Web3 Founders Are Choosing Wall Street Over DeFi, New Report Finds

The Web3 startup environment is undergoing a fundamental shift as founders increasingly build for institutional finance rather than crypto-native markets, according to The State of Web3 Capital 2026 report and comments from X Ventures Head of Accelerator Ferdinand Le Tendre.

Drawing on more than 200 startup applications submitted between January and May 2026 through the Proof of Pitch program, the report finds that tokenization, regulated financial infrastructure and enterprise adoption have overtaken decentralized finance as the industry’s primary focus.

For Le Tendre, the findings suggest something bigger than a maturing market.

“Most people read this report and see a market maturing. I see a market picking sides, and it is choosing institutional finance over crypto-native finance.”

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Tokenization Has Become Founders’ Top Priority

The report shows that 29% of applicants identified real-world asset (RWA) tokenization as their primary sector, making it the largest category across the dataset.

DeFi followed at 23%, while decentralized AI represented 11%, with DePIN accounting for 7%. Together, infrastructure-focused sectors now represent more than 70% of founder activity, indicating that entrepreneurs increasingly see blockchain’s future in modernizing financial markets rather than creating parallel financial ecosystems.

After this year’s Proof of Talk, we examined the state of Web3 capital.

Together with our Strategic Communications Partner @INPUT_global , we analyzed more than 200 startup applications from Proof of Pitch 2026, alongside an exclusive survey of 13 Web3 VC funds and public market… pic.twitter.com/5TiOSZ5shz

— Proof of Talk (@proofoftalk) June 30, 2026

The report also highlights stablecoins as a major driver of that transition.

Le Tendre believes the shift reflects growing demand from institutions.

“A year ago people treated stablecoins as plumbing. Now stablecoins are the clearest product-market fit in the industry and the entry point for almost every payments and treasury discussion we have with institutions.”

Rather than launching consumer tokens, founders are increasingly building infrastructure for payments, capital markets and tokenized assets.

Startups Are Building Businesses Before Token Economies

The report also paints a picture of a more financially disciplined startup ecosystem.

Nearly 89% of applicants remain at pre-seed or seed stage, with 49% classified as pre-seed and 40% raising seed rounds.

Unlike previous crypto cycles, however, many companies already have operating businesses.

Applicant stage figures — 56% of application are in pre-revenue. | Credit: X Ventures

Thirty-seven percent already generate revenue, while another 7% report profitability, meaning almost half the applicant pool has established commercial traction before scaling.

According to the report, this represents a major departure from earlier market cycles, when startups frequently prioritized token launches ahead of product-market fit.

Instead, founders increasingly focus on building sustainable businesses first, with token economies becoming a secondary consideration.

Geographically, North America remains the dominant startup hub, representing 35% of applicants, followed by Europe at 25%. The Middle East continues gaining momentum, doubling its share to 5% as ecosystem development accelerates across the UAE and Saudi Arabia.

Canton Emerges as an Institutional Dark Horse

While Solana remains the most frequently mentioned blockchain, appearing in 25% of applications, followed by Ethereum (22%) and Base (21%), Le Tendre says the report contains a less obvious signal.

Canton Network, mentioned by 7% of founders despite launching only two years ago, ranked ahead of several more established ecosystems, including BNB Chain, Avalanche and Bitcoin.

Sectors of building — Sectors where founders are building. | Credit: X Venture

For Le Tendre, that reflects where institutional blockchain adoption is heading.

“RWA overtaking DeFi is the tell. It is the industry admitting the future is not a parallel financial system, it is the existing one rebuilt on better rails.”

He argues that investors should pay closer attention to infrastructure designed specifically for regulated financial markets.

“The defining infrastructure story of the next two years is not the chains everyone is naming today. Watch Canton.”

Built around settlement, custody, privacy and compliance, Canton aligns closely with what institutional investors increasingly demand as tokenized finance expands.

“The winners of this cycle,” Le Tendre concluded, “will not have the loudest community. They will have the rails banks can use, the revenue to prove it, and the discipline to make the crypto invisible and the value obvious.”

Web3 Founders Are Choosing Wall Street Over DeFi, New Report Finds

Tokenization Has Become Founders’ Top Priority

Startups Are Building Businesses Before Token Economies

Canton Emerges as an Institutional Dark Horse

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