Guest: Bill Qian, Chair of Cypher Capital

Question: Hi Bill, can you talk about your recent investment situation?

Bill: Hello. Our fund has been quite fortunate, as during this bear market cycle, we have heavily invested in Solana, Ton, and Sui, and at the application layer, we have also invested in projects like Peaq, Uxlink, and Bouncebit. So overall, we currently have over 6x returns, and the overall liquidity is very good.

Question: We've heard that many VCs are not doing well this cycle. How do you see it?

Bill: In the last cycle, it was a time when everyone was rushing to go public (VCs were also rushing along). This cycle is a period of "letting the bosses run first". Who are the "bosses"? The exchanges and the founding teams. VCs are required by the exchanges and founding teams to practice the "long-term" value proposition, so they have been tied up with lock-up periods of around 3 or 4 years, and can only watch the price charts, watching the exchanges and founding teams cash out, feeling helpless and anxious. I often joke that VCs in this cycle are not a profitable business, but rather they have become "subordinate-level" financial consumers, making donations (grants) to the industry, promoting the industry's great development, which is also a good deed.

Question: But don't the founding teams also have lock-ups and are "long-term" as well?

Bill: You're referring to the "Team Allocation" lock-ups in the financing PPT, right? This is just a formal "Team Allocation". You can understand it as the entire coin pool belongs to the founding team, so all the constantly unlocking coins in the entire pool are pools that the founding team can sell under various pretexts. However, some coins, the team sells to develop the business; some coins, the team sells to buy Ferraris.

Question: It's rare for a fund like yours to have captured Solana/Ton and Sui at the same time in this cycle. Can you share the stories behind these investments?

Bill: In this cycle, I've made our platform the largest investor in Solana in the Middle East, and possibly one of the top three globally. When you feel an opportunity is right, the remaining decision factors are courage and position size. As an investor who has experienced the entire Web1, Web2 and Web3, the training I've received has given me a deep understanding of the concept of "concentrate to get rich", whether it's Tencent and JD for Hillhouse Capital, ByteDance for SIG, Tesla for Scotland's Baillie Gifford, or Apple for the later Buffett, the heavy position in core assets has always been the source of important returns.

Question: You supported Ton very early on, can you talk about it?

Bill: We were the first institutional investor in Ton globally, and I personally was the first global external director of the Ton Foundation. Our cost was less than 1/4 of what many Silicon Valley funds later invested. My logic for joining the Ton Foundation as a director and advisor was: of the top five social communication software in the world, one is in China, three are in the US, and they can't do Web3, and the other one is Telegram, so I invested. And frankly, at the time, Western investors had doubts about Ton, feeling that Russian projects should be avoided, and were also afraid of the impact of the previous Telegram's gram incident. But since I live in Dubai and often meet with their team, I understand their passion and vision, so I was actually more resolute; and stepping back, isn't Crypto anti-establishment? Those who make big money in this industry, which one is not anti-establishment? Like USDT, Binance, etc.

Question: I remember the Sui primary market fundraising was very competitive, mostly a16z, Sequoia US, etc. As a relatively young investment firm, how did you manage to get an allocation?

Bill: We are the first team globally to help a sovereign country establish a Bitcoin strategic reserve, we are the only Crypto listed company in the Middle East, and we are the only listed state-owned enterprise in the global Crypto industry (the major shareholder of our group Phoenix is a UAE government entity). When communicating with the founders, rather than positioning ourselves as "a young investment firm", we prefer to introduce ourselves as an "industrial investor" from the Middle East. So the founders were very willing to cooperate with us and gave us a $5 million allocation exclusively. This also made us the only investor in Sui in the Middle East, and probably the largest Chinese investor globally.

Question: Why did you heavily invest in Solana and become their largest investor in the Middle East?

Bill: Because we saw that even after FTX, developers were still active in the Solana ecosystem. At the same time, MEME started to rise, so when the market was still uncertain about Solana, we decisively took a heavy position, and by 2023 we had become the largest investor in Solana in the Middle East. At the same time, we also brought Solana to the Middle East, and next year Solana will hold its Breakpoint annual conference in Abu Dhabi.

Question: This cycle, many people have been criticizing VCs, feeling that VCs are not popular and many are not making money. How do you see it?

Bill: Rise and fall, a time of glory and a time of decline. I'm not at all pessimistic about the VC industry, although we must admit that the VCs of this cycle and this vintage are facing challenges. For the next cycle, it's very likely that due to the clearing out of VCs in this cycle, as well as a large number of new innovations emerging in the context of technological progress and regulatory relaxation, the days of VCs will be better. It's like the VCs established in 1999 in Silicon Valley were a very poor vintage, and most of their investments probably ended up bankrupt, but the VCs established in the years after the bursting of the Silicon Valley tech bubble had a reversal in return performance. I'm optimistic about the VC industry as a whole, because the industry's development needs us, including: to screen good teams and development directions for the industry, to provide vision and resources for founders, to improve the success rate of projects, and ultimately to provide good assets for the secondary market.

Question: Web2 VCs are still constantly operating various multi-billion dollar deals in the AI industry, do you think there are any differences between the VCs in the Web2 and Web3 industries?

Bill: They are quite different. The Web2 industry requires "high walls, ample provisions, and slow to claim the throne", so the typical approach is: raise enough money in the primary market, like $10 billion, $100 billion, or even more, this is "ample provisions"; constantly expand market share, delay profitability, and establish their own moat, this is "high walls"; delay going public, so they don't have to worry about quarterly reports and public investors, delay dividends, these are "slow to claim the throne". The core support behind this strategy is private market capital, i.e. VCs. So we can see that Web2 VCs are getting bigger and bigger, big enough to do $100 billion in a single fund, because they need to provide enough ammunition for the "nuclear war" between founders.

But the logic of Web3 is different, emphasizing "getting famous early on". Now the cycle from primary to secondary market is a bit too short, not really supporting good teams to work on products steadily. This fast-paced industry form will encourage founders to chase hot spots, do marketing, and quickly list on exchanges. Therefore, I actually feel that Web3 needs more "patient capital", leaning a bit towards the style of the Web2 industry, able to accompany founders to do more accumulation in the primary market.

Question: Thank you, one last question, how do you see the top of this bull market cycle, will there be a top or a Super Cycle?

Bill: When people start talking about a Super Cycle, you have to be careful. It's like someone telling you: this time is different, this tree will definitely grow up to the sky. The big logic of Crypto is still growth, but the specific form will definitely be a spiral upward in the cycle. Market Timing is very difficult, we usually construct our portfolio based on the current market sentiment, making it more aggressive or defensive. Thank you!