Varun Datta, venture capitalist and CEO of Truth Ventures, discusses how institutional capital is reshaping the future of Web3.
For much of the past decade, Web3 has been a market driven by narratives. Attention has shifted from ICOs to NFTs, from decentralised finance to AI tokens, and more recently back towards Bitcoin as prices have recovered. Every cycle has generated enormous interest, attracted fresh investment and brought new participants into the sector. It has also reinforced the idea that Web3 is primarily a story about digital assets and market performance.
I have never been convinced that tells the whole story.
The more time I spend speaking with founders, investors and institutions, the clearer it becomes that the conversation is changing. While public attention often remains fixed on prices, many of the most important discussions are now centred around the infrastructure supporting the wider ecosystem. That is where I believe some of the most significant long-term opportunities are emerging, and it is increasingly where institutional capital is directing its attention.
The shift itself should not come as a surprise. As technologies mature, investors naturally begin looking beyond the products attracting headlines and towards the systems that make those products possible. In my opinion, Web3 is reaching that point.
Institutions are asking different questions
The first phase of institutional interest was largely about gaining exposure. Products such as spot Bitcoin and Ethereum ETFs allowed investors to participate in the growth of digital assets without needing to engage directly with the underlying technology.
Today, the conversation feels noticeably different. Financial institutions are spending far more time exploring tokenisation, digital custody, settlement infrastructure and blockchain technologies that could improve existing financial systems. The focus has gradually moved away from asking whether digital assets deserve a place in institutional portfolios. Instead, discussions are increasingly centred on how decentralised technologies might improve efficiency, reduce costs and modernise processes that have remained largely unchanged for decades.
That, to me, is a far more meaningful development than any individual movement in cryptocurrency markets.
Institutional investors have never been in the business of chasing headlines. They usually invest after asking difficult questions about durability, commercial viability and whether a technology solves problems that are likely to exist well into the future. Once those conversations begin, attention naturally moves further down the technology stack, and that is exactly what we are now seeing across Web3.
History Offers Some Important Lessons
One lesson that repeatedly emerges throughout technology investing is that visibility and long-term value are rarely the same thing.
During the early growth of the internet, most people focused on the websites they used every day. Meanwhile, other businesses were quietly building payment infrastructure, cloud computing, networking technologies and enterprise software that enabled the wider internet economy to flourish. Looking back, many of those businesses became every bit as influential as the consumer platforms they supported, if not more so.
Artificial intelligence appears to be following a similar path. Public discussion understandably centres on the latest AI applications, yet enormous value has also been created by companies building the chips, compute infrastructure and software environments required to make those applications work at scale.
I think Web3 is beginning to follow that same pattern. As the industry matures, the foundations are becoming more important than the headlines. The businesses solving scalability, privacy, interoperability, liquidity and decentralised compute challenges may never dominate the daily news cycle, but they are creating infrastructure that thousands of developers and businesses will eventually depend upon.
History rarely repeats itself exactly. It does, however, have a habit of following familiar patterns.
Why infrastructure has always been our focus
At Truth Ventures, we have never viewed Web3 as a collection of token projects. We see it as an evolving technology ecosystem, and that naturally changes how we evaluate opportunities.
Rather than asking whether a project is attracting attention today, we ask different questions. Does the technology solve a meaningful problem? Will that problem still exist if markets become less enthusiastic? Can the product improve the way developers, businesses or institutions actually operate? Those questions tend to reveal far more than short-term market sentiment ever will.
That philosophy explains why our investments span different parts of the ecosystem. Bittensor is exploring decentralised approaches to machine intelligence and compute. StarkNet is tackling blockchain scalability. peaq is building decentralised physical infrastructure that connects digital networks with real-world assets, while Ternoa is focused on privacy and secure data management. In decentralised finance, 1inch continues addressing fragmented liquidity through practical engineering rather than market narratives.
Although those companies work in different areas of Web3, I believe they all share the same characteristic. Each is attempting to solve a challenge that becomes more important as adoption grows. Whether markets are bullish or bearish does not fundamentally change the need for faster settlement, secure data, scalable infrastructure or more efficient liquidity.
That distinction has become increasingly important for long-term investors.
A hybrid financial system feels far more likely
People often frame the future as a choice between traditional finance and decentralised finance. Personally, I do not think the industry will develop in such absolute terms.
Financial institutions have spent decades building regulatory expertise, global relationships and operational resilience. Those advantages remain enormously valuable. At the same time, decentralised technologies are introducing new ways to improve transparency, settlement, asset ownership and collaboration across financial markets. I believe the greatest opportunity lies in combining those strengths rather than assuming one system must replace the other.
We are already seeing early examples of that convergence through tokenised assets, modern settlement infrastructure and growing institutional engagement with blockchain technologies. As regulatory frameworks continue to mature and implementation becomes easier, I expect those relationships to deepen rather than diminish.
The companies creating the greatest value over the next decade may not be those trying to replace existing institutions altogether. Instead, I believe many will be the businesses providing infrastructure that allows traditional finance and decentralised technologies to work alongside one another.
Capital is beginning to follow capability
Speculative capital will always move quickly because that is simply how emerging markets behave. Institutional capital tends to arrive later, but when it does, the questions become much more rigorous. Investors begin looking for businesses capable of building durable technology, generating practical utility and supporting wider adoption over many years rather than simply benefiting from the next cycle of enthusiasm.
For me, that is the story unfolding across Web3 today. The market will continue experiencing periods of optimism and volatility, and Bitcoin will almost certainly return to the headlines many times over. Those cycles are part of every emerging technology market and I do not expect them to disappear.
What feels different now is where serious long-term attention is beginning to settle. Infrastructure is no longer viewed as a niche part of Web3. It is increasingly being recognised as the foundation upon which tokenisation, digital ownership, decentralised finance and many future financial applications will be built.
The businesses developing those foundations may never generate the loudest headlines; they often spend years working behind the scenes while others capture the market’s attention. If previous technology cycles have taught us anything, however, it is that lasting value is very often created in exactly those places.
