The Transformation Journey of Encryption Venture Capital: From Hype to Stability

In the current encryption market environment, traditional venture capital models are undergoing significant changes. Venture capital in the Web2 space is becoming increasingly cautious about risks and is more inclined to follow the lead of government-guided funds. Although seed round financing in the Web3 space is popular, it is difficult to see tangible results, and the boundaries between venture capital and financial advisory roles are becoming increasingly blurred. Targeting certain mainstream trading platforms for entrepreneurship has become an industry consensus, and various insights and memos have been transformed into chips for information exchange.

From an overall perspective, an increasing number of large venture capital firms are beginning to participate in project token issuance, dreaming of feeding back the primary market through the secondary market. This model differs from early equity investments, Initial Token Offerings (IXO), and the dual stock/token model. The market is rapidly moving towards maturity, but in this process, small venture capital firms may become the casualties.

After the founder of a well-known trading platform made a comeback, investment has become the leading direction, with education as the slogan and social media at its core, focusing on a meme coin project within a certain public chain ecosystem. The investment department of the platform was recently renamed, increasingly exhibiting characteristics of a family office.

The avoidance of risk and the pursuit of investment stability are reflected not only in later-stage investments and mature projects but also in the weakening of project exploration. Taking a certain emerging investment institution as an example, we can glimpse the trend of emerging funds transitioning to traditional funds from its investment style, providing a reference for the change in investment style after future wealth accumulation.

Based on data from the past six months, the number of seed round financings has not significantly exceeded that of Series A and subsequent rounds, and the funding amounts across rounds are not vastly different. This indicates that the boundaries of financing rounds in the encryption currency field are disappearing; projects that can secure small amounts of funding may continue to receive support, while those unable to obtain funding may remain in a state of long-term financial scarcity.

Investment Layout During AI Cooling Period

Although the AI field currently seems a bit quiet, some investors believe this is the right time to position themselves, hoping to attract real developers.

Emerging investment institutions' investment directions do involve AI, but most projects can relate to AI. These projects can be roughly divided into two categories: "using encryption technology to develop AI" and "using AI to promote the development of encryption technology." However, in the current era of widespread application of AI technology, overly emphasizing the necessity of AI seems to be of little significance.

Let us briefly review the characteristics of each investment project in chronological order:

1. Opinion Labs: This is a prediction market platform based on human opinions, which may utilize the predictions of social media opinion leaders for trading, aligning with the concept of information finance (InfoFi) while also possessing traditional trading attributes.

2. Plume Network: Although the tokenization of real-world assets (RWA) is not a new concept, the financing journey of Plume Network is quite unique. After obtaining funding from top-tier institutions, it chose to conduct its Initial Exchange Offering (IEO) on a certain trading platform, followed by investments from emerging investment institutions. This flexible financing strategy reflects the unique opportunities in the encryption market.

3. Tensorplex Labs: This project attempts to utilize liquid staking derivatives (LSDfi) to achieve the decentralization of large language model (LLM) training and datasets. Although the practical significance of decentralized AI is questionable, it is not uncommon to gain the favor of investment institutions within the industry against the backdrop of the cryptocurrency sector's eagerness to integrate with AI.

4. Vana: This is an AI conceptual project that spans multiple market cycles and has continuously received support from well-known investment institutions since 2021, eventually successfully landing in the launch pool of a mainstream trading platform.

5. Blum: As one of the few seed round projects, Blum focuses on trading-oriented decentralized finance (DeFi) products. Interestingly, it received joint investments from the investment departments of two competing platforms, showcasing a spirit of collaboration within the industry.

The Rise of Family Office Style

As the wealth creation wave from 2017 to 2021 recedes, many new elites in the encryption field are transforming their investment institutions into family office-style funding agencies, focusing more on project stability rather than high returns.

For example, the founder of a well-known contract trading platform established his own family office two years ago. These transformed investment institutions often pursue stability, not blindly chasing short-term high returns, and pay more attention to Meme-related tools and infrastructure rather than directly investing in Meme tokens.

However, the investment style of emerging investment institutions is still in formation. Although they often invested in trading products in the past, after the high-profit era of decentralized finance (DeFi), there may be fewer truly high-quality projects. Most projects may be attempts to apply Web2 AI technology to Web3, which may be seen as innovative in the Web3 space but could be considered marginal products in the broader AI industry.

Conclusion

Cryptocurrency venture capital truly took off during the Initial Coin Offering (ICO) era, reaching its peak before the collapse of a major exchange. Currently, many institutions are wrapping up their established investment projects, striving to complete the token issuance, despite facing skepticism from the market.

The concept of risk investment in cryptocurrency itself stems from the influx of large amounts of capital, and with it comes an increase in risk. As the market matures, the roles and strategies of investment institutions are also continuously evolving to adapt to this rapidly changing industry.