ABCDE stops investing in Vernal, and encrypted VCs start the road to transformation and survival?

Author: Patti, ChainCatcher

Edited by: TB, ChainCatcher

Last weekend, ABCDE Lianchuang Dujun officially announced that "ABCDE Capital has stopped investing in new projects and suspended the second phase fund fundraising plan", and briefly summarized the investment of ABCDE Phase I fund: it invested nearly US$40 million, supported more than 30 projects, and led the investment of more than 50%.

As soon as Du Jun's tweet was released, it caused an uproar on X.

Pessimism and helplessness intertwined

Some people believe that this reflects that the investment environment of the first-level investment in the crypto market has deteriorated to an extreme, and even if investment institutions invest fully, it will be difficult for them to reverse the decline; some people also analyzed that this may be a helpless move made by investors to stop losses in a timely manner.

In the view of investment blogger Kay Capital, Du Jun announced that he would stop investing is likely because the return on investment of Crypto VC is too low in this round. He pointed out: "The Crypto VC pass level in the last round was 5-10 times return, the excellent level was 20-50 times return, and the top level was more than 100 times return." However, the Crypto VC pass level in this round only reached a loss of 50%, and the excellent level was barely losing or making a small profit, while the top level was a project that was opened in a position, such as Sui, which may have the chance to double the full position.

Kay Capital further analyzes the high risks and high volatility currently faced by Crypto VCs, as well as the entire process of VC losses. He mentioned: "Suppose a four-year investment cycle requires most of the funds to be deployed within 2 years." At this stage, it is in the third year after the 2022 bear market, and some VCs are in the stage of having no money to invest.

At the same time, not all investment projects will be released, and many projects are at risk of being unable to be released, which means that VC investment cannot be returned to create benefits. Among the projects that can be released, TGE unlocking has become one of the reasons why VC investment is difficult to recover. Kay Capital said: "Many projects need to wait for a year to truly flow, and at this time projects and market makers (MMs) have already 'defeated' the project."

In addition, crypto blogger DeFi Teddy posted a post on social media, pointing out that the Crypto VC model currently faces multiple problems, including lack of innovation and serious homogeneity; creating illusions of prosperity through airdrops; high valuation and low circulation, retail investors become buyers, etc.

So, what is the truth? Is Crypto VC really so pessimistic?

ABCDE transforms and launches Vernal

In fact, during the period when ABCDE announced the suspension of new project investment and second phase fundraising, its new incubator product Vernal has begun to be brewed. As Du Jun said: "I want to change my position and rethink how to participate in the development of the industry." He also said: "This is not a matter of capital or ability, but a choice of direction", and the new product Vernal may become Du Jun's new direction.

Subsequently, Du Jun briefly shared the "Vernal" plan in his new tweet: launching a new incubator brand Vernal; continuing to invest in primary market investment; studying secondary transactions, and inviting crypto-enhancing people to join his team.

Financing environment remains viable

In fact, under the seemingly negative market sentiment, Crypto VC still maintains a positive financing environment.

According to RootData data, as of now, there have been 13 seed rounds of financing in the crypto field this month, and crypto native funds including a16z and Dragonfly are still active in the crypto investment field.

Among them, the seed round of financing of Codex, a stablecoin blockchain startup led by Dragonfly Capital, is the largest. Coinbase and Circle, Cumberland, Wintermute and Selini Capital, all participated in the investment, and Dragonfly spent about $14 million in this round of financing.

Similarly, in April alone, a16z participated in six crypto project financings, covering AI, social and other fields, and according to market information, a16z is seeking to raise $20 billion for its largest fund.

Faced with the market's negative voice for the crypto industry, Dragonfly managing partner Haseeb Qureshi also responded that he has been a venture capitalist in the crypto industry for nearly 8 years, and has heard many remarks such as "no one will buy these tokens", "the truth of the industry has been revealed", and "there will be no more rewards".

He said that crypto VC fundraising in 2018/2019 is extremely difficult, but reality has proven that the cycle will restart. He stressed: "If you are really not optimistic about encryption, then take out real money and short-selling the market. We will compare the results in three years."

The way to survive under the depletion of liquidity

In fact, as a large amount of hot money flows from VC coins to Meme, the already exhausted liquidity has become precarious, and the crypto market has fallen into a "broken project collapse wave."

According to statistics from KOL @Anymose 96, among ABCDE's investment in coin issuance projects, the highest decline in the currency price is as high as 95.5%, which may also become one of the factors in ABCDE's transformation.

This is also the dilemma faced by the leading capital institutions in the upstream of the ecosystem, and a breakthrough in the transition is imminent.

Capital institutions represented by ABCDE are transforming. While maintaining their primary investment business, they are actively expanding to the secondary market investment and trading fields, striving to achieve better market performance and capital returns.

Old-brand native crypto capital represented by a16z and Dragonfly Capital have turned its attention to popular fields such as AI and stablecoins, and seek more development opportunities with the help of a wider focus, capital scale and application products.

Haseeb delivered a speech on AI Agents in March this year, and talked about the impact of AI on Crypto and its expectations for the future of AI and Crypto. At the end, he said, "The intersection of cryptocurrencies and AI will be very rich in the future, but this depends to a large extent on the development of AI and the integration with encryption." This also shows that "AI + Crypto" will become an important investment target for Dragonfly in the future.

Conclusion

How to survive in a time when liquidity is exhausted has become a question that many Crypto VCs think about.

It is obvious that the AI ​​track that will lead to the future of mankind has become a natural bond connecting web2 and crypto liquidity, and "AI + Crypto" has gradually become an important narrative for VCs to obtain liquidity.

If encryption is regarded as a circle, then ABCDE's transformation seems to be creating liquidity within the circle, while a16z and Dragonfly Capital are asking for more liquidity outside the circle.

In the future, it is still unknown how the pattern of the crypto capital market will evolve and whether capital institutions can find new ways to survive in transformation.

But what is certain is that the crypto capital market is undergoing unprecedented changes and challenges, and capital institutions need to constantly adjust their strategies and adapt to market changes in order to survive the fierce competition and achieve sustainable development.