The tokens, known as BTRST, serve as a currency and reward system for Braintrust users. But the Silicon Valley startup also sold hoards of them to investors like Tiger on the condition they agree to multi-year lock-up periodsan arrangement designed to ensure investors dont dump their holdings and depress the price. 

During cryptos recent bull run, token strategies paid off handsomely as digital assets soared. But in early 2022, the market took a dramatic turn. The collapse of industry mainstays like Terra and FTX sent cryptocurrencies into a free fall, dropping cryptos total market cap by as much as 70%. Meanwhile, venture capital firms and their limited partner investors grew reluctant to open their wallets as interest rates began to skyrocket.

For Tiger, the broader meltdown translated into hefty losses in its venture investments, prompting the firm to reportedly look into selling some of its holdings to pacify LPs. Ordinarily, this would entail seeking buyers for shares on the secondary market, a laborious process compared with dumping tokens. In the case of Tigers BTRST tokens, however, the firm could simply sell them directly on crypto exchanges as soon as a lock-up period expired.

According to on-chain data reviewed by Fortune, Tiger wallets have been dumping Braintrust tokens since January, tapping institutional investment firm FalconX to sell hundreds of thousands, contributing to the price slumping over 20%. Tiger declined to comment.

Cratering token prices create a dilemma for venture investors: Unlike private companies, where a decline in valuation isnt immediately apparent during a bear market, losses at token-based projects like Braintrust can be seen by everyone right away.

Adam Jackson, Braintrusts cofounder, said that he sticks by the companys crypto-based strategy, arguing that the price of the token has no impact on its utility for the Braintrust platform. Even so, he acknowledged that prices impact sentiment. Token projects have to eat that shit every day, he told Fortune.

The Braintrust episode highlights the fraught new frontier of crypto venture capital. Liquid tokens can create a massive and immediate upside during a bull market but an outsized wallop when the good times endunderscoring how the challenge of climbing out of a bear market is even greater for crypto-based venture capital. Fortune spoke with investors, analysts, and entrepreneurs to discover how the new industry is adapting.

Juicing up those numbers

Unsurprisingly, the volatility has been distressing for those new to the rollercoaster of crypto. 

Theres no way to hide behind the opaqueness of the private markets for a crypto fund with token holdings, said Robert Le, a crypto analyst at industry data provider PitchBook. 

While crypto projects have raised money with tokens for yearsmost notably in the initial coin offering explosion of 2017the model took off with mainstream venture firms during cryptos most recent bull market. VCs no doubt observed the early success of projects like Solana Labs, which sold nearly 80 million Solana tokens to investors, including Multicoin Capital and 500 Global, before launching in 2020, and netting some of its early backers a reported $1 billion in returns as of late 2021.

In recent years, most crypto venture deals involved some combination of equity and so-called token warrants, which entitle VCs to a certain number of tokens at a future date. Crypto startups often raise money to build out their projectoften a new blockchain, as was the case with Solanabefore launching a public token.

The huge potential returns from tokens spurred the rise of crypto-focused funds such as Pantera and Polychain Capital, followed by later players like Haun Ventures and Paradigm. The promise of token riches also attracted the attention of generalist venture firms, including Sequoia Capital and Bessemer Venture Partners. In an era of zero interest rates and tons of cash in the private markets, many VCs latched onto cryptoand tokens in particularas the next hot thing. 

Lilita Infante, a former Department of Justice special agent who founded the crypto crime-fighting startup CAT Labs, told Fortune that she had trouble raising money in the heady days before FTXs collapse. She felt a major roadblock when she approached VCs was that the project didnt offer tokensonly old-fashioned equity. I didnt have the pump-and-dump element, so they werent interested, she said.

The allure of publicly traded, liquid tokens also attracted hedge funds like Tiger and Brevan Howard along with VCs trying their hand at hedge fund-like plays.

One crypto VC, who spoke on the condition of anonymity, told Fortune that hedge funds that later launched venture strategies, like Jump Trading and Brevan Howard, typically have more hedge fund DNA than venture DNAa situation that would prove troublesome for crypto firms like Braintrust since hedge funds like quicker exits, and, unlike their VC counterparts, are reluctant to wait years for a project to bloom. The crypto VC said they would sometimes try to persuade other participating firms to have longer lock-up periods, with the assumption that some other firms were just interested in short-term liquidity. 

Money has been really misallocated, argued Alyse Killeen, founder of the Bitcoin-focused fund Stillmark. Youve seen projects get funded that can produce a return via tokens without producing a sustainable product.

Despite the risks, the strategy still reaped benefits during the bull market. Both 2021 and 2022 saw record fundraising for crypto-focused VC firms, including Multicoin, which raised a $430 million fund in July of last year, and Electric Capital, which raised a whopping $1 billion in March of 2022. 

I would say some portion of that is because they had very good metrics by getting liquidity super early and juicing up those numbers, said Le, the Pitchbook analyst, explaining crypto firms fundraising prowess.

In the world of venture capital, firms must use an accounting practice known as mark to market for equity investments, a process that assesses the value of their startup shares every quarter. As a result, LPs have limited insights into the value of their VCs holdings.

In the case of token holdings, crypto VCs are likewise obliged to mark to market. But since token markets are much more liquidtrading publicly 24/7 their investors can gauge the value of their portfolios on a dailyor even hourlybasis. 

The upshot is that, following the recent meltdown in the crypto market, funds couldnt hide from the real-time performance of their token holdingsand what they revealed often wasnt pretty.  

What the hell did you do? You were 6x up!

The numbers so far tell a bleak story. 

Several crypto VC firms have seen their assets under management, or AUM, fall considerably over the last year: Multicoins AUM fell from roughly $8.9 billion at the start of last year to around $1.4 billion as of the end of 2022; Paradigms dropped from over $13 billion to around $8.7 billion over the same period, according to Newcomer and independently verified filings. Although AUM isnt a perfect measure of a firms success and can fluctuate for reasons other than a funds performance, its a gauge for its well-being.

Multicoin also told its investors in an annual letter that the firms token-focused hedge fund lost over 90% in 2022, Coindesk reported, though the fund was reportedly still up nearly 1,400% net of fees since inception. Multicoin declined to comment. Paradigm, meanwhile, began this May to downplay its crypto emphasis on its website. 

We remain as excited and committed to crypto as ever, Alana Palmedo, Paradigms COO, told Fortune in a statement.

Because token transactions occur on publicly viewable blockchains, its also possible to review the holdings of VC firms if their wallets are identifiedanother quirk of the crypto ecosystem. By cross-referencing token investment announcements with on-chain transactions, the analytics company Nansen tracks prominent VC wallets.

Nansens wallet findings suggest the U.S. dollar value of VC firms token holdings has decreased substantially from mid-May 2022 through mid-May 202324% for Andreessen Horowitz, 37% for Paradigm, and nearly 70% for Polychain.

Nansens data is limited to Ether and ERC-20 tokens, which excludes widely held tokens including Solana and Bitcoin, and so its findings often reflect a fraction of firms total holdingsbut given the drop in the value of tokens of all sorts, the ETH numbers are likely indicative of a broader trend. A Nansen analyst added that declines could also be caused by wallet transfers or tokens being staked. Paradigm and a16z declined to comment to Fortune on the research firms findings, while Polychain and Dragonfly did not respond.

Kavita Gupta, the founding managing partner at the crypto-focused Delta Blockchain Fund, told Fortune that at the height of the bull market, her fund was up 600%, buoyed by its token investments. Today, its up just 18%. Like many crypto-native VCs, Gupta said shes not concerned.

If you believe in those projects and you hold them long enough, theres going to be a bull market again, she told Fortune. 

Some like Vance Spencer, a cofounder of the VC firm Framework, even argue the lower value of liquid tokens presents better deals than private valuations, which are still in the process of adjusting to the market. 

The tricky part is convincing LPs to remain calm. Guptas investors include crypto founders but also high-net-worth individuals, family offices, and institutionsand not all of them are accustomed to the cyclical whiplash of the industry.

We continuously have to educate the family offices who are, like, a shipping family industry from Vietnam, she said. Theyre like, What the hell did you do? You were 6x up!

Meanwhile, interest in crypto among family offices, which invest in many VC firms, is waning. According to a Goldman Sachs survey of 166 institutional family offices from mid-January through late February, only 12% expressed potential future interest in investing in crypto, down from 45% in 2021. 

Some crypto-native funds told Fortune that they self-select for LPs who understand the cyclical nature of the market and wont get squeamish. 

You want to scare off the people that aren't aligned in that way, said Alok Vasudev, a cofounder of the venture fund Standard Crypto. You want to make sure that the folks that are in the boat are the ones that really believe in the strategy.

The LPs of crypto-focused VC firm CoinFund have brought a lot of questions to us and we have tried to over-communicate through this period, Seth Ginns, who manages the firms liquid investments, told Fortune. The fact that the crypto VC space has multiple different types of investable assets across liquid tokens and venture investments is valuable, he says, and thats apparent to their LPs.

Some LPs understand the unique dynamics of token investing, including Jackson, the Braintrust founder, who's also an investor in Multicoin, Polychain, and ParaFi. He argues token prices are down because of a relative lack of liquidity, and that valuations will recover during the next bull market.

Everyone walked out of the room at the same time, he said. Whatever music was playing when we left is what we think is still playing.

Even so, the stark drop in token prices, along with the general downturn in the venture industry owing to macroeconomic factors, has hurt crypto firms ability to raise new funds. 

Fundraising for crypto VC has fallen off a cliff in 2023, according to PitchBook data provided to Fortune. Though the data is only through mid-May, its not off to a good start: Crypto firms globally have raised just $500 million98% less than in all of 2022over eight funds90% fewer. Those fundraising hardships have also been felt, to a lesser degree, among venture capital firms across the board.

At the recent Medici conference in Los Angeles, an invitation-only crypto event in Beverly Hills for top investors, VCs were all saying its the hardest fundraising environment theyve ever seen, Jackson, who attended the conference, told Fortune. Youre eating shit, things are oversold, and theres no liquidity.

The final innings? 

While enticing LPs back into crypto may not be easy, there are signs token-based investing is here for the long term.

Around FTX, there was definitely an increased hesitancy, particularly among LPs that were new to the space, around deploying into crypto funds, CoinFunds Ginns says. I think we're in the final innings of that.

In recent months, cryptocurrencies have made a comeback: Solanas token is up over 100% year to date, while Bitcoin is up 63%though both far below their highs of 2021. On the Bitcoin side, I think you can expect to see larger funds raised this year, Killeen from Stillmark told Fortune. 

Token strategies remain popular among crypto-focused VCs. In early April, the venture firm Dragonfly invested $10 million in Bitget, a Seychelles-based trading platform. Data from Nansen shows that Dragonfly received around 60 million Bitget tokens in returnat the time, worth about $24 million. 

Bullish investors reference trends like the rise in developers working in the crypto space and the passage of crypto regulation in markets from the European Union to Brazil as reasons to be excited about the space. 

And ever the optimistic crowd, VCs like Ginns are taking a rosy view: "We actually pretty definitively believe that we're in the next bull market right now."

Generalist VCs can, and have, shifted attention to more buzzy areas like artificial intelligence to invest unspent cash. Some crypto firms have followed suit, including Foresight Ventures and Paradigm. According to one LP, who spoke on the condition of anonymity, Paradigm had not communicated any changes to its investors. Alana Palmedo, Paradigms COO, emphasized that the firm is not pivoting from crypto. 

But many crypto VCs are standing by their strategy. They don't really have a choice, PitchBooks Le said. I mean, it's in their mandate.

It was just a road rash, thankfully, mostly knees and elbows. The student popped up immediately and appeared otherwise fine, and he was wearing a helmet. But when Glaser later looked at dashboard video from a car that happened to be nearby when the incident occurred, she was deeply shaken.

Honestly, I was going fast enough and they were going fast enough that it could have been fatal, she told me. I never saw them because they were going so fast.

The boys were blasting through the intersection at a speed neither of them likely would ever reach on a conventional bicycle. But because the lead cyclist was on an electric bike, with the trailing cyclist hanging on to it with one hand and steering his bike with the other, Meghan Glasers recollection wasnt faulty: The boys really were going fast enough that something far worse could have occurred.

Increasingly, some trauma specialists say that is precisely what theyre seeing. Though the record-keeping on severe e-bike injuries is spotty, both anecdotal evidence and emergency, trauma and orthopedic department interviews suggest that were on the front edge of a new order of danger on both bike paths and roadways.

I honestly believe that we probably are only seeing the tip of the iceberg, says Dr. Marko Bukur, medical director of trauma at New Yorks Bellevue Hospital and himself an avid cyclist. A lot of the injuries that are coded (in the electronic medical record) as conventional powered devices are probably e-devices.

The bigger problem: We have no coherent plan for dealing with it.

While reliable numbers are elusive, the pattern isnt. According to the U.S. Consumer Product Safety Commission (CPSC), emergency visits due to micromobility-related accidents (e-bikes, e-scooters, and hoverboards) more than doubled from 2017 to 2021. The National Transportation Safety Board (NTSB), meanwhile, counted 53 deaths from e-bike accidents from that same period and it decried the lack of complete, consistent and reliable data that likely leads to vast underestimations of the actual statistics. The NTSB report cited a UCLA study of data collected from 180 outpatient clinics which concluded that e-bikes may lead to higher fatality rates than either motorcycles or cars. And a Dutch study found that e-bike riders were 1.6 times more likely to wind up in the emergency department than riders of regular bikes.

Those statistics will likely continue to balloon. E-bike sales are taking off, as people increasingly flock to the idea of a bicycle that can be pedaled, but with the motor doing the work when wanted or needed. E-bikes can take riders from 20 mph to nearly 30 mph, or faster than the average Tour de France rider-the kind of top speeds an average cyclist would never attain on their own.

In the U.S. alone, almost 900,000 e-bikes were sold in 2021, a near doubling of sales from just one year earlier. According to a report by the National Bicycle Dealers Association, total sales revenues surpassed $1.3 billion in 2022, a 33% increase from the previous year.

Its opened up the world to a wide range of individuals, says Tracy Sheffer, co-owner of the e-bike retailer Pedegos store in La Jolla. Kids that used to sit in the house and play video games all day are now on electric bikes and theyre getting out and getting active.

Industry analysis suggests that a surge of interest from baby boomers is also driving demand. But for teens and retirees alike, these top speeds are no joke. They are residential-street auto speeds, essentially, and trauma specialists say its more than enough locomotion to produce severe injury. Yet in the U.S., theres a near-total absence of cohesive policies or regulations to deal with that reality. This is a product that, governmentally at least, doesnt fall neatly into any single category.

The vehicle is heavier. I consider it a vehicle, says Dr. Joseph Patterson, an orthopedic trauma surgeon at USCs Keck Medical Center in Los Angeles. (Generally, e-bikes weigh between 50-80 pounds.) The patients are ejected at higher speed, but unlike most motorcycles, theyre not wearing protective equipment. Theres no helmet law for them.

This is partly because e-bikes in many states are placed in the same category as conventional bicycles, and riders are thus required to wear only a bike helmet-and even then only within certain age ranges in many states. Other states have outdated laws that dont include a classification for e-bikes at all. The CPSC, meanwhile, regulates them as traditional, human-powered bikes, and the federal government explicitly excludes them from any motor vehicle category.

That leaves much of the regulatory responsibility to local governing bodies, with a resulting crazy quilt of rules. In some cities or states, e-bikes have access to bike paths and bike lanes; in others, they ride the road in front of and behind full-size cars. In most states, they are exempt from registration or licensing requirements. 

But people in e-bike accidents dont look like people in conventional bicycle mishaps, according to trauma surgeons in larger metro areas where e-bikes are becoming legion. Patients have fractures that are more likely to be open, where the bones come out of the skin, says Patterson. Were seeing a higher instance of polytrauma, meaning more than one part of their body or more than one organ system is seriously injured. Were seeing more serious injuries overall, patients needing to come into the hospital for longer and needing more surgeries.

To Patterson, who says the incidence of such e-bike accidents is clearly going up, the severity of these injuries resemble those from motorcycle crashes more than standard bike collisions or falls. And Dr. Charles DiMaggio, director of injury research at NYUs Langone Department of Surgery and author of a widely circulated analysis of data from 2000-2017, says e-bikes were three times more likely to result in hospitalization when compared to traditional pedal cycles, with many e-bike related hospital discharges coded as internal injuries.

We are really seeing the gamut, Bellevues Bukur told me. This includes head and neck injuries, traumatic brain injury, spine fractures, chest injuries, solid organ injuries and extremity fractures, of course. We have had a plethora of people that have been on e-powered devices and definitely getting banged up really bad. I mean, ICU level of care.

To these specialists, the risks are obvious. Older riders may have slower reaction times, are more prone to serious injuryand dont bounce back as quickly from accidents. Younger riders have likely never been on anything as fast as an e-bike and have limited decision-making skills in quick-changing settings, as Meghan Glaser discovered in La Jolla, but they are industrious: There are already plenty of videos explaining how to hack e-bike motors to go much faster than 30 mph. 

Add in risky and dangerous behaviors such as drunk biking, retrograde cycling, ignoring traffic lights and using cell phones while e-cycling, and you have a recipe for disaster. A Chinese study found that these behaviors were higher in those with e-bike-related traffic injuries than in those without such injuries. 

Ive seen kids younger than teenagers riding them. Im not happy when I see that, says Dr. Gabe Wardi, a practicing emergency and critical care physician at University of California San Diego Health. This is a motorized vehicle that goes on the road (with cars), which is not ideal for someone whos 12 or 13, but these kids also take full advantage of the fact that you can cut through neighborhoods on paths where youre supposed to either walk or be on a non-motorized bicycle. They probably dont know the rules of the road.

Should they? As e-bikes continue to grab market share in the U.S., it is a question worth asking. The industry trade group PeopleForBikes wants the three common classes of e-bikes regulated strictly as bicycles. But the rising incidence of severe injury calls for a close examination of other options.

There is a public safety interest, too. In DiMaggios study, e-bike accidents were three times more likely to involve a collision with a pedestrian than either traditional bikes or powered scooters. (Again, think speed.) And because U.S. infrastructure lags so far behind developments like this, there arent enough dedicated bike lanes in major cities-a common theme that, of course, predates the e-bike movement by decades.

You have to put the infrastructure there for people to use it, says Elizabeth Bowersox, program director of the San Diego Bike Coalition. The city has to take that initiative first and put that infrastructure there, and then people will use it.

Thats one area in which to work, but it requires a long view. In the meantime, trauma specialists say, enforcing strict helmet laws is practically a must, and figuring out either licensing/certification requirements or mandatory education-especially for renters-is something to strongly consider.

There needs to be a classification for something between a motor vehicle and motorcycle and a regular bicycle, says USCs Patterson. And I know California law; its based on wattage and maximum speed. But, Im not sure if thats protecting peopleIm seeing them come in at speeds of 30 to 40-plus, sometimes 50 miles an hour.

This may feel like a major-metro issue, but it wont be long before communities across the country are dealing with the ramifications of the e-bike explosion. Its the fastest-growing segment of the bike industry in terms of sales, and the proliferation of bikes capable of traveling at car speeds cannot be safely ignored.

The helmet is definitely warranted, and I think theres probably going to have to be an age restriction or a minimum age on at least some of them, says Dr. Linda Dultz, a trauma surgeon in Dallas. I cant imagine a 13-year-old being able to drive something that can go 25 to 30 miles an hour in the middle of a road. It just doesnt seem safe.

Carolyn Barber, M.D. has been an emergency department physician for 25 years. Author of the book Runaway Medicine: What You Dont Know May Kill You, she has written extensively about COVID-19 for national publications, including Fortune. Barber is co-founder of the California-based homeless work program Wheels of Change.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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In a LinkedIn post on Wednesday, the billionaire Virgin founder, who spends most of his time on his private 74-acre Caribbean island, responded to a question about the most useful skills for entrepreneurs.

He shared his top tips for budding entrepreneursas well as a reminder to remember that every business should be launched to solve a problem.

Listen

Listen deeply and always act with empathy, Branson urged anyone thinking about running their own business. I cant underestimate the power of listening.

He added that simply being receptive to others, and listening more than he speaks, has helped him come up with all kinds of ideas. To maximize on this, Branson said, he is constantly making notes wherever he goes, which helps inspire new ways of doing things.

Being a good listener and an empathetic person is the only way to put yourself in the shoes of your customers, which is the best way to run a business, he advised. You cant solve a problem unless you really understand it.

Take risksand look on the bright side

Anyone starting a company needs to embrace optimism and say yes as much as they can, according to Branson.

Entrepreneurship is often a no risk, no reward arena, so youve got to take calculated risks and realize its OK if it doesnt always work out, he said.

Earlier this month, Bransons rocket company Virgin Orbit shut down after filing for bankruptcy and selling its assets and equipment. The company, founded in 2017, flew numerous missions but had difficulty raising funds and never made a profit as a public firm.

Questions have also been raised about whether some of the British entrepreneurs other high-risk betslike investments in space tourism and hyperloop travelwill pay off.

In a recent interview with the BBC, Branson said he feared he would lose everything during the pandemic. He personally lost $1.5 billion trying to save his companies as COVID-19 bit into businesses around the world.

Despite experiencing troubling times alongside the positives, however, Branson insisted that risk-taking is a necessity for any founder.

I often say that every risk is worth taking as long as its for a good cause and contributes to a good life, he said in Wednesdays blog post.

The Virgin founder that he lives by the mantra: The brave may not live forever, but the cautious do not live at all.

Your career and life will be so much more exciting if youre taught how to take smart risks, lean into your fears, and see the glass half full in life, Branson added. This is innately linked to trusting your instinct, which is certainly something that can be learnt and should be regularly exercised.

Utilize your team

Bransonwho received a knighthood for services to entrepreneurship in 2000noted that it was vital for any entrepreneur to get the best out of their team. That meant managing people effectively, but also being a great teammate.

Delegate and collaborate effectively, he wrote. The truth is that Virgin could never have evolved from a student magazine to a global brand if I hadnt learnt how to trust people, collaborate and delegate.

For young people dreaming of leading a business, he said it was important to learn the power of delegating and bringing out the best in others as early as possible.

Everyone brings such different skills to the table, and you really cant do it alone, Branson said.

Be creative

Creativity should be used to solve problems, according to Branson, who noted that as a person with dyslexia, thinking differently is all Ive ever known.

You cant innovate without lateral thinking and using creativity to solve problems, he said. Giving people the permission to dream big, bring radical ideas to the table, and draw outside of the lines is so important.

It makes life a lot more exciting too, he added.