ChainCatcher Encryption VC Tucao Conference｜Opin Selected Version

Compiled by: Scof, ChainCatcher

Edited by: TB, ChainCatcher

Encrypted VC is at an important fork in the road. As the liquidity of the primary market shrinks and the difficulty of exit increases, ABCDE, the once glorious star fund, chose to press the pause button, and this action has become a fuse that has leveraged the deep fluctuations of the industry.

This issue of Space invited five guests, Du Jun, founder of Vernal & Huobi, KK, founder of Hash Global, Will Wang, partner of Generative Ventures, Jademont, CEO of Waterdrip Capital, and Henry, investment director of NGC Ventures. Focusing on the pause of ABCDE, we deeply explored the current challenges of the primary market, the structural dilemma faced by crypto VCs, and the changes in investment logic and survival strategies at the new cycle nodes.

At a time when liquidity dividends fade and narratives are weak, how can crypto VCs redefine their value? Can primary investment continue? Where is the new exit channel? What core abilities do you have become a necessary condition for traveling through the cold winter and winning the future? We try to find the answer in a calm examination of reality.

The full version can be clicked to listen to the playback: https://x.com/i/spaces/1MnxnwXVYeyKO

Based on Space 's discussion content, the editor has refined and summarized the main views and core thoughts, and is not a complete record verbatim, striving to present the essence and context of this in-depth dialogue.

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1. Is ABCDE 's suspension a case or an industry trend? It reveals what difficulties are currently facing for encrypted VCs?

When discussing the phenomenon of ABCDE pause, everyone agreed that this is not only an individual case, but a general trend reflection in the crypto VC industry.

Will pointed out that as the exchange's voice gradually weakens, the model that once relied on exchange listing to ensure liquidity and exit returns has been greatly challenged. The shell effect has declined, the secondary market has repriced, the primary market has a high valuation, and the long lock-up period has erupted, which has caused crypto VCs to face difficulties in exiting and the intensification of uncertainty in the future of the project. At the same time, liquidity premium no longer easily supports asset pricing, and investors have to re-examine the fundamentals of the project and emphasize the importance of truly creating value. The industry has gradually shifted from the extensive growth of rapid coin issuance arbitrage in the past to patiently incubating and accompanying real businesses, returning to the investment logic that can truly create long-term value.

Jademont analyzed the problem of industry structural imbalance from a deeper level. He pointed out that the currency circle has long had too much voice, which is completely different from the traditional capital market. In the stock market, the exchange is just a neutral platform that provides trading services and charges handling fees. However, in the currency circle, the exchange does both transactions, investments, and lending and financial management, and can even directly interfere with the release of project tokens. This centralized and lack of supervision makes the investment agreement useless. He bluntly stated that the current dilemma of VC investment is not just a problem with the project itself, but is caused by the chaos in the entire ecological rules and the extremely weak investor status. He mentioned that several projects that have been launched recently originally agreed to issue coins but changed their minds temporarily. Investors' rights were arbitrarily deprived of their rights, but they had no choice. This phenomenon seriously undermines the basic trust of the primary investment market. However, Jademont also saw a slight positive change. He believes that as more and more projects are only worth $100 million or two million even on exchanges, the industry is beginning to realize that exchanges are no longer the only criterion for success or failure of projects. When the gap between "supervisors" and "notsupervisors" narrows, the VC industry is also expected to return to a more normal investment logic.

Henry added that exchanges in the crypto industry have long held excessive voice, which has led to the marginalization of VC's decision-making power and influence in projects. Even though the lock-up period is getting longer and longer, VCs' actual control over the project is getting weaker and weaker. As the liquidity premium effect after the Institute gradually weakens, the market value difference between projects on different exchanges is also narrowing, and the absolute status of the exchange is slowly shaken. He said that although the current primary market investment is facing difficulties, this dilemma is cyclical. With the industry's reshuffle and the return of its original intention, the investment rhythm and industry's voice are expected to gradually recover.

2. Is primary investment still effective in the crypto market? What is the most difficult point in the primary market now?

Du Jun believes that the primary investment in the crypto market is still effective, but the difficulty is significantly higher. The current challenges in the primary market are mainly reflected in several aspects: first, the project valuation is still high, and the uncertainty of investment exit has increased significantly; second, the competition for good projects is extremely fierce, and the share is difficult to obtain, and long-term locking positions further amplifies future risks. He also said that he was not very interested in projects that issued coins in the near future and was more willing to find projects that were resilient and could cross cycles.

KK believes that investors must pay more attention to the fundamental value of the project rather than short-term liquidity arbitrage opportunities. He would rather invest in some commercial supporting facilities, such as stablecoins, payments, and commercial data links. At the same time, due to the low penetration rate of Web3 applications, primary market projects also face major challenges in implementation and user growth. Especially for early-stage projects, the business model is not yet clear and the market verification cycle is long, which makes the return on investment cycle lengthened. First-level investors need to be more patient and select projects that have the potential to travel through cycles and truly create user value and business value.

3. In which direction will crypto-level investment develop in the future?

Regarding the future development direction of primary investment, Will said that although the primary market environment is difficult, people who have really made primary investments for more than ten years have long been accustomed to this kind of fluctuation. The problem with the crypto market now is that the industry governance structure is primitive, the exchange has too much say, and the founders lack real risk burden, resulting in the disappearance of excess returns. He pointed out that future tier one investments must bet on founders and projects that are really risky. Only those who are willing to invest time, reputation and take the risk of major failure can create real value and rewards in the industry. The market is becoming effective: garbage projects are abandoned by the market, and exchanges will be eliminated if they are not changed. VC's opportunity lies in firmly supporting founding teams that can travel through cycles and dare to take risks.

In addition, KK emphasized that the core direction of the future is to promote the commercialization of Web3. VCs need to find companies that do well in Web2 to help them solve the problem of cost reduction and efficiency improvement through Web3 technology. For example, in the fields of film, television, music, and sports, use specific business values ​​to convince them to transform instead of just talking about the Web3 vision.

Henry believes that in the future, the first-tier crypto investment will revolve around the layout of "leading one version". Although the market is difficult, adhering to primary investment is still the main line of crypto native funds. It will only be more cautious and moderately diversified, such as allocating a small number of secondary market assets, but not forcibly transforming into areas that are not good at. He shared an investment case: at the beginning of the last cycle, he bet on a project that transformed in a timely manner. The founder not only had advanced knowledge, but also dared to bet decisively when the trend was not yet clear, and eventually became a pioneer in the track and achieved impressive returns. Henry believes that in the future, the founder's cognition and gambling will be the key to choosing projects. In addition, he emphasized that cross-cycle operational capabilities are equally important. Projects must be able to stick to directions and adjust flexibly in a bear market in order to gain an advantage when a bull market breaks out. In the future, first-level investment will not only compete in short-term returns, but whether the team can travel through the cycle and seize the next explosion point.

Jademont pointed out that if crypto VCs want to break through the dilemma in the future, they must actively evolve and no longer be led by the exchange's voice. He mentioned that although VCs have been highly dependent on centralized exchanges for project exits in the past few years, with the weakening of exchange liquidity dividends and the market value of high-quality projects, this old path is no longer sustainable. He shared two exploration paths by VCs bypassing exchange control: one is decentralized liquidity, such as DEX and decentralized agreements, but this road is facing centralized platform encirclement and difficult to completely subvert; the other is a more realistic approach - guiding high-quality projects toward traditional capital markets and land on mature markets such as Nasdaq and Hong Kong stocks. Jademont pointed out that as the United States improves its attitude towards the crypto industry, more and more large Web3 companies are preparing to go public, and the liquidity and valuation system of the traditional market have become better exit channels.

He bluntly stated that instead of fighting in the currency circle filled with Shitcoin, it is better to help truly excellent projects stand out in a deeper and wider capital pool. In the future, crypto VCs need to "vote with their feet", use their strength to lead projects to break out of the traditional currency path, enter the traditional financial system, and achieve higher quality exits and returns. This is not only a test of VC capabilities, but also an inevitable trend for the healthy development of the industry.

4. Compared with two years ago, what changes have occurred in the core indicators that crypto VCs pay most attention to when judging projects? Why?

Will said that VCs have begun to pursue the project's Goodwill Finance indicators, namely the real contribution of the project to society and the industry and the actual use scenarios. The project team 's cognition, reasonable "gambling" and ability to survive and develop across cycles have also become the focus of evaluation . The reason for this change is that the industry has experienced a painful transformation from blindly pursuing liquidity to returning to fundamentals. VCs realize that only projects that truly create value and can travel through cycles are investment targets worthy of long-term companionship and bets.

KK said that compared with two years ago, the core metrics of crypto VCs in judging projects have undergone fundamental changes. In the past, VCs focused on indicators that were easy to quantify, such as the number of on-chain addresses and TVL (locked positions). Now they are paying more attention to whether the project's business logic is true, whether it has truly solved clear problems, and whether there are sustainable revenue and growth paths.

Du Jun believes that today's crypto investment must return to the most basic value judgment: whether the project actually creates value. Whether it is public value, commercial value, or other forms of social value, the core is whether there is a real solution to the problem , rather than playing with concepts and speculating on short-term liquidity. He mentioned that when filtering Web3 projects, he often asks two questions: Does the project really require blockchain technology? Is it really necessary to issue coins? Many projects actually do not use blockchain but are more efficient, and they are cleaner without issuing coins. This kind of value judgment is consistent with the logic of traditional Web2 investment. In Du Jun's view, future investment should no longer be influenced by empty narratives, but must return to the clear and direct logic of value creation. Only truly valuable projects can cross the cycle; while valuable projects will eventually become garbage dumps.

5. Will you invest your money in early-stage crypto funds now? What kind of "survival plan" or "risk hedging" do you want VCs to give?

Regarding whether they will invest in early-stage crypto funds, the guests generally have a more positive but cautious attitude. KK believes that now is the best time to invest in encrypted VCs, because the industry is experiencing the baptism of value return, the bubble is reduced, the valuation returns to rationality, and the cost-effectiveness is extremely high. At the same time, VCs that are still sticking to are often teams with firm belief in the industry, mature methodology, and able to survive cycles.

Jademont emphasized that although he is willing to invest, he will screen GP (fund manager) more strictly, focusing on his past performance, strategic execution and ability to travel through cycles. As for the "survival plan" given by Hope VC, it mainly includes: reasonable fund management, stable project screening logic, clear exit strategy, and profound insight into industry trends. A truly excellent VC should be able to survive cycle troughs and rise rapidly when cycles reverse.

Will said he still firmly supports early VCs in the crypto field, especially the GPs left in the most difficult cycles, mostly people who have true beliefs, methodology and can survive. He believes that now is a positive screening period for GP, and funds that can persist, stick to strategies, and live by investment itself rather than management fees are trustworthy. At the same time, Will emphasized that trading is the real killer weapon of the crypto industry. Compared to being addicted to ideological narratives, the industry should focus more on expanding the scale of on-chain transactions to replace part of the traditional financial system. The scale effect brought by transactions is the opportunity for trillions or even tens of trillions of dollars in the future. He said that the impact of crypto trading on traditional finance should not be underestimated, and the industry is currently in the most critical period of fighting. He insists on betting on the trading direction and insists on supporting teams that can truly fight tough battles, which is his basic judgment on the future of crypto VCs.

Henry said he is currently cautious about investing in early-stage crypto funds and screening standards will be stricter. Although there is no determined investment decision yet, if we can see a VC team that truly has a unique competitive advantage next, he will still consider taking action. He emphasized that no matter how the market fluctuates, choosing a GP with differentiation capabilities and long-term competitiveness is the key.