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Chatting with Crypto VCs: It’s a market that rewards greed and hard work

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If you don’t have a super high level this year, you may not be able to survive. As long as you can survive, the benefits will be very high.

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Source: DeepTech x Lishuo

A few years ago, I watched the movie "The Yellow Sea" and became accustomed to the restrained violence aesthetics of Chinese directors. The scenes of people fighting and splattering blood in close combat made me feel suppressed and sad. The people in "The Yellow Sea" are like crazy dogs carrying the rabies virus, biting wildly in order to survive. Later, I actually went to the Yellow Sea. The sea was gray and extremely cold, and the wind was like a knife cutting my face with a fishy smell. The small fishing boat followed the waves up and down like a piece of paper that could be overturned at any time. My feelings from years ago were finally released. Here is my wandering hometown, but also a grave.

When violence becomes the main way to solve problems, crime no longer exists in the name of evil. This is the survival law of the jungle.

When fraud becomes a business model, victims often become perpetrators.

This is a market that rewards greed and diligence.

In both Shenzhen and Hangzhou, there are many startup teams that hide in various low-key office buildings without logos, receptionists, or even landlines. They only have an office to avoid being seen as a fraudulent company when recruiting people. It's like going back to the beginning of the story, when you go back to your hometown for a family gathering during the Chinese New Year and are asked which mountain you're from, you instinctively say a profession that everyone can accept. In a time when the money-making track has been fully divided, their goals are even clearer: to go to sea to fish, and the bigger the storm, the more expensive the fish.

Shenzhen is enthusiastic about cash flow business, playing stacking games, and researching money nesting doll games. Adapting to the rules, the social media team has been configured in English. Only a few people know the real background, and most of them rely on guessing. When you suddenly find a project TVL on a certain chain that has rushed to the top three in a week, and big players entered the market months ago, with a hot spot mode of one pledge after another, the community is boiling, and analysis articles appear in major Chinese media. Congratulations, if you can't find the founding team on the official website, Shenzhen Big Brother is going to make you rich.

Friends in Hangzhou choose popular infrastructure construction, contribute code, and write twenty projects to hit the bull market. As for Beijing and Shanghai, there's not much to say. There are a few funds with offices or mobile personnel from overseas projects. Those who should have left have already left, and sometimes even a table of hot pot can't be gathered for a gathering. The past was like a blooming flower, but now we look at each other in silence.

He said: Never have I seen an industry with such a high tolerance for fraud.

This industry is very insecure for entrepreneurs. Of course, since I have chosen this path, I cannot talk about so-called security. As a founder, I feel that I need to be like a bomb disposal expert, first of all, not to blow myself and the team up. Secondly, investors. This is not a technology-first industry. We must go where the hot money is, and the team cannot afford to waste time. We must achieve our goals within a limited period, otherwise we will be liquidated. You say that everyone now has to look at the US stock market trading hours, watch institutional inflows and outflows, and pay attention to US macroeconomic policies. They also claim to want to overthrow the traditional financial order. Don't be ridiculous.

"The ideal situation is, of course, to be at the center of the hot spot on the track. Nowadays, investors will directly ask you about data and your plans for listing. Equity is basically not worth any money, and discussions are focused on token price and lock-up periods. It is not practical to talk about equity here. Do any of those who claim to focus on the first level only invest in equity? No."

"The more perfect state is when value is discovered by the community and driven purely by user promotion. I won't bet on this probability, I don't believe in such perfection."

"Looking at the bright side, the mainstream financial world has already accepted this industry. However, many ordinary people are being excluded, and the threshold for entrepreneurship has become higher and higher. When you say it's high, it's relative. The cost of fraud is getting lower and lower, and in some areas, you still need to hire security guards and recruit people to do illegal activities. After so many years of market education, users have become surprisingly tolerant of fraud. From my perspective, technology is used to solve problems, but it doesn't necessarily make the world a better place. However, for project parties, if you invest, you will basically get a return. With technology, marketing, and operations, if users see sincerity and effort, the market will reward you. Being criticized is nothing compared to staying alive. If you can't survive the bear market, that's another story."

When fraud becomes a business model, victims often become perpetrators. We can easily see this cycle of fraud, which is exposed by the numbness and familiarity with it.

Going back nine years in time, Shanghai's entrepreneurial friends will not forget the scene of Vitalik's first roadshow. What I remember is a plastic poster printed by a street-side printing shop, several rows of office chairs, and the skinny V standing next to the chubby Chu Xiaohu. The audience below has changed their nationality after several years, some have lost everything in gambling, some have returned to their original life trajectory, some are on the edge of the industry, and some have become fraudsters. The reality is that the success you see is always very, very rare. The bottom-touching, knocking-down, starting-over, and winning-all story only exists in short dramas or KOL's stories on X.

Investors: Empty talk misleads people, embrace reality.

The basic disk of change. "Many people will go bankrupt this year," said a fund manager in an interview. Many people cheer for ETFs, unaware that the price has already been set. You jokingly promoted from a smelly cryptocurrency trader to a US stock trader, not knowing that you have stepped into another misty and dark forest.

Remembered a friend's comment a few days ago: If blockchain becomes an alternative financial circle, then it deviates from its original intention - to become a remedy for a failed financial system. An alternative financial circle has no value to the world. The real value will only flow to the new land of hope.

The traditional role of an ideal investor was to help someone get started and then let them go on their own way. However, in the world of finance, this model is completely inadequate. Many funds that have been struggling in the primary market for years have quietly transformed themselves, with LD CAPITAL being a representative example. Its secondary fund is managed by Jiye Loo. I asked Loo a simple question: "LD is now focusing on the secondary market. What is your biggest takeaway from this compared to investing in the primary market in the past?" I received a slightly unexpected answer.

She said: "I haven't even done Level 1, actually. Level 2 is definitely more difficult."

I personally think that in the secondary market, buying and selling is still relatively easy if it is not exposed on the chain. The commenter replied with three crying emojis and added, "It's just too much."

There are no fewer rumors, slander, and conspiracy theories in the second-tier face of the encryption industry. High professionalism is required.

楼说：「Mainly it's difficult to do, and there will definitely be a lot of volatility this year. The US stock market is also uncertain. If we don't achieve a very high level this year, we may not survive. But as long as we can survive, the returns will be very high.」

"There are many things that can be analyzed from data, but having a lot of data doesn't necessarily make one an expert. Those who can ignore a lot of irrelevant information and accurately judge the mid-term trend are the ones who are truly skilled. These experts are usually quiet and unassuming. (I only realized this after reaching the second level.) My level is average, I used to not understand anything, but now I understand a little and know that I don't know everything."

The attitude of the building towards the secondary market is cautious and pragmatic.

There are also some urgent investors who may be driven by anxiety to transform to the second level. The hot narratives have become too fast, and the projects invested with high valuations have now been abandoned by the market, especially this year's Bitcoin ecology inscription and MEME fire, fair launch, and many hot projects with wealth effects have nothing to do with VC. First-level investment is sometimes superficially glamorous, but in reality, it has encountered numerous pitfalls, and losses can only be swallowed. A bunch of projects that have been invested in either die halfway or have an uncertain fate. For more responsible projects, they will send an email apologizing, saying "sorry, we failed."

Even if a project is listed on a first-tier exchange after being invested in, many people will send private messages to congratulate, thinking that they will achieve financial freedom through this project. In fact, the project party changed the terms before listing, extended the unlocking period, and could only receive the book value. From investment to full unlocking, it often takes 8 years or even longer. After two rounds of bull and bear cycles, the final return may not be as good as holding high-quality assets such as BTC/ETH/SOL at the secondary accumulation point during the bear market. "Good projects" are strong, and VCs have no say. At a dinner party, an investor complained helplessly that he had invested millions of dollars but had not received any "harvest" yet, and wanted to seek project rights protection (but I was wearing a long gown and held back).

Anonymous VC: Whether it's first-tier or second-tier, eventually everyone has to exit the cash-out game. When the market discovers, or rather, verifies countless times that most people are not suitable for first-tier investments (although there are still very accurate and good first-tier funds to invest in), it is wise to switch to second-tier. "Coin trading" is also an important track, and it is also very professional. Your investment research ability, control of market trends, and analysis of macro and micro situations will all affect the results. The key is, I'm not so anxious anymore. When investing in first-tier, I was too passive, and there were too few good projects that Asian funds could invest in. Moreover, I guess there are no longer pure equity investments in the current market.

Jayden (Greythorn): End of 2022. Because we found that first-tier investments and business models from a few years ago are very different. For us, on the one hand, projects that receive a lot of attention from the West for true technological innovation have high valuations, and it is difficult for us to participate. On the other hand, we have experienced many times where we invested in first-tier projects, but due to various reasons, the project party changed things like SAFT, and there were situations where coins were not given during the unlocking period, so it is better to just do second-tier projects. I also invest in first-tier projects, but the proportion is very small. More of them are projects that come out of the developer community, with a mentality more like "donations" in the early days of the coin circle.

Kris (Xinhuo Asset Management): We mainly focus more on the secondary market. Because we believe that the secondary market has better liquidity, price discovery will be better, and information will be more transparent. After entering the bear market in 22, the top few asset management institutions fell, and market sentiment fell all the way. But in 23, from bear to bull, everyone saw the arrival of a new round of bull market cycles in 24 and 25, so major institutions and asset management platforms are increasing their investment in the secondary market. Invest in the primary market during the bear market and invest in the secondary market during the bull market. The cycle is short, the effect is fast, and the cost performance is higher.

Therefore, what he is satisfied with is not the need for "making money", but "asset allocation", which can also be considered as arbitrage between the traditional and crypto worlds.

以利相交，利尽而散。

Translation:

Interact for mutual benefit, disperse when the benefits are exhausted.

A&T Capital founding partner Jasmine wrote in November 2023 that A&T has stopped actively investing for over half a year and has gradually shifted its focus from the primary market to the primary and secondary markets. One reason for this is to prepare for an exit. She believes that it is easier to incubate and operate secondary funds than to create new primary funds.

In her view, "the community is becoming stronger and the call for Fair Launch is getting louder. From the perspective of some scammy project parties, it is easier to deceive the community than to seek VC; from the perspective of some legitimate project parties, VC may not necessarily understand my industry, so it is better to educate my potential users than to 'waste time' educating VC. The space left for first-tier VCs may also be shrinking."

VCs have figured it out. Instead of doing this, let's all invest in cryptocurrency together. To quote Jayden from Greylock Capital: "Just go straight to level two!"

This article is a joint interview and creation by DeepTech and Lishuo, with a focus on funds with Asian backgrounds. Follow the official account to obtain the complete interview with Grey Thorn Capital in the background, including their investment preferences for 2024.