Shocking Story Protocol Co-Founder Exit and Its 2% Impact on IP

Key Points

• Story Protocol Co-Founder Exit Rocks Market as IP Token Dips 2%
• Jason Zhao exits Story Protocol after 3.5 years, sparking controversy.
• $134M in VC backing cushions market sentiment.
• Grayscale adds IP to Top 20 list, boosting investor confidence.

Jason Zhao, co-founder of the blockchain-based intellectual property platform, has abruptly stepped away from the project just months after its Token Generation Event (TGE).

Zhao’s sudden departure after 3.5 years with the team has caught many off guard and sparked intense community speculation.

After 3.5 years building Story from scratch, I’m stepping out of my full-time role. I’ll stay closely involved as a strategic advisor.

While incubating Poseidon, I rekindled my original passion from my DeepMind days: applying AI to frontier industries like science and space.… pic.twitter.com/fd8J0c9uSO

— Jason Zhao (@jasonjzhao) August 16, 2025

The official reasons behind Zhao’s exit remain vague. However, crypto circles are buzzing with theories suggesting deeper internal conflicts. Some accuse top-level figures and investors of forcing Zhao out, calling the move a result of internal “power struggles.”

today’s story protocol chain fees

*checks notes*

$17 pic.twitter.com/C0e30tdarS

— glee (@larrettgee) August 17, 2025

While founder exits are not uncommon in crypto, the timing here is suspicious. Zhao left right after the token launched, an event typically meant to solidify leadership, not shake it up.

Story Protocol had recently celebrated several key milestones:

• It raised $134 million in venture capital,

• A U.S. company invested $360 million,

• And its native token, IP, landed in Grayscale’s Top 20 list.

Despite this momentum, Zhao’s exit has cast a shadow over the future direction of the project.

One X (formerly Twitter) user commented:

“Jason Zhao didn’t leave Story; he was pushed. And by people more conniving than him and with bigger egos.”

Story’s TVL. Source: DefilLama – Techtoken

The drama has also reignited debates about the growing power of venture capitalists in the crypto space. With a16z (Andreessen Horowitz) as a primary backer of Story Protocol, critics argue that the influence of VCs often overshadows the voices of builders.

As one critic put it:

“VCs like a16z and Paradigm aren’t backing builders anymore. They’re funding grifters and dressing up gimmicks as innovation.”

But the other side of the argument remains optimistic. Supporters point to a16z’s long-term commitment to Story Protocol, noting it’s their most heavily backed crypto project to date.

“A16z hasn’t even started kingmaking $IP. They’ve invested five times already,” an X user argued.

A16z hasn’t even started kingmaking $IP, they’ve backed this team 5 times now, making it their most invested crypto project ever, and you’re bearish anon? Where we’re going, you’re not going to need charts. It’s going to be beyond virality.

PSA: I’m simply a spot $IP buyer https://t.co/MDwbdJCDjx

— Taran (@Taran_ss) August 17, 2025

This kind of back-and-forth is becoming more common, as we’ve seen with other hot-button events like the Ripple-SEC settlement, where leadership decisions and regulatory drama significantly influence community trust and market reaction.

IP Token Holds Steady Amid Founder Fallout

Historically, when a founder exits a project—especially after a TGE—the token usually takes a hit.

But not this time.

The IP token dropped just 2% in the 24 hours following Zhao’s exit, according to BeInCrypto. That’s a small dip for a project facing public leadership drama. It signals that investors may still have faith in the protocol’s core vision and roadmap.

So, what’s holding up the price?

For one, the $134 million in VC capital provides a safety net. Second, Grayscale’s listing has given the IP token increased visibility among institutional investors.

Story (IP) price. Source: Techtoken

Third, market participants seem to believe that Story Protocol is now mature enough to survive without a single figure at the helm.

But there are concerns beneath the surface.

Despite its funding and visibility, Story Protocol’s Total Value Locked (TVL) is sitting at just $25 million, a modest figure for a project with such large backing. Daily fee revenue? Only $17.

These numbers are well below expectations. And unless utility improves, even strong VC support may not hold investor confidence forever.

Interestingly, this echoes a trend seen in low-performing meme coin reserves, where tokens with high visibility and hype still struggle to show strong fundamentals.

9 cases where the founder left after TGE

And what happened to their tokens🧵

(1/10) pic.twitter.com/KBOZrNMVc8

— StarPlatinum (@StarPlatinumSOL) August 17, 2025

Yet, the market’s lukewarm reaction to Zhao’s departure shows how far the space has come. Community members no longer panic immediately—especially when they believe a project can scale without depending solely on its founders.

What This Exit Tells Us About VC Power in Web3

Beyond token price and leadership shifts, this situation also highlights a growing issue: the evolving relationship between VCs and project founders in Web3.

In the early days of crypto, founders were the heart of innovation. They led communities, shaped vision, and made the tough calls.

Now, as more VC money pours into Web3, founders are finding themselves under pressure to meet growth metrics and scale faster, sometimes at the cost of decentralization.

Story Protocol may be the latest, but not the only case. Other projects have also faced internal clashes after securing large rounds of funding. The pattern is becoming familiar:

1. Launch a visionary Web3 project

2. Raise millions from VCs

3. Begin scaling

4. Internal tensions emerge

5. A key founder leaves

In Zhao’s case, community members are wondering whether he was removed because he no longer aligned with VC interests—or if deeper issues around governance and control were at play.

We’ve seen similar power struggles in the past, such as when OKX burned $2.6B worth of OKB tokens, a massive supply cut that sparked debates about control and transparency in tokenomics.

This shift isn’t just about one founder or one project. It’s about how Web3 is changing.

Founders are increasingly finding themselves balancing innovation with investor expectations. And as tokenization becomes more mainstream, community trust will depend on how transparent these transitions are.

For Story Protocol, Zhao’s exit may not be the end—it could be a transformation point. But it also serves as a cautionary tale for other builders navigating the line between decentralization and VC control.

Meanwhile, tokens like SKALE, which saw a 90x spike in trading volume, show how quickly momentum can shift in this space—especially when strong narratives or investor excitement take the lead.

Still, developers and builders would be wise to remember the biggest advantage of crypto: its ability to distribute trust and ownership, rather than concentrate it. That’s a principle that must remain at the heart of any decentralized project.

And for investors, understanding the importance of timing, especially in volatile market cycles like during Fed decision weeks, is crucial. A founder exit is only one of many factors that can move a token.