much longer exit timelines that have much higher risk of going to zero but that in the rare winning outcome can return smaller multiples of their larger capital pool. They will continue to earn nine-figure fees per year, and have billions to deploy at later stages into these more mature companies who would otherwise exit.

So while we have this growing number of highly successful $1B/$10B/$100B companies, very few of them are positioned to exit. But for smaller fund managers (sub $500M) who share cap tables with these multi-stage leads and their LPs it means instead of a pipeline of exits from this parade of unicorns, they’re stuck with extended hold periods driven by the rules being written by the larger players.

It’s like the Tampa Bay Rays believing they’re playing the same sport as the Dodgers. I think it means a new form of funding at early stage will start to emerge just as I’ve discussed my belief that a new set of companies will emerge that aren’t looking for billions in funding or $10B+ exits when a profitable business they own can produce life changing outcomes for founders.

Just like the gamblers on the expo floor in Singapore have decided to play the wealth creation game by different rules than past generations, to survive and thrive in this new venture environment, smaller fund managers must recognize they cannot compete directly with larger platforms on their terms. Instead, they need to establish differentiated strategies that capitalize on their unique advantages - perhaps focusing on sectors overlooked by larger firms, developing specialized expertise, or, in our case, by constructing new funding models that the larger firms aren’t positioned to offer. By playing a different game entirely rather than attempting to beat larger VCs at their own game, smaller managers can carve out a sustainable niche in the competitive early stage ecosystem.

Thanks as always for reading,

Jake Dwyer
Founder & Managing Partner
Factor Capital