Original text from Marco Manoppo
Compiled by Odaily Golem (@web3_golem)
In the bull market, we are always bombarded with information about people who have achieved 100x returns (such as Hyperliquid), but we don't talk enough about the missed opportunities. In this article, I review my story with Virtuals Protocol, how I met with the founders in the early days, and how as a VC, I missed out on it (which now looks like my first 100x opportunity).
Note: Theoretically, the first 1000x opportunity I missed in my life was the Solana seed round investment through an angel friend in 2019, but I was not a VC at the time.
Virtuals was the biggest liquidity venture capital opportunity I missed in this cycle. The founders first contacted me in July at ETHCC, when their FDV was around $50 million. Before that, I had even heard about the project from a mutual friend in the first quarter, when their valuation was even lower. However, six months later, the AI agent tokenization platform became the star of the current crypto cycle.
The Virtuals co-founders, Jansen and Wee Kee, indeed have extraordinary courage.
I remember they tirelessly shared information about Virtuals with investors and operators in the field. Since they were mostly in Southeast Asia (SEA), I heard about their rebranding from PathDAO and their story about AI Agent tokenization from my crypto industry friends.
Even after experiencing the bear market and not being listed on any mainstream CEX, their unwavering dedication to the project is impressive. If faced with the same situation, many other founders would have returned LP funds or abandoned their projects, but the Virtuals team persisted, and they are now stronger than ever before.
What made me think Virtuals would not succeed
Earlier this year, we saw a lot of Crypto x AI projects trying to do decentralized computation or reasoning. I probably don't even need to say how many of these projects were just hollow hype, with most of them not really having a way for retail participants to get involved. Of course, users can earn some airdrops by joining the network and running some computations, but there's nothing that can excite the retail market more than GameFi or DeFi when it comes to airdrops.
Initially, I thought Virtuals might try to gamify the way they collect unique data, combined with consumer-centric applications, to differentiate the user experience - maybe even with a touch of "Ponzi economics". After all, data is still the bedrock of any AI model; what better way to incentivize people to share unique data than magical internet money? Just like in Westworld Season 3.
But it turns out the crypto market is becoming more complex and barbell-shaped. We skipped the above process and went straight into the asset issuance space - which is where the main product-market fit (PMF) of the crypto market lies.
And the Virtuals team, with their previous efforts, was fully capable of seizing this opportunity.
GOAT Ushers in the Era of AI Agent Tokenization
People often say that when you're prepared for an opportunity, luck will come.
The AI Meme coin GOAT sparked a market frenzy for AI Agent tokens, as it opened up the market's imagination about what would happen when AI agents can interact with some form of currency. While there are still many questions about the limitations of GOAT, whether there is some degree of human intervention, etc., the most important thing is that GOAT made people believe that when AI agents are combined with cryptocurrencies, they will open up a whole new experimental world.
Realizing this opportunity, the Virtuals team knew they had to leverage their technology and act quickly.
Virtuals' tokenized AI agent LUNA was launched on October 16th, about a week after the GOAT release. If you've been in the crypto industry long enough, you'll know that just showing up as a "beta" before mainstream projects is far from enough. So at a breakfast meeting in Bangkok, Jansen told me that the Virtuals team was working hard to make Luna the first AI agent capable of autonomous on-chain transactions.
Lessons Learned for Success
Fundamentally, reflection is often subjective, but here are some insights I've gained from this missed opportunity:
Resilience: The Virtuals team has demonstrated extraordinary resilience through their continuous iteration of various products. Different founders will have different motivational structures based on their personal reasons and socioeconomic backgrounds. Regardless of these factors, the key is to bet on those who don't give up easily, maintain a strong ambition, and always stay on top of market trends.
Geographic arbitrage and rapid experimentation: Projects that try to do rapid experimentation (more of a platform/launchpad model) often struggle to succeed in Western markets due to their high-cost structure. But Virtuals, being located in Southeast Asia (SEA), was able to iterate quickly at a lower cost structure, while still benefiting from a user base and capital markets priced in US dollars.
Resilience and business-first: The advantage of Southeast Asian founders lies in their resilience. The region has always been business-first, learning from the success stories of the West/China, whether in traditional businesses, Web2 businesses, or crypto businesses, and localizing them. The Virtuals founders fully demonstrated this mindset of being business-first, not ideological or technocratic. They knew what they didn't know, what they lacked, and what their moat was.
What Might Happen Next
The AI agent frenzy has been going on for about two months, but I feel like I've aged two years. While the market has shown some signs of fatigue, I believe we will see an even crazier crypto x AI frenzy in 2025. The vertical domains of cryptocurrencies always start from the most "degenerate" corners and gradually evolve into more mature use cases.
One thing has always been right → Without cryptocurrencies, AI experiments would be severely constrained.
This is most evident in AI agent experiments. Without a mountain of paperwork and lawyer support, an ordinary AI agent cannot access the real capital in the TradFi system. We can't just give real cash to an AI agent, and cryptocurrencies are the purest form of digital currency for digital intelligent beings.
Therefore, AI agent experiments will evolve from a GPT wrapper that can only simply tweet but is valued at over $100 million, to more interesting use cases - personally, I hope to see:
More AI agent tokenization frameworks and tokenization platforms. While the Virtuals team has been rolling out new products, the market is still highly competitive. Other platforms, such as ai16z, MoemateAI, Spectral_Labs, griffain, etc., have emerged and captured a certain market share.
Niche AI agent experiments. Projects like freysa, Fi, and Big Pharmai show that we can explore more niche experiments and use cases, the key is how to develop interesting experiments into legitimate protocols.
Consumer cryptocurrency x AI agents. How to maintain the advantages and novelty of AI agents, while packaging them in an appealing way as consumer applications? It can even be combined with other AI products (such as data, training or inference) - the key is to maintain the novelty of the AI agent.
AI agents x vice (vice industries). I don't dare to elaborate too much here, but we will see more AI agents creating significant cash flow by entering vice industries (gambling, adult industry, etc.), not just through their tokens or trading the crypto market.
AI agents x payments. Advance the interaction between agents, and how we can use agents to unlock more seamless off-chain and on-chain payment experiences.
When it comes to community-driven projects, the VC mindset sometimes falls short. The key to breakthrough is to always maintain an open mind towards new experiments, unbound by traditional norms, and be agile rather than idealized.
Related Reading
VIRTUAL's market cap reaches $3 billion, what stories are the AI projects in the ecosystem telling?
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