At the Hong Kong Web3 Carnival, which is dominated by Chinese people, one of the hotly discussed topics among people was the "KOL round". This newly coined term originated from the fundraising stage of new startups (seed round, A/B/C/D round) etc.), rounds defined according to different company development levels and fundraising scales.
Web3 borrows this concept and targets early fund-raising targets at Web3 KOLs (opinion leaders) who operate communities, giving KOLs early investment discounts and conducting marketing through KOLs. "KOL round" has become a necessary part of recent new projects, increasing the source of profit for KOLs.
This phenomenon has also caused a lot of discussion:
- Is it better to seek out KOLs than venture capital firms?
- Will new startups cut off KOLs in turn?
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ToggleVC becomes meme, KOL becomes VC
In response to the meme coin craze, strange phenomena began to appear. The public chain claims that it will collect meme coins, VC will hold meme coin competitions , and analyze how useful the meme coins will be, calling it "memefra" (meme infrastructure). It seems that these institutions are no longer limited to Web3 projects that have "real uses or plans", but are embracing meme coins from the masses.
Simplified Chinese KOL @nftbanker (小江) shared his thoughts on his recent trip to Paris: "VC has started to become a Meme, and KOL has started to become a VC. The conditions of European and American funds that are not well-known are four times worse than those of KOLs. They don't understand how the Chinese can use them. An Excel sheet raised funds overnight, while they are still waiting for the unlocking period. These KOLs have already made money. Several KOLs who have just graduated from Chinese universities have become the fastest, most successful and most successful KOLs in this bull market. The first VC to cash out.”
Perhaps due to the influence of meme coins, new projects are turning to focus on KOLs. Do KOLs have any advantages?
Is the advantage of KOL second only to first-tier VC?
Investor Jayson @jaysonhu2018 believes that the benefits brought by KOL to new projects are second only to first-tier VCs.
Because compared to VCs, the KOL community makes decisions faster and can quickly decide to invest and deliver funds. Compared with VCs’ internal processes and decision-making, it takes more time and investigation. Moreover, the funds invested by the KOL community are not necessarily less than those of VCs, which is equivalent to the level of second-tier VCs.
"It's normal for a few KOLs to come together and invest a few hundred thousand dollars or a few million dollars into a single project." @jaysonhu2018 said.
The lock-in conditions of KOLs will be tied to publicity and marketing. The exposure and resources they bring to new projects are no worse than VCs.
Second-tier VCs are not even as good as KOLs
@jaysonhu2018 believes that many second-tier VCs are only arbitraging through relationships, and their ability to select targets is not necessarily better than KOLs working alone. KOL has also developed a certain "good vision" in the social ecology of eliminating the weak and supporting the strong.
Is the KOL round just a low-amount marketing campaign? Will he be cut instead?
However, some people believe that KOL rounds are still only a part of VC marketing.
Researcher Chen Jian said that the main point of the statement "KOL>VC" is that the valuation obtained by KOL is lower than that of VC, and the unlocking conditions are better than that of VC. But in fact, the quota of the "KOL round" is very low, and you have to endure the emotional blackmail of some new startup projects. That is to say, KOL not only spends their own money, but also has to work for the new startup. Compared to institutions, we only get a few crumbs.
Wu Blockchain, founder of Wu Shuo Blockchain, said bluntly that many KOL rounds are actually driven by VCs, and the two are just complementary. KOL rounds have high valuations, fast unlocking, and low quotas; VC rounds have slow unlocking, low valuations, and high quotas. In fact, without the endorsement of well-known VCs, KOLs may not dare to invest. The statement "KOL > VC" is probably an exaggeration. He believes that the phenomenon shown by the "KOL round" is that VCs are beginning to operate traffic.
Taiwanese investor Woody explained that it is very simple to understand the "KOL round", which is part of the marketing expenses. Those tweets on Twitter are very standard, and many KOLs have received similar requests. It just allows KOL to give priority to withdraw from the market and leave, and the share is very small. In fact, it is not easy to be cut off. These are just the publicity expenses for new projects.
Woody suggested that some "KOL rounds" are not recommended. For example, if the lock-up time is too long, you may lose all your money, or if it is too local (bad quality), there is no need to bear the infamy for a small amount of money, and it must be unlocked at the same time as the institution. Yes, it is tantamount to letting your community take over from the organization.
The free market between KOLs and fans
Many cryptocurrency investors probably do not have the time to research and lack the experience to judge investment targets. KOL plays an important role in giving advice, and the emergence of the “KOL wheel” also proves the influence of KOL in promoting investment promotion.
"What can you buy that will make you money?" As long as you can answer this simple question from investors and make people feel satisfied, you can achieve your mission.
KOLs bear financial and reputational risks, and fans can judge the KOLs’ character and performance on their own and choose targets in the free market. “KOL Round” activities, which are based on the role of investment advisors and provide advisors with promotional budgets, have become an important part of the current cryptocurrency market.
