The Evolution and New Trends of Venture Capital in the Encryption Industry

Venture capital is undergoing a transformation in the cryptocurrency space. Traditional Web2 venture capital is increasingly risk-averse, preferring to follow the lead of government-guided funds. At the same time, seed round financing for Web3 startups is facing challenges. We observe that the boundaries between the roles of VCs and financial advisors are becoming increasingly blurred, and starting businesses aimed at mainstream trading platforms has become an industry consensus.

From a holistic perspective, an increasing number of large VCs are starting to enter the secondary market by participating in project token issuances, attempting to achieve first-market investment goals in this way. This model differs from early equity investments, initial token issuances (IXO), and the dual model of stocks and tokens, marking a rapid maturation of the market. However, this process may lead to the elimination of small VCs.

After the return of a founder of a well-known trading platform, their investment strategy has shown new characteristics: investment-oriented, with education as a slogan, using social media as the main communication channel, and focusing on meme coin projects within specific public chain ecosystems. Recently, the investment department of the platform has been renamed, and its operational model is increasingly resembling that of a family office.

This attitude of risk aversion and the pursuit of investment stability is reflected not only in late-stage investments and mature projects but also in the gradually weakening innovative exploration of projects. Taking a certain investment institution as an example, we can glimpse how emerging capital is gradually transforming into a more conservative investment approach through the changes in its investment style.

Based on data from the past six months, seed round investments are no longer in an absolute dominant position in terms of quantity, and their financing amounts are not much different from those of subsequent rounds such as A/B/C rounds. This indicates that the financing rounds in the encryption industry are becoming flatter, and projects that can secure small amounts of funding may continue to receive support, while projects that cannot obtain initial funding may face long-term difficulties.

Opportunities at the Intersection of AI and Encryption: A Cooling-Off Period

Although the AI field is currently in a relatively calm period, some investors believe that this is precisely a good opportunity to lay out plans, hoping to attract teams that are truly focused on technological innovation.

In the intersection of AI and encryption, we can roughly categorize projects into two types: one type utilizes encryption technology to advance AI development, such as Vana and Tensorplex Labs; the other type employs AI technology to optimize the encryption ecosystem, such as Plume Network, Blum, and Opinion Labs.

It is worth noting that the combination of AI and encryption is diverse, and sometimes it is difficult to clearly define the main attributes of a project. At this current stage, the application scope of AI technology is extremely broad, and almost all projects can establish some kind of connection with AI.

Investment Trend Analysis

1. Opinion Labs is committed to creating a prediction market based on human opinions, which may leverage the influence of social media KOLs to build prediction and trading systems.

2. Plume Network focuses on the tokenization of physical assets in the field of (RWA), and its financing journey is quite dramatic, showcasing the unique ecosystem of the encryption market.

3. Tensorplex Labs aims to combine liquid staking derivatives (LSDfi) with AI to achieve decentralization of AI training and datasets.

4. The Vana project spans multiple investment cycles and has received support from several well-known institutions, demonstrating the lasting appeal of an outstanding project.

5. Blum is one of the few seed round projects focused on trading-related DeFi products and has received investment from multiple trading platforms.

The Rise of Family Office Models

As early encryption investors accumulate substantial wealth, more and more people are turning to the family office model for asset management. This model no longer pursues extremely high returns, but rather focuses on project stability and long-term development.

For example, the family office Maelstrom, established by the founder of a certain contract trading platform, focuses on investing in stablecoin projects and innovative DeFi products. This investment strategy reflects confidence in the long-term development of the market as well as an emphasis on risk management.

Conclusion

Encryption venture capital is undergoing a transformation period. From the early token issuance model, to the peak period before the FTX collapse, and now to the adjustment phase, the entire industry is continuously evolving. Currently, many investment institutions are completing the wrap-up of established projects while also exploring new investment directions and models.

In the future, encryption VC may need to find a balance between risk control and innovative investment to adapt to this rapidly changing industry. Only those investors who can patiently wait and accurately judge market trends will stand out in this field full of opportunities and challenges.