I have been chatting with some colleagues in the past few days. VCs in the crypto are basically dead in this round. Fortunately, we did not invest much in the first level, but turned to the second level.
"When I chatted with someone from a market maker, he sympathized with us VCs. In the first year after the project was launched, the VCs couldn't get the coins. Only the market makers, projects and exchanges had coins. But when the price dropped, it was the VCs who took the blame. It will also be ridiculed as a VC coin."
At the Hong Kong crypto event, LD Capital founder Yi Lihua fought against VCs in the crypto. In his opinion, VCs are the biggest culprits in this crypto cycle. Not only do they lose money, but they also have to be chased and scolded. .
Entering 2024, many senior crypto VC practitioners have resigned one after another to join project parties or the secondary market for one reason: not making money.
Today, VCs in the crypto are facing multiple difficulties: they cannot find suitable investment projects, and the valuations of their favorite projects are extremely high; it is difficult to exit old projects, and the entire Altcoin secondary market is seriously lacking in liquidity. Some investment projects are immediately launched as soon as they are launched. The book loss is 50%-90%; even if you are lucky enough to invest in a good project and extend the Token lock-up for many years, everything will be unknown by then...
Many VCs in the crypto rely on external LP capital injections and need "brand packaging". Even if their bodies are half cold, they still have to pretend to be living well.
When the project party cannot obtain liquidity from the secondary market, then VC becomes an exit liquidity.
This time, VCs in the crypto are already on the road to safeguarding their rights.
VC rights protection in progress
"Do you know what despair is? It's the day ZKX goes online." Investor DAVID said he was very ashamed to have participated in such a project.
ZKX Token, with an investment cost of US$1, fell directly from the opening price of US$0.6 to US$0.2 on the first day it was listed on the exchange, resulting in a direct book loss of 80%. However, this was not the end. Since then, ZKX has continued to fall, once falling to 0.000618 , almost zero.
A few months ago, ZKX was also a well-known star project. StarkNet's leading derivatives platform has received investment from well-known institutions such as GCR, Amber Group, Crypto.com, Hashkey, StarkWare, OrangeDAO and other well-known institutions, with a cumulative financing amount of US$7.6 million.
On July 31, ZKX founder Eduard directly announced that he chose to shut down the platform because he could not find a feasible economic path.
All investors were caught off guard like a bolt from the blue.
Perlone Capital partner Jin Kang denounced ZKX as a scam on X.
The team closed the project 6 weeks after the TGE; the token unlocking plan was suddenly modified during the TGE; the actual circulating tokens during the TGE exceeded the official documents... Jin Kang said, "If this is not a scam, then what is it?"
Under Jin Kang's call, many ZKX investors decided to join a group to defend their rights. So far, the rights protection group has gathered 42 relevant people, and everyone has provided suggestions.
Some investors know that under the existing SAFT agreement framework, it is difficult for investors to get their funds back, so they proposed to put pressure on the Starknet Foundation, hoping to provide investors with subsidies.
During the rights protection process, an external team also contacted investors and expressed their desire to take over and restart the ZKX platform to provide new trading methods for the existing ZKX community.
ZKX is just a microcosm of the many current activist VC cases. Some investors told TechFlow that they have currently suspended primary investment and shifted their energy to "post-investment management." They inquire and study the development status of invested projects. Projects that have no operational progress will undergo "rights protection" and apply for a return of investment funds. Most of them are old projects that participated in investment in 2022. There are many investments from well-known institutions such as Coinbase Ventures, under the concept of Metaverse, etc., which have now been lost. Popularity, social media has also stopped operating...
However, defending rights is not easy...
Difficulty safeguarding rights in the crypto
Protecting rights in the crypto is difficult to achieve.
Yi Lihua, who has many years of experience in safeguarding rights in the crypto, also said that he has defended multiple projects in the crypto, with few successes.
Primary market investment is about being willing to admit defeat, not to mention that most primary investment in Crypto adopts SAFT/SAFE contracts. The investment entities are offshore organizations such as BVI. There are legal flaws. Investment institutions are located in various countries. If you want to rely on legal means Defending rights is very difficult. For VCs, rights protection often focuses on action, uniting with other investors to jointly put pressure on the project party, and act emotionally and rationally, but the leadership is still in the hands of the project party.
Yi Lihua said that in most cases of rights protection, the founder of the project side simply ignores you and there is nothing you can do about it. Some founders are more shameless and are willing to refund half of the money, which is already very good.
A VC partner who participated in the ZKX rights protection said frankly that even though they have common rights protection needs, the interests and demands of different institutions are too scattered, and some VC investment amounts are not particularly large, so they will not "all in" and try their best to do this. thing.
In addition, most VCs want to maintain basic dignity, so they are actually unwilling to break up with the project team unless they have to.
On the contrary, individual investors who can put aside the shackles of face, boldly and persistently defend their rights have a higher success rate. From the beginning, the question of who is more reasonable in protecting rights in the crypto has finally become "who is more shameless and who is more capable" The game of "persistence".
Not only VCs, but now many KOLs in the crypto are also on the road to safeguarding their rights.
ALEX, a practitioner in the encryption industry, has teamed up with multiple KOLs to participate in the KOL round of a certain encryption project.
When ALEX found the project and expressed the hope for a refund, otherwise it would mobilize KOLs to FUD you together. The project side happily expressed its welcome to join forces with KOLs to FUD the project, which can bring attention and popularity to the project.
VC in the crypto, a vulnerable group?
Leo Tolstoy said that happy families are nearly unanimous, while unhappy families are unhappy in their own way.
In the encryption industry, happy VCs are almost the same, and unhappy VCs have their own ways of losing money.
According to the descriptions of some VC practitioners, projects to be defended can be classified into three major factions.
Projects such as ZKX that broke the market as soon as they were launched and then officially announced that they would cease operations are called "Rug faction".
The second type is the "bad guys", who take Listing as the end point, and then allow the currency price to plummet, penetrating the center of the earth. Investors have not yet received any tokens, and have already reaped more than 90% of the book losses.
At this time, the project party often claims to the outside world that "the market is not good, but we are still working." Investors want to protect their rights, but can't find a suitable "reason" and feel like crying.
The third category, the "zombie faction", the project party chose to retreat for a long time after financing, and has gone through rounds of bulls and bears, but still remains silent, making people wonder whether the project party just wants to come to the encryption industry to witness history.
Although some of these projects will maintain social media updates and operations to tell everyone that they are still alive, they are like zombies in terms of narrative, operation, and technical development. Although they are still alive, they are no different from dead.
Whether it is traditional VC or crypto VC, they all follow the 80/20 rule. A large number of projects will fail, and they need to rely on 20% of successful projects to cover costs and obtain benefits.
However, in the crypto, even if VC invests in a "good project", it is not as profitable as everyone imagines.
A VC partner said that he had invested in a game project in the seed round stage, and the development momentum was good. Later, the T1 trading platform was launched. Unexpectedly, before the Token was launched, the project party requested to modify the contract, saying that it met the requirements of the exchange. Extend the token lock-up period.
Although the current book value is still floating, it cannot withstand the decline of the copycat. It has fallen by more than 80% from the highest point since its launch. It is still unknown what the market will be like when the token is unlocked in the future. The partner complained, Nowadays, VC lock-up is more stringent than A-shares and US stocks.
LD Capital partner LI XI also said in July, "The portfolios that LD Capital has launched this year are all profitable on the books, but they are all Paper Value, 0 unlocked. Stop talking about VCs making money. The money is all used by projects. Fanghe Exchange made money. Except for the VCs who took over the market, most of them are big leeks. This cycle’s primary market has been extremely difficult.”
Not only modifying the lock-up conditions, some project parties will also modify the cost price of VC investment tokens and forcibly increase the cost; some project parties will also repurchase the previous quota midway. If it is to exit according to the latest round of valuation, it will be Conscience, some will ask for a discount to repurchase...
Therefore, in the eyes of many VC practitioners, they are the vulnerable group in this industry. To use a more pretentious term, in the four-way game between project parties, VCs, exchanges, and retail investors, VCs lack a "handhold". Without the right to speak, we can only passively compromise.
For retail investors, VC coins have now become a derogatory term, and investors' attitudes towards VCs have changed from following them to being disenchanted and even disgusted.
According to previous research conducted by TechFlow TechFlow, the influence of "famous VC endorsement" in investment decisions is only 31%, even lower than KOL recommendations.
For project parties, most VCs lack unique Value Added, do not even have the ability to make independent decisions, and do not dare to lead investments. They will only ask, "What other institutions have invested in you? If xx invests, then we will also participate." a little."
This year, with the primary market showing hell-level difficulty, many crypto VCs have begun to transform: some try to deeply participate in the incubation and construction of a project, increase their say in the project, and become disruptive VCs; some VCs simply give up. First level, move to the secondary market...
But all complaints can probably be attributed to one thing: the market is not good, and a big bull market can solve most conflicts.
The market needs a "copycat season" to save the trapped VCs in the crypto.
It’s great to come, but what if you don’t come?
The encryption market is changing rapidly. In addition to project parties, those who need to actively seek changes may also be VCs in the crypto.
