Interview with AllianceDAO Partner: Crypto Entrepreneurs are fleeing to AI, and 90% of Crypto+AI are false propositions

Original interview:Jack , BlockBeats

Original editor: Zhouzhou, BlockBeats

In this cycle, AllianceDAO is the first-level investment institution that "lived the best" in the encryption field. At least among retail investors, it is still the dark horse VC that "incubates $1 billion in revenue applications." The current level of the crypto market is bleak, and fund managers compete with IRR and DPI on social media to compete with each other. Faced with the future, some funds will "stop the gun" and turn to second-level, while some funds will stop operating and no longer raise funds. At this point in time, Qiao Wang, founding partner of AllianceDAO, said: We need to increase our investment and become more radical.

Of course, Alliance is not blindly optimistic, nor is it blindly "others fear me and I am greedy." What is before them is a Web3 world with a collapsed narrative and an crypto industry with constant loss of talent. At the fork between Crypto and AI, how can a vertical VC make a choice? How to locate yourself? This is not a simple problem, and it is something Qiao Wang really needs to think about and solve, but fortunately he understands: "Most VCs in this industry don't know how to invest in the application layer."

"The US dollar encryption VC that understands China best" will decide

whether to "pull the trigger" in 5 minutes after chatting.

From "Trump blows" to "Trump blackmail", the group that has changed the most in attitude towards the US political circle in the past few months may be people in the currency circle. Since Trump issued the meme coin $TRUMP, industry liquidity has begun to dry up, and the bullish sentiment that has continued to heat up since Trump was elected in November has gradually faded, and the "tariff black swan" on Liberation Day has become the fuse for the 180-degree attitude reversal in the currency circle.

Now, many people in the currency circle have become loyal enthusiasts of the macro economy, and no one cares about undervalued high-quality targets or "future crypto narratives" in the market. According to industry media statistics, investment and financing activities in the primary market will also reach a historical freezing point in the past few years. But AllianceDAO decided to invest in more projects. In order to do this, he can now make his own judgment in 5 minutes chatting with the entrepreneurial team.

BlockBeats: As a founding partner of a crypto-leading agency, have you often considered the impact of changes in the macro environment on your company recently?

Qiao Wang: As a lean startup, the external environment has actually little impact on us. We didn't spend much money at first, and when we were limited, we still had those expenses. As long as the management philosophy remains lean, the impact will be small.

But I think the biggest problem between China and the United States is that they do not understand each other. This incomprehension is fundamental. For example, the United States' tax hike policy on China thought it would force China to make concessions, but this completely misjudged the situation. This strategy may work in 2018, but now China's dependence on US exports has been greatly reduced, and the economy is also transforming, actively reducing its dependence on the US.

In addition, the trade war has made the country more united. The economy may be under pressure, but external threats have brought everyone together. The United States completely messed up this matter. Of course, I am not an expert, I just based on observation and understanding. I hope everyone can learn more.

BlockBeats: Is this kind of incomprehension reflected in the English crypto community? Is it a big impact on the crypto industry?

Qiao Wang: This kind of incomprehension is indeed deeply rooted. In the past decade, the United States has generally regarded China as an "enemy" rather than a competitor, from the government to the media to society. This zero-sum thinking - "If China wins, we lose" - leads policy, cultural and social decision-making and is difficult to change in the short term. This exists from top to bottom and will not be changed for a while.

The situation in the crypto industry is better. Most practitioners are smarter and have a more comprehensive understanding of the world than ordinary Americans. Among the people I come into contact with, they usually regard China as a respectable competitor rather than an enemy. This is different from the views of mainstream American media and government. Most Americans are influenced by the media and regard China as a threat.

In the medium and long term, the macro economy has little direct impact on the crypto industry. There will be fluctuations in the short term because the market will fluctuate with US stocks. But several executive orders signed by Trump were very good for the crypto industry and were positive overall. For our career, the focus is on finding good projects, and macro fluctuations will not change our investment logic.

BlockBeats: Many people believe that the trend of US stocks largely determines the trend of BTC, and many people believe that global M2 is the dominant factor in BTC prices. What are your expectations for the performance of the crypto market this year?

Qiao Wang: I have no strong judgment on the short-term trend of the crypto market because there are two opposite forces. On the one hand, U.S. stocks may fall in the short term (3-6 months) due to economic recession or inflation data, dragging down the crypto market. Especially the current valuation of US stocks is very high and may decline in 3-6 months. On the other hand, global liquidity is increasing, such as printing money, which may drive up crypto assets prices. I can't predict which of these two forces is stronger. So, I have no clear view on encryption in the short term, but US stocks are likely to fall.

The calculation method of M2 varies from person to person, such as whether it includes data from China or other countries. But overall, global M2 is rising, and the long-term trend of crypto assets is highly correlated with M2. In the short term, other factors such as U.S. stock volatility may dominate the market more.

BlockBeats: Judging from the data reported by media, first-level investment activities in crypto markets have dropped to freezing points in recent months. Can AllianceDAO itself feel this "cooling change"?

Qiao Wang: In the past one or two years, VC investment in the primary market of the crypto industry has basically remained the same. If the secondary market (such as currency price) rises but the primary market remains unchanged, it means that the primary market performs worse than the secondary market. Once the secondary market falls, the primary market may fall even worse and may continue to decline in the next one or two quarters. But Alliance’s incubation camp is not affected by the number of other VC investments. If the market investment decreases, we may instead invest more. The key is whether there are good projects, and we will not blindly invest without good projects.

BlockBeats: AllianceDAO has always had a unique methodology in product entrepreneurship and incubation, especially during the previous MEME boom. Now that the MEME cycle seems to have been judged as a "past tense", will you reflect on your previous investment and incubation strategies?

Qiao Wang: We review and reflect every day, but the overall investment method will not change due to the recession of a certain track. We focus on good teams and potential directions. In the past year, we have optimized the decision-making process: we used to chat with the team for one hour and discuss in depth in two sessions.

Now it is found that after carefully reviewing the application materials, 20 minutes of communication is enough and a decision can be made within 24 hours. Because early information is limited, intuition and industry experience are more important. The core is the team's logical clarity, expression ability, and desire for success, which can often be perceived in 5 minutes.

BlockBeats: What details do you mainly look at when judging team potential in 5 minutes?

Qiao Wang: First of all, it is clear logic and can explain complex problems simply. The second is enthusiasm, feeling that they really want to make things happen. The rest of the time is mainly about understanding the details of the areas or projects we are not familiar with, but the overall feeling of the team can be basically confirmed in 5 minutes. In the early stages, the direction or track of the team may be unclear and these are not critical factors.

Crypto Entrepreneurs "escape" toward AI

Some time ago, IOSG founding partner Jocy posted on social media, saying that another project in his portfolio was transformed into AI, and expressed concerns about the prospects of the crypto industry.

"Crypto entrepreneurs are running toward AI" is a sad saying, but it is true. Qiao Wang also does not deny the existence of this situation. In the latest AllianceDAO incubation camp, one-third of the projects were pure AI entrepreneurial teams. In the previous incubation camp, pure AI projects were only a small part. During this period, many projects have turned to the AI ​​field.

Crypto VCs are "forced" to enter the AI ​​field. Investment may be becoming increasingly common in the industry. When there are inexplicably many AI entrepreneurs in their investment portfolio, fund managers seem to have to think: What are their advantages in the AI ​​field? How to locate your own fund?

Encryption VCs are "forced" to enter AI investment

BlockBeats: In this cycle, many fund managers mentioned that many projects in their portfolio have transformed into AI. Is there a similar situation with AllianceDAO?

Qiao Wang: Our latest incubation camp has 25 projects, about 1/3 of which are related to AI. Some teams started with pure AI projects, while the other part originally did crypto projects, but later transformed. They chose us mainly because the team has a background in the crypto industry and understands our incubation model.

BlockBeats: Why do pure AI projects choose institutions in the encryption field as incubation platform?

Qiao Wang: These teams used to work or start businesses in the crypto industry, but now they want to do AI, and just happen to know us, so they applied for our project. The AI ​​projects they do are mostly vertical applications, such as education, law or advertising, and industry experience is more important than AI technology background.

BlockBeats: When did this transformation phenomenon start to occur frequently?

Qiao Wang: The past six months or so, starting from the end of last year.

BlockBeats: Is this transformation process a notification to you after the team makes a decision on its own, or is it a decision together in communication with you?

Qiao Wang: Some teams have very strong ideas themselves, make decisions first, and then come to communicate with me. There are some teams who will first want to discuss with me what to do next, and I will also give them some suggestions. Even if I think they have a very good understanding of users and markets in a certain field, I will give them some AI ideas. Then we discuss what to do next. So, basically both cases are available.

BlockBeats: When the Web3 craze first appeared in the past, many Internet teams were chasing the trend, and now Crypto entrepreneurs are chasing the AI ​​craze again. How do you judge whether a project is conducting "hot arbitrage"? Will those entrepreneurial teams who are serious about their transformation to AI have any concerns about their success rate?

Qiao Wang: We are very alert to this problem. When Web2 switched to Web3 in 2021, we invested in some projects, and later found that some teams were just chasing the trend. Now communicating with the AI ​​team, we will explore in-depth product details, target market, user pain points, and why they do this project. The core is to judge whether they truly understand the industry and whether they solve real problems. It is best for the team to solve the pain points for themselves, and this motivation is the most real.

The biggest reason for failure in entrepreneurship is that the problem solved does not exist. Teams that switch to Web2 often assume that there is demand in the market, but in reality, may not. Now when communicating with the AI ​​team, what we are most concerned about is: Who is the target user? What are the pain points? How to verify pain points? The ideal situation is for the team to solve their own problems because they understand the authenticity of pain points best.

For example, a team we invested in, with a product manager at Uniswap, found that TikTok has high advertising costs and uses AI to significantly reduce costs. This is a pain point-driven entrepreneurship. And some people feel that it will be very uncomfortable if I don’t solve this problem, because I have this problem myself, so they have to solve this problem.

BlockBeats: Some entrepreneurs are worried that iterations of big models may make vertical applications lose value. How do you view the investment logic in AI projects and how is it different from crypto investment?

Qiao Wang: The key is whether the project can provide value that cannot be replaced by big models, such as unique user experience or exclusive data. Take Cursor as an example. It uses AI to assist in writing code. Although it relies on big models, its value increases with the iteration of big models through developer data and optimized user experience.

When we invest in AI applications, we focus on the team's in-depth understanding of the industry and the ability to solve real pain points, rather than just technical background. Mainly around products and markets: Who are the target users? What pain points should be solved? Why choose this market? What are the unsolved problems in the market? Each project is different, the question is very specific, the purpose is to confirm whether they think deeply and whether they truly understand user needs.

**BlockBeats: In your opinion, what is the main driving force for most entrepreneurial teams that transform into AI?
**

Qiao Wang: Yes, it is mainly about grasping opportunities and opportunities. And they find it very interesting to do this, which is very important.

BlockBeats: What does "interesting" mean?

Qiao Wang: Interestingly, they think this technology itself is interesting and it can solve users' pain points. For example, one of the biggest problems in Crypto in the past decade is that many teams have not solved a real problem.

But in the field of AI, they may see some real pain points and feel that AI can help solve these problems, which is what they find interesting. Do you understand? You see, as you mentioned just now, many large manufacturers, such as Tencent, have strong products and fast marketing, but in the end they still have to rely on issuing coins. It is actually obvious that this is not solving the real problem, but just to make money.

BlockBeats: Will "returning to AI" by entrepreneurial teammates or friendly forces affect the momentum and confidence of other crypto entrepreneurs in your portfolio?

Qiao Wang: Yes, this will definitely have an impact. Everyone who starts a business in the Crypto field will be affected in this regard. It may be the influence of friends around you, or the influence of public opinion. At this time, everyone will think about it: Why am I still doing Crypto? Why didn’t you do AI? This kind of psychology is actually very normal.

BlockBeats: Crypto entrepreneurs seem to be showing similar enthusiasm for AI for "Web3" and "Metauniverse" that Internet entrepreneurs showed.

Qiao Wang: Yes, there were two mainstream narratives in the previous cycle, one was the meta-universe and the other was the Web3 meta-universe. I always thought that was a "fake narrative" and there was nothing really interesting to me. However, I thought Web3 was very interesting at the time, and I still think it is very interesting now.

Web3 has done one thing I think is the core of it, which is decentralized social media. This is essentially very interesting because it can't hand over such a great deal of power to companies like Twitter or Facebook. However, at that time, users may not have really felt that there was a particularly large demand for this matter, or that the technology had not yet developed to the level that could solve users' pain points.

From Crypto vertical to pan-tech, Alliance rethinks Branding issues

BlockBeats: After the investment projects transform into AI, do they need to adjust their financing model and amount?

Qiao Wang: At the application level, the financing model is actually not very different. But I think AI has significantly improved the work efficiency of developers in the past few years.

You may have seen some articles I posted recently. Since ChatGPT first came out - probably in November 2021, I have asked our investment team a question: How much does AI improve your engineering efficiency?

In the first few months, their answer was that the efficiency improvement was about 20% to 50%. But I track this question every year, and the last time I asked them a month or two ago, and their answer was: it increased to 2 to 4 times. From the initial 20% -50% to 2-4 times now, this is a very amazing change.

So, if this trend continues, entrepreneurs will actually need less and less money in the next 5 to 10 years. Because an engineer may be able to complete the work that only four engineers can do. Based on this judgment, our current investment philosophy has become very simple: we give you $500,000, and you take two or three people to do it. Two or three people can last for about two years, which should be enough for you to find product-market fit.

Then when you find product-market fit, or you have started making money, you can start recruiting more people. Or it will be easier for you to raise funds. You can raise a Series A or a seed round that is more late, and then recruit people and scale them. In this regard, there is no difference in essence whether it is an AI project or a Crypto project as long as it is an application layer. Of course, if you're doing something more underlying, more infrastructure, it might really cost more, right?

BlockBeats: Is there a case where AllianceDAO has transformed AI and successfully found PMF?

Qiao Wang: My definition of product-market fit is actually relatively strict. In my opinion, true product-market fit means that your product's weekly or monthly growth rate can be stable at 10% to 30%, or even higher. At the same time, you have begun to achieve annual income of seven figures or even higher.

And the most important thing is that the user needs are constantly pouring in, even so many that your team is difficult to deal with. I think this state has reached PMF. If we look at this standard, I have never seen a project that has transformed from Crypto to AI and has really reached this level.

BlockBeats: Is it because these teams are just starting out? Or have you encountered some problems?

Qiao Wang: I think it is mainly because it's just started. In fact, the transformation from Crypto to do AI has only started in the past six months, so they may need more time to really find product-market fit.

Moreover, the competition for AI is very fierce now, and it can be said that it is extremely "volume". In almost every vertical field, dozens or even hundreds of teams are doing similar things, and the competition is very fierce.

BlockBeats: Back to AllianceDAO itself, this is an investment institution focusing on the crypto field, but now that there are a group of pure AI entrepreneurial teams in the portfolio, will you think about some questions about brand positioning?

Qiao Wang: I will think about branding, and then we are gradually improving our branding. In the end, we want to make an accelerator and continue to do Crypto, but we will also do Crypto.

Because in fact, technology always feels like wave after wave, and each wave may be 5 to 10 years, which may be longer, but after this wave has passed, the investment opportunity may not be too much in the earliest stages, so you have to see what the next wave is, so we will eventually be accelerator in various fields.

BlockBeats: When encrypted VCs get into the AI ​​field, do you feel that the risk factor you are facing has become higher? In addition, will this phenomenon of entrepreneurs "escape" also affect your personal confidence in the industry?

Qiao Wang: I don’t think the risk factor is higher. Although AI is indeed fiercely competitive, it is a big trend after all. I think this trend may be an order of magnitude larger than cryptocurrencies.

So, overall, I don’t think the risk factor is higher. As for the impact of AI on cryptocurrencies, there must be some, because I have seen with my own eyes that many cryptocurrency entrepreneurs have turned to AI. Judging from my personal feelings and from the data, many talents have indeed been lost to the AI ​​field.

" We invested in every entrepreneur who has moved from AI to Crypto."

BlockBeats: Are you worried about this situation: more and more projects are changing careers to do AI, and fewer and fewer Crypto entrepreneurs, which makes people feel that the industry seems to have no hope.

Qiao Wang: I do worry about this problem. But what I am most worried about is whether the entrepreneurs we invest in will succeed in the end.

If they want to transform and do AI, I will focus on confirming two things. First, does he no longer have the enthusiasm for what he is doing now? Do you think the current direction will not be good results in the long run? I need to figure this out.

Second, is he ready for the new direction he wants to do - such as AI? Does he have the abilities and resources needed to accomplish this? More importantly, can the new project he has done truly solve the pain points of users? If the answers to both questions are positive, I won’t stop them from doing new directions, and I will even encourage them to try.

BlockBeats: You mentioned just now that the crypto industry has lost many outstanding talents due to AI. These talents are mainly developers or visionaries?

Qiao Wang: Both. I think there are two main reasons for the loss of talent in the Crypto field. One is AI, which I have seen with my own eyes. Another is the U.S. government’s crackdown on Crypto over the past four years. The combination of these two has indeed led to the loss of many talents, whether it is entrepreneurs with vision or developers.

BlockBeats: Can I make a judgment that most of the lost entrepreneurs entered Crypto in the last cycle?

Qiao Wang: Yes, right. In fact, in the past six months, there are still some Web2 people who want to come in and do Crypto. They know they can do AR, but they don’t want to do AR, but choose to do Crypto because they find Crypto interesting. In fact, there may be four or five such people. We also voted, and almost every person I have switched from Web2 to Crypto in the past six months to one year, because we think such people are very interesting.

They can obviously do AI, but they want to do Crypto, and they have good ideas, so we will vote for them. People like this are often very interesting. Therefore, there are still such people, but there are more people turning to AI in the opposite direction, and there may be one or two orders of magnitude more in this direction.

BlockBeats: That is to say, the emergence of 4-5 Crypto vertical projects is accompanied by 10-20 AI-transforming projects.

Qiao Wang: Yes, it may be one or two orders of magnitude higher, not just 10 to 20, but there may be dozens to hundreds of such in the entire industry, or even more.

BlockBeats: What are the directions these few entrepreneurs who are determined to be Crypto?

Qiao Wang: They will do some projects that combine social and speculation, such as they see Palm Fantasy, Moonchat, and some social projects. Although these products may fail, they feel that the execution may not be done well, but the essential principle is very good. So they want to do this.

At the same time, they also feel that the AI ​​field is too competitive and are not sure whether they can succeed in the AI ​​field, so they want to do a project that is both interesting and not so competitive.

BlockBeats: Conversely, what vertical fields are the AI ​​projects in Alliance 's portfolio currently concentrated?

Qiao Wang: We are not investing in many AI projects now. In this recent period, AI projects account for about 1/3, which is seven or eight projects. They do various directions, such as some of them are for developers, similar to the previous Y Coding, and directly generate code in languages, which is very interesting.

There is also the team that I mentioned earlier that does AI video advertising, and the team that does educational projects for children, primary and secondary school students and even younger age groups. Some of them use AI to make games, which are basically directly converted from language generation to a game. We know all kinds of things, but we don’t invest much.

Moreover, the seven or eight teams we invested in were all from the Crypto field. You see, they have all started in Crypto before, or come from some better companies, such as Uniswap, Coinbase, etc.

**BlockBeats: In other words, the Crypto industry has a strong background.
**

Qiao Wang: Although these teams have a strong Crypto background, as I said just now, if you do AI applications, I don’t think AI experience will be of much help.

BlockBeats: This is quite sad. The best people in the industry are not planning to stay in this industry now.

Qiao Wang: Actually, there are still some teams with strong backgrounds who are purely Crypto. However, the AI ​​content in the previous issue is much lower than that in this issue. The previous issue was basically zero, but later one or two teams may transform into AI. When they came in, they did it, and it took them for a while, maybe about half a year before they transformed into AI.

Does Crypto+AI have a future?

BlockBeats: The concept of Crypto+AI is still popular. Do you think this is a "pseudo-narrative"?

Qiao Wang: I think 90% is a pseudo-narrative, but maybe 10% will do something interesting. You can think of Crypto and AI as two big circles, and the intersection between them is actually very small. Although both circles themselves are large, the intersection between them may be very small. However, in that small intersection, there may be some interesting things, such as decentralized training, which may be quite interesting.

We have seen some similar projects, but most of them are infrastructure, and many VCs are also chasing these projects and giving them very high valuations, which makes it difficult for us to participate. Although the teams of these projects are strong and I like them very much, these types of projects are difficult to do and may take several years to do. At present, decentralized training has not made much progress.

The biggest challenge is how to aggregate the small models trained in each data center. Data transmission between different data centers is very expensive, and it is very expensive to transmit this information over the network. Therefore, it is still unknown whether decentralized training can be cheaper than centralized methods.

BlockBeats: Under the current market context, has the primary market valuation and popularity of Crypto AI projects decreased significantly?

Qiao Wang: Actually, there are still some very large funds, and they don’t have many choices, so they can only focus on investing in this type of project. So, in the end, there will be multiple VCs who will invest in the same big project together.

I think many VCs don't really understand the application layer of Crypto, so they can only invest in technical infrastructure, but these infrastructure projects don't have that much interesting stuff. For example, Layer 2, there are already hundreds of them on the market now, you can only find some slightly interesting tracks and then concentrate on investing.