I've been rejected by both sides.
When pitching to traditional VCs: "This is too crypto."
When pitching to crypto VCs: "This isn't crypto enough."
This is the purgatory where some of today's most promising startups find themselves – companies I call "Web 2.5" – not fully Web3, not purely Web2, but building at the edge where these worlds meet.
While pure crypto plays get the attention and traditional software gets the institutional funding, these hybrid companies get overlooked. Yet in my experience, they're often building the most sustainable, impactful businesses in the space.
The Rise of Crypto Infrastructure
Two technology developments have accelerated this trend: the growing adoption of stablecoins and the emergence of zkTLS (pioneered by Opacity Network). These innovations allow any company to incorporate crypto elements without building a fully crypto-focused business.
Each quarter, more companies incorporate crypto technologies to solve specific problems – not because they're "crypto companies," but because these tools solve real business challenges better than alternatives.
The Anatomy of a Web 2.5 Company
These companies share several distinguishing traits:
1. Problem-first, crypto-second
They start with a genuine problem, then strategically apply crypto where it creates advantage – not the other way around.
Take Ribbon – initially a professional social network using NFTs for credentialing. To users, they were solving verification challenges in professional networks. To crypto VCs, they weren't "crypto enough" because tokenisation wasn't central to their business model. Yet they grew to 200,000 users and eventually evolved into an AI-powered hiring platform, with crypto technologies as enablers rather than their identity.
2. Crypto as infrastructure, not identity
For Web 2.5 companies, blockchain is part of the tech stack, not the entire solution – similar to how companies use AWS or incorporate AI without being called "AI companies."
One portfolio company (a word-of-mouth marketing platform) recently started integrating Opacity to automatically verify when customers post about products on social media. Before, they manually verified each post. Now they scale infinitely with blockchain-powered verification, yet remain a marketing platform, not a "crypto company."
3. Founder fit over crypto credentials
The founders often come from traditional tech backgrounds, not crypto. They've witnessed problems firsthand as operators and recognised how specific crypto technologies could create better solutions.
These founders aren't pushing tokens for quick liquidity. They're building actual businesses with sustainable revenue models that happen to leverage blockchain where it makes sense.
4. Bridge-building, not world-replacing
Rather than attempting to replace existing systems wholesale, they bridge gaps and enhance what works.
Immersve can help both crypto and non-crypto companies launch debit cards by partnering with MasterCard. Traditional VCs saw "crypto" and balked, missing that this was fundamentally a fintech solving real-world problems for both markets.
Why These Companies Win Long-Term
These hybrid companies represent crypto's inevitable future. While spectacular token launches generate headlines, these companies are quietly building sustainable businesses that will outlast market cycles.
Layer3 exemplifies this approach. They have a token, but they've also generated $20 million+ in revenue. They didn't build for a token; they built a distribution engine for Web3 that connects users with protocols through learn-to-earn models. The token enhances their business by aligning incentives, but the business fundamentals stand independently.
The End of Categories
In my first fund, I focused on pre-seed and seed crypto companies. For my second fund, I'm expanding to include more Web 2.5 companies. And for funds after that, I expect the distinction between "crypto companies" and "tech companies" may become meaningless – just as we don't distinguish "internet companies" today.
The most interesting innovation happens at boundaries – where categories blur and traditional definitions fail. That's precisely where these overlooked companies thrive.
If you're building in this space – too crypto for traditional VCs but not crypto enough for the token crowd – I'd love to talk. You might just be building what comes next.
