What is the role of VC in the Web3 world?
The original title: "IOSG Weekly Brief | survival of VC in the Web3 # 108"
Source: IOSG
Part.1 Insight
Author: Momir Amidzic & NBSP; Investment Associate
This article is for the purpose of industry learning and exchange only, and does not constitute any investment advice
In 2021, Web 3.0 entered the public consciousness and became a buzzword, while NFT introduced millions of new users to the world of decentralized applications. On the funding side, many crypto native funds have raised significant new capital, and large vc and private equity firms such as Tiger or Coatue have expanded their digital asset departments and are actively investing in a variety of Web 3.0-oriented projects.
This has two effects. First, if Web3.0 is "owned" by venture capital firms, many of the top players like Jack Dorsey (co-founder of Twitter) will question the fundamentals of Web3.0 even more. On the other hand, increased competition among venture funds may force some funds to choose unethical investment strategies in order to gain investment share in the current round, or to make short-term profits at the expense of reputation.
Only research-driven VCS that provide real value to our projects can have a positive impact on the current market life cycle. However, we have also heard some questions about whether there is still a need for professional funding on the project side in the Web 3.0 ecosystem. In response, we should first analyze the role of venture capital and private equity firms in the Web 3.0 world and what value-added services these institutions provide to a decentralized economy.
The secret of value-add
Market signals - reputation
Market signaling - Reputation
Early projects often rely on the backing of investors. Industry leading VC basically have strict due diligence procedures. Their support for a project is often interpreted as a positive signal by market participants, who include not only users but also individual investors, even exchanges, protocols on L1, etc., because they are also looking for value in an active, investable crypto market.
Yet gaining a reputation takes years of hard work and hard work, building a track record and relationships with the local community. New portfolio projects can be backed by the reputation of the investment firm, which for VCS is the most time-consuming venture fund activity. A16z, for example, is considered one of the most prominent investment firms in the field. Therefore, whether OR not A16Z does any activities after the investment, the mere act of investment is already considered a very beneficial help to the project, because the vast majority of market participants will view this as a signal that the project may be excellent and worthy of more attention.
Resource Network & NBSP;
Network
VC is an industry focusing on accumulation. In most cases, the longer VC survives in the market, the greater the competitive advantage. Building a network of resources requires hands-on practice, including organizing hackathons to support early developers, organizing conferences such as summits, networking with security audit firms/financial institutions/other VCS in different regions, and speaking up through the media. In general, it is a process of continuous empowerment of the network of resources.
A new project usually needs some industry referrals, so the project side is very interested in the resources of excellent VC. Referral resources, although more VC time and energy than endorsing the project, but still achieve scale. In general, VCS are more willing to take the initiative to introduce resources, rather than purely meet the needs of the project side. For VCS, the key to standing out in terms of resources is the weight of those resources. For example, introduce a security audit firm, link to a well-known centralized exchange, help recruit talent, contact media channels, communicate with portfolio companies, etc.
Experience & have spent
Experience
Similarly, experience is proportional to time. For project founders, this experience is useful because it can be used to make long-term strategic decisions, as well as market orientation, especially in such a restless market. In an emerging market like cryptocurrency, there seems to be no right or wrong choice. However, an experienced VC can definitely help the project side to make a more reasonable plan, whether in the timing/method of financing or the deployment of human resources.
Solid capital & NBSP;
Deep Pockets
Some agreements require a lot of liquidity to support, but also considerable capital to support long-term development, for which strong capital is essential. In addition, VCS need to develop a more risk-averse investment logic to support these untested products and ideas over the long term. VCS with a higher risk tolerance are willing to take extra risk and lock up money in untested smart contracts.
Hands-on practice & NBSP;
Hands-on approach
Finally, perhaps the most valuable service for good VCS, but also the hardest to scale, is hands-on practice. A practical solution can be read as an integration of the investor and the project side, and often participate in the daily progress of the project, while at the same time in marketing, R& D and token economic model to further expand cooperation.
Some examples of VCS having a profound impact on portfolio companies through hands-on involvement include: Paradigm worked on Uniswap V3 and Opyn Squeeth options, or Delphi Digital worked on Token economics for Axie Infinity, etc. Of course, if you notice, we have a lot of practices like this, and we spend a lot of time helping projects grow after investment.
To be sure, given the constraints, such as the cost of time and people, including the large number of investment projects, it's hard for VCS to do everything themselves. In any case, consensus and common goals are the basis for close and long-term cooperation.
Motivation binding & NBSP;
Aligning the incentives
From a project perspective, it is necessary to determine the type of partner they want. Some projects may be very strong in one particular area (such as market research) but have little experience in others (such as marketing), so they are looking for complementary VCS. Each project has its own unique preferences, however, they should plan their financing according to those preferences.
For example, if the project is looking for VCS with long-term engagement, they should not let a large number of VCS into the round, but make sure they provide a large enough investment scale for the vc firms they partner with. Alternatively, maximizing the use of capital in the start-up phase may require more investors, however, at the expense of some other value-added services.
Fund size & NBSP;
Sizing-up
From a VC's point of view, reputation can be lost through a few wrong moves, or it can fade away as the VC becomes complacent. While it is acceptable to spread risk and support more projects, this is not the best strategy as it will affect the fund's reputation and ability to compete in the future. In addition, because each new investment diversifies the firm's resources, the increase in marginal value decreases as the number of investments increases.
The valuation and concentration of bets on a fund can show the extent to which a fund's beliefs and theories are driven. In our view, venture capital plays an important role in the Web 3.0 ecosystem. Finally, as in any other area, market dynamics will naturally filter out VC's that are truly valuable in that area, and value extractors will eventually be shut out of the primary market.
Part.2 Investment and financing events
Completed $4 million financing, led by Spartan Group
*DeFi
DeFi Governance platform Completed $4 million seed round financing, led by Spartan Group. IOSG Ventures, Dragonfly, Hypersphere, Fundamental Labs, Fenbushi Capital, Rarestone Capital, GravityX, Shima Capital, Figment Such as ginseng. It is reported that the Bribe agreement aims to change the decentralized governance by encouraging agreement participation. Depositors deposit their governance tokens into the Bribe pool to earn income, and bidders use their voting rights to support or reject the governance proposal. Honest Services will be integrated with Aave for the first time in January 2022. Due to the special nature of Aave DAO, Aave's Bribe pool takes the form of ethereum pledge contract and is currently being audited by Trai Lof Bits and Stela Labs. After that, IT will expand to Tokemak market maker agreement and launch Tokemak Bribe Pool.
Banksea Finance completes multi-million dollar strategic financing
*DeFiAI
Banksea Finance, a technology-driven NFT prognostic and mortgage lending project, has announced the closing of a multi-million dollar strategic funding round. An Capital, Parrot, MEXC Global, Spring Wind, RioFund, Solar Eco Fund, Digital Renaissance, Zonff Partners, Definitive Finance, Digital Dozens of investors participated in the round, including Assets, Investment Solutions AG (Artem), GTA Ventures, INV Ventures, CatcherVC and Palar Capital. It is reported that Banksea Finance is the AI predictor and NFT mortgage lending platform providing quotes for NFT. It is committed to providing real-time objective quotes for NFT, improving NFT liquidity and fully releasing NFT's financial value.
Flip raised $6.5 million in seed funding, led by Distributed Global and Chapter One
*NFT
Distributed Global and Chapter One led a $6.5 million seed round for NFT market aggregator Flip, Investors included CMS Holdings, NFT artist PLpleasr (aka Emily Yang), Keyboard Monkey, DeeZe, and Larry Cermak, vp of research at The Block.
TooNFT raised $1.75 million from HG Ventures
*NFT
TooNFT, a blockchain-based webcomics platform, raised $1.75 million, with HG Ventures, GBIC, Alphabit, Adaptive Labs, Mindfulness Capital and Prestige Fund participating. TooNFT, based on South Korean webcomic platform Toomics, has amassed 50 million net users since its launch in 2015 and raised over $15 million in funding from traditional venture capital firms, aiming to bring millions of webcomic enthusiasts around the world to a decentralized network. The TooNFT project will also introduce users to pledge, governance, P2P investment opportunities and more.
Web3Auth raised $13 million series A round, led by Sequoia India
*Web3
Web3 app Web3Auth (formerly: Torus) has raised $13 million in Series A funding. The financing was led by Sequoia Capital India, Union Square Ventures, Multicoin Capital, FTX, Bitcoin.com, DARMA Capital, Chainstry, Hashed, KOSMOS Capital, Kyros Staking Facilities, Ventures, LD Capital, Minted Labs, P2P Capital, Phoenix VC, Mining Facilities, YBB Capital, Moonwhale, Decentralab, etc., Funding will be used to simplify getting started with encryption and authentication.
Vybe Network raised $2.5 million, led by Lemniscap
*Infra
Data Infrastructure Solutions Vybe Network announced the closing of a $2.5 million seed round led by Lemniscap, Alameda Research and Sino Global Capital, Inscribe, SVC, Zokyo, Switchboard, etc., and angel investors included Chris McCann.
Animoca Brands has raised $2 million from Kingdom Karnage
*Gamefi
Animoca Brands, DFG and Enjin have raised $2 million for Kingdom Karnage. In addition, development team Kepithor Studio has announced a number of new GameFi mechanics designed to accelerate the game's distribution and increase its player base. Kingdom Karnage is a P2E trading card game that has been in beta for over two years and joined Enjin's ecosystem in November 2018 with a $100 million grant from Enjin's Efininity Metaverse Fund.
MetaCat completed seed round financing, HashKey and others participated in the investment
*Metaverse
Data analytics MetaCat announced that MetaCat has completed a seed round of financing with HashKey, Zonff Partners, Digital Humanism, Metaverse Limited, Null Capital. MetaCat specializes in meta-cosmic data analysis, content navigation, land leasing and more.
Proof of Learn closes $15 million in funding, led by New Enterprise Associates
*L2E
Learn to Earn platform Proof of Learn (POL) announced the closing of a $15 million funding round led by New Enterprise Associates, Animoca Brands, GoldenTree Asset Management, Gumi Cryptos Capital and Infinity Ventures Crypto are among the investors, and the funds will be used to promote the project.
ChromaWay closes $10 million in funding, led by True Global Ventures
*Social
ChromaWay closes $10 million, led by True Global Ventures 4 Plus (TGV4 Plus) Fund for $5 million. According to the introduction, ChromaWay is the creator of relational blockchain, combining the power and flexibility of a mature relational database system with the secure collaboration and disruptive potential of blockchain to easily develop user-friendly decentralized applications for almost any industry, including games, music, land management, and more.
Fan Controlled Football has raised $40 million in Series A funding, led by Animoca Brands and Delphi Digital
*Sports
Sygnum, a digital asset banking and trading platform, has raised $90m in a new round of funding at a valuation of $800m. The financing was led by Sun Hung Kai, with participation from Animoca Brands and Meta Investments. As previously reported, In June, Swiss digital asset bank Sygnum started hosting and trading a range of decentralized finance (DeFi) tokens, including Aave, Aragon, Curve, MKR, Synthetix, Uniswap and 1Inch Network, Sygnum has also added banking services to the USDC.
GCR DAO announced $1.2 million in funding from IDEO CoLab Ventures and 1KX
*DAO
Decentralized community GCR DAO announced $1.2 million in funding from IDEO CoLab Ventures, 1KX, Valhalla Capital, HanDAO, and GBIC, Other investors include Axie Infinity co-founder Jeff Zirlin, YGG co-founders Gabby Dizon and Beryl Li, Polygon CEO Jaynti Kanani, and Flamingo DAO's Adam Kornfield, Coinvise CEO Jenil Thakker, CoinGecko co-founder Bobby Ong, Showtime CEO Alex Mesmaj, and more.
NEAR closes $150 million funding round led by Three Arrows Capital
*Layer1
Distributed Global and Chapter One led a $6.5 million seed round for Flip, the NFT market aggregator. Investors included CMS Holdings, NFT artist PLpleasr (aka Emily Yang), Keyboard Monkey, DeeZe, and Larry Cermak, vp of research at The Block.
DeFi Alliance has raised $50 million and plans to transform into a DAO
*Web3
Web3 startup accelerator DeFi Alliance has announced the closing of a $50 million funding round. Twitch co-founder Kevin Lin, Gemini cofounders and president/CEO Cameron and Tyler Winklevoss, Terra founder Do Kwon, And OpenSea co-founder and CEO Devin Finzer, Aave founder Stani Kulechov, Circle co-founder and CEO Jeremy Allaire, and BlockFi founder Zac Prince joined the board.
Citadel Securities received a $1.15 billion investment from Sequoia Capital and Paradigm at a valuation of $22 billion
* Hedge Fund
Venture capital firms Sequoia Capital and Paradigm have agreed to invest $1.15 billion in the Chicago-based company. Sequoia partner Alfred Lin will also join Citadel's board. Citadel Securities is managed separately from Citadel, Mr Griffin's $43 billion hedge fund, whose fortune Forbes estimates at $21.3 billion.
Conduit raised $17 million, led by Portage Ventures
*Defi API
Conduit, DeFi API startup, raised $17 million in funding, led by Portage Ventures, FinVC, Gemini Frontier Fund, and former A16Z partner Rex Salisbury. Conduit, a Canadian startup, plans to use the funding to further build its API and expand into Latin America and the US.
Part.3 Project progress after IOSG investment
The network of Arbitrum One has been restored. The outage is due to hardware failure of the main Sequencer node
*Layer 2
Gitcoin donation record and POAP display are added to the Web3 TAB page of Mask Network products
*dApp
Web 3.0 Project Mask Network product "Web3" TAB added "Donation" and "Footprint" supported by the decentralized information flow protocol RSS3. Support to display users' donations to other projects through Gitcoin and poaps on twitter's native page. Previously, the "Web3" TAB already supports displaying user-owned NFT and DAO information. As previously reported, RSS3 is committed to the vision of platformless media and applications, Has completed a new round led by CoinShares Ventures, Coinbase Ventures, Dragonfly Capital, Mask Network, HashKey Group, and Fabric Ventures.
Boca parallel chain Moonbeam Network has completed the launch process and officially launched
* boca/Moonbeam
Moonbeam Network has officially launched and is the first fully operational parallel chain on the Boca chain. Additional infrastructure deployment will follow, including cross-chain Bridges, multi-signature support, Chainlink Integration, and more. Currently the token GLMR is transferable and users can connect Moonbeam to MetaMask to use GLMR.
Boca's seventh parallel chain slot auction was won by Composable Finance
* wave card & have spent
Polkadot network 7th parallel chain slot Auction candle period ends. Composable Finance was in the lead throughout the candle period. So after "rolling the dice" ended, at 23:35, Composable won Polkadot's 7th parallel chain slot Auction with a lock of 6,027,000 DOT.
DeBank launches Web 3 user ID casting feature
*Wallet
DeBank platform has launched Web3 user ID feature and started ID casting. According to DeBank, Web3 ID has no pre-mining, no reserved ID, and no official privileges. Accurate target allocation: Registration quota will be opened in batches according to "Web3 social ranking", preventing robot batch registration, so users can first get their favorite ID; Native Web3 identity System: This "Web3 user ID" is a cross-chain system, because Web3 is built on a multi-chain ecosystem rather than a single chain.
Celer announced the launch of the Celer Messaging Cross-chain framework to better support multi-chain applications
* across chain & have spent
Celer Network today announced the launch of Celer Inter-chain Message framework (Celer IM), and has launched a test Network. Developers can now compose dApps using cross-chain function calls through Celer IM; At the same time, Celer IM greatly simplifies the application experience, users do not have to switch connected blockchain can use multi-chain applications in one click. In addition, Celer has released Demo applications, documentation, smart contract framework and sample application code based on Celer IM.
Kava to launch Surge program (ATOM version)
*Defi
Kava, the cross-chain DeFi platform, announced the launch of Surge, during which users who supply new IBC assets with Kava Lend will be rewarded with Kava and HARD Tokens in excess of 500% annual returns. ATOM will become the first IBC asset to be added to Kava Lend on January 27. The proposal to support ATOM provisioning and lending will go live on January 20th, and assets will be added to Kava Lend after the proposal is approved on January 27th. Early ATOM liquidity providers are expected to generate annualized returns of up to 1700% during Surge activity. When ATOM's supply assets approach $10 million, the liquidity provider will still earn an annualized return of more than 170%. Other IBC assets, including UST, LUNA, OSMO and AKT, will also be rolled out and participate in Surge.
Part.4 Industry pulse
Opyn's new derivative Squeeth has been launched on the Ethereum main network
* derivatives
Opyn announced the launch of its new derivative Squeeth on the Ethereum main network. Squeeth roughly tracks the price of ETH² with no expiry date and liquidation price. The advantage over options is that there is no rolling position required and the risk factor Gamma is constant. OSQTH is an ERC20 token from Squeeth that can be traded on Uniswap V3. Squeeth can be roughly seen as a quadratic perpetuity contract, hedging against VOLATILE LP losses by going long oSQTH and short ETH due to its nonlinear nature, an innovation that sparked a discussion on the derivatives circuit.
Metaverse is the first major Chinese Internet company to be named after Bytecode
* yuan universe
Byte completes his claim to his own meta-universe corporation. According to industrial and commercial information, a company named Shanghai Matavos Technology Co., Ltd. has undergone a personnel change. The legal representative of the company will be changed to Wang Fengkun on December 10, 2021. Wang Fengkun is the head of Byte Advertising technology and the legal representative of Byte Multiple subsidiaries. The company was founded on August 31, 2021, around the time byte was reported to have acquired VR equipment maker Pico. Metavos is the Chinese transliteration of the English name Metaverse, according to people familiar with the matter. It is the first major Chinese Internet company to be named after the concept of Metaverse.
Digital RMB APP launches The number of downloads on many platforms increased by more than 10 times a day
* Digital RMB
The digital RMB (pilot version) APP has been on sale since Jan 4. By January 9, the number of downloads of the digital RMB (pilot version) APP on Huawei's APP Market had soared from "less than 10,000" on the first day to "more than 5.8 million". Other platforms said that after the launch of the digital RMB (pilot version) APP, the average number of new users pushing digital RMB wallet increased by more than 10 times.
Rhodium, a crypto mining company, is planning an IPO valued at $1.7bn
* miners
Rhodium Enterprises, a bitcoin miner, plans to sell 7.69 million shares at $12 to $14 each in an initial public offering under the ticker symbol RHDM, according to SEC filings. After the IPO, the company will have about 56.8 million class A shares outstanding and 67.5 million Class B shares outstanding, implying A market value of between $1.49 billion and $1.74 billion.
IMF: Crypto assets moving in tandem with equities pose risks to financial stability
* Reports from authorities
Crypto assets are no longer on the fringes of the financial system, according to a new report by the International Monetary Fund. The increased and considerable linkage between the cryptocurrency market and the stock market points to the growing interconnectedness between the two asset classes, which could soon pose risks to financial stability, especially in countries where cryptocurrencies are widely adopted.
Fidelity Canada is adding bitcoin exposure to two traditional ETFs
* Heritage Fund
Fidelity Investments Canada announced that Plans to add some small bitcoin exposure to the Fidelity All-One Growth ETF and the Fidelity All-One Balanced ETF, as well as corresponding versions of mutual funds, Fidelity Advantage Bitcoin ETF will be added. Fidelity said two traditional All-In-one ETFs were low-risk ETFs and the change would change the funds' risk rating to "medium". The decision to add a small bitcoin allocation to traditional funds was made because of its diversification advantages and potential to improve risk-adjusted returns in the future.
U.S. lawmakers from both parties are calling on the CFTC to strengthen cryptocurrency regulation
* regulation
A bipartisan group of US lawmakers has called on the CFTC, the US derivatives regulator, to do more to regulate cryptocurrencies, which could be good news for industry executives who want the agency to play a bigger role. In a letter sent to Commodity Futures Trading Commission Chairman Rostin Behnam, the top Democrats and Republicans on the Senate and House agriculture committees said the CFTC had a key role to play in regulating digital assets. They asked Rostin Behnam to answer a series of questions about the size and scope of the crypto market, crypto crime and how it differs from traditional financial market crime, and the CFTC's authority to "protect customers and ensure market integrity."
The State Bank of Pakistan and the federal government have decided to ban the use of all cryptocurrencies
* regulation
根据巴基斯坦 SAMAA 电视台报道，根据在有关数字货币的案件听证会上提交给信德省高等法院（SHC）的报告，巴基斯坦国家银行和联邦政府已经决定禁止使用所有加密货币。去年 10 月 20 日，信德省高等法院要求联邦政府在三个月内规范加密货币。据 SAMAA 电视台报道，法院此前指示政府组建一个由联邦财政部长领导的委员会，以确定加密货币的法律地位。
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