(The Weekend Insight) - Strategic Migration: Crypto Founders Pivot to Real-World Startups in India

In today’s deep-dive we will explore one of the most fascinating aftershocks of the 2022 crypto crash in India: the migration of Web3 founders into real-world, Web2-style startups. What looked like a death sentence for the industry two years ago has turned into an unexpected entrepreneurial laboratory, where some of the most ambitious crypto builders are now repurposing their skills into fintech, SaaS, gaming, and infrastructure ventures.

The 2022 crypto meltdown wiped out billions of dollars in token valuations and shut down entire business models overnight. Global crypto market capitalization fell from over $3 trillion in late 2021 to under $900 billion in 2022, a near 70% collapse. In India, the effect was compounded by regulatory actions: steep taxation (30% on gains, 1% TDS on transactions), payment gateway restrictions, and enforcement scrutiny. For many Indian founders, the choice was binary: pivot or perish. Some moved abroad, incorporating in Dubai or Singapore, hoping to ride out the storm. But a surprising number stayed back and began building in sectors where capital and customers still existed.

We think the most important insight here is that these pivots are not random. They follow clear patterns that leverage the core capabilities crypto entrepreneurs had already developed: product design for digital-first users, expertise in tokenomics and incentive alignment, fluency with compliance grey zones, and a global mindset. These strengths are now being re-deployed in fintech, SaaS, and gaming - areas where India continues to offer scale, regulatory clarity (compared to crypto), and investor appetite.

Fintech has emerged as the natural landing ground. India’s financial infrastructure - UPI, Aadhaar, account aggregators, ONDC - is now the envy of the world. Former crypto founders who once tried to build DeFi protocols are now building neobanks, SME lending platforms, and investment-tech products. The pivot makes sense: the same obsession with liquidity, flows, and incentives that drove token design is now being retooled to optimize lending books, payment rails, and customer stickiness. India’s fintech market is projected to reach $1.3 trillion in AUM by 2030, and crypto talent is eager to carve a piece of that. For example, founders from previously token-driven startups have gone on to launch consumer-facing fintech apps that integrate UPI with wealth-tech offerings. Others are building cross-border remittance tools using the same rails they once experimented with for crypto transfers. The reallocation of skills shows a pragmatic recognition: real-world finance is where scale lies today.

Another major cluster is SaaS and infrastructure. Here, the pivot has been toward enterprise data, AI, and digital infrastructure services. Crypto engineers were always strong in building scalable protocols and backend systems. In the Web2 world, these skills translate directly into building API-based SaaS products, developer tools, and infra layers for enterprises. Consider companies like Finarkein Analytics, which moved from building data infra for decentralized apps to creating data exchange and aggregation layers for financial institutions. Or Zyber 365, which reframed its decentralized system architecture into enterprise cybersecurity and productivity tools. We think these moves reflect an underlying truth: the token was never the moat; the infrastructure was. By stripping out speculative layers, founders are finding that their technical expertise is still in demand in India’s enterprise landscape.

The gaming sector is another hotbed of pivots. Many Web3 founders who once chased play-to-earn models have transitioned to building conventional gaming startups, but with a twist: they are bringing crypto-style incentive design into Web2 gaming. Studios like Tegro and Rush Gaming are examples of teams that once toyed with tokens but now focus on loyalty, engagement, and micro-transaction-driven business models. By detaching themselves from volatile tokens, they retain the community-driven ethos while aligning with India’s booming gaming market, projected to touch $8.6 billion by 2027. The logic here is simple: Web3 taught founders how to design sticky systems of incentives; gaming offers a legitimate arena to deploy those skills without regulatory risk.

It’s also important to note the emergence of “hybrid pivots,” what some call Web2.5. Here, founders aren’t abandoning crypto entirely but are embedding Web3 rails inside more traditional businesses. For instance, startups working on tokenizing real-world assets like invoices, carbon credits, or supply chain documents are finding traction. These models blend compliance-friendly enterprise value with crypto-native technical rails. We think this middle path may become more prominent as regulations stabilize.

This strategic migration is not without risks. Many investors remain wary of founders with “crypto baggage.” A startup that once ran an ICO or token sale is often seen as a credibility risk. Valuations, too, have reset. Whereas crypto startups once commanded 30–40x revenue multiples during the bull run, pivots now struggle to secure even 8-10x unless they show tangible traction. The dilution is real, but so is the discipline it brings. For some founders, the humility of resetting expectations is precisely what makes their new ventures sharper.

The cultural challenge is equally significant. Crypto was built on decentralization, community ownership, and rapid iteration - values often at odds with compliance-heavy Web2 sectors like fintech or healthtech. We think one of the big tests for these founders will be whether they can adapt to the slower, rule-bound realities of regulated sectors without losing their innovative edge. Some already are: by hiring compliance officers early, building governance-first products, and engaging with regulators proactively.

India is not alone in this trend. In the US, crypto founders have migrated into AI and climate-tech. In Europe, they’ve leaned into gaming and tokenization of real-world assets. What makes India unique is the scale of both the talent pool and the domestic digital market. India’s crypto user base at its peak was estimated at 20 million; that’s a massive sandbox of digitally native users. When founders redeploy their skills here, they don’t need to hunt for customers abroad - they can test and scale domestically.

In short, the first phase of this pivot tells us three things:

• The 2022 crash acted as a Darwinian filter, forcing out speculative builders and nudging serious entrepreneurs to repurpose their skills.

• Pivots follow clear patterns: fintech, SaaS/infrastructure, gaming, and hybrid Web2.5.

• Risks remain, but discipline, regulatory clarity, and domestic market depth offer real tailwinds.

Now, let’s talk about broader implications - how these shifts are reshaping valuations, investor expectations, and the long-term health of the ecosystem.

The first clear impact is on funding discipline. During the bull run, crypto startups in India often raised capital on the back of tokenomics rather than business models. Valuations were detached from fundamentals, with 30x or 40x multiples not uncommon. Post-crash, we think this has flipped. Founders now face investor demands for revenue visibility, regulatory compliance, and customer acquisition metrics. For example, fintech pivots are benchmarked against existing neobanks and lending platforms. Gaming pivots are measured on DAU/MAU ratios, ARPU, and retention. SaaS pivots are judged by ARR growth and churn. This reset is painful but healthy - it is teaching a generation of founders how to build enduring companies.

Another shift is cultural. Crypto’s DNA was about speed, decentralization, and permissionless innovation. Web2 sectors require compliance, governance, and patience. The best founders are learning to blend both worlds: retaining the community-first, iterative energy of crypto while adopting the rigour of regulated industries. We think this cultural synthesis could become a competitive advantage. A fintech built with a crypto founder’s growth hacking instincts, combined with a compliance officer’s discipline, may be better positioned to scale than incumbents weighed down by bureaucracy.

There is also the question of credibility. Some investors remain cautious, associating “crypto baggage” with regulatory risk or reputational overhang. But the tide may be turning. Early pivots that show traction are helping reset perceptions. For instance, ex-crypto founders building SME lending platforms or B2B SaaS infra are now securing backing from mainstream VCs who once shunned tokens. We think that if even 10–15 such pivots succeed meaningfully by 2026, the stigma will fade, and “crypto-native” may evolve into a badge of resilience rather than risk.

Gaming and metaverse pivots illustrate this well. Tegro, originally a Web3 gaming experiment, has repositioned itself as a marketplace and infra provider for gaming assets that doesn’t rely on speculative tokens. Rush Gaming, once token-heavy, now emphasizes skill-based gaming with stable revenue models. These examples show that while tokenomics collapsed, the underlying thesis of engagement through incentives still holds. It’s just being re-expressed in compliance-friendly forms. India’s gaming market, growing at over 20% CAGR, offers a fertile ground for this evolution.

The hybrid Web2.5 model is another important frontier. Tokenizing real-world assets (RWA) - whether invoices, carbon credits, or supply chain finance - is attracting interest. We think this model could allow India to leapfrog into global leadership, as it combines the credibility of real-world value with the efficiency of blockchain rails. The challenge, of course, will be regulatory clarity. Without explicit frameworks, RWA tokenization may remain experimental. But if policy catches up, this could be one of the biggest exportable innovations from India’s pivoting crypto founders.

Looking globally, parallels are instructive. In the US, many crypto founders have migrated into AI, bringing the same early-mover instincts into generative models and infra. In Europe, founders are leveraging their Web3 experience into gaming and tokenized finance. India stands out for its domestic digital rails and vast consumer base. UPI alone processed over 117 billion transactions in FY24; this provides a sandbox unmatched elsewhere. Crypto founders who once optimized liquidity pools are now designing products for UPI flows and ONDC integrations. The scale is staggering, and it gives India’s pivots a home advantage that other regions lack.

What does all this mean for the long-term? We think three structural outcomes are emerging:

• Investor playbooks are being rewritten. VCs who once backed tokenomics must now learn to underwrite revenue models, compliance strategies, and regulatory pathways.

• Founder DNA is being reshaped. A generation that cut its teeth in volatile crypto markets is now applying those lessons to build more resilient, diversified companies.

• The ecosystem itself may be stronger. Instead of a narrow bet on speculative assets, India now gains a pool of entrepreneurs skilled in cutting-edge tech, but grounded in real markets.

The strategic playbook for government and ecosystem actors is clear. We think policymakers should accelerate clarity on tokenization of real-world assets, extend sandboxes to gaming and fintech experiments, and support capital formation for pivots through blended finance. Investors, meanwhile, should recognize that “crypto baggage” may actually signal antifragility. Founders who survived the crash have demonstrated resilience, adaptability, and global networks - traits any early-stage VC should prize. And founders themselves must embrace humility: reset valuations, focus on fundamentals, and build governance-first companies.

Ultimately, the 2022 crash was a brutal correction, but not an ending. In India, it may even prove to be a beginning. The forced migration of talent from speculative crypto to real-world startups is expanding the scope of innovation, not shrinking it. By 2032, when India’s digital economy is projected to contribute $1.1 trillion to GDP, we may look back at this moment as a pivot point: when a crash in one sector seeded resilience across many others. The paradox, once again, is that crisis created opportunity.