Original compilation: TechFlow

Original compilation: TechFlow

Crypto venture capital can often appear murky to the outside world, and many consider it one of the most competitive and cutthroat branches of the crypto space. A constant stream of new funds, lightning-quick funding rounds, a recent (written by a disgruntled founder) tweet about a "vulture capital" fund (which doesn't allocate resources, but hopes to Funding for transactions), some founders are now choosing to avoid taking money from pure transaction funds and instead partner with a large network of angel funds or DAOs.

Whenever I think of who has had traditional success with crypto primitives, I always think of a very exciting and famous scene from the movie "Margin Call" (It's provocative because it reflects pre-Lehman Brothers pre-2008). In this scene, Jeremy Irons plays a great CEO who only understands the most important things and nothing else. When the market was about to crash, he told his colleagues: "Why (I) made a lot of money?"

"If I told you there were three ways to make a living in this business, what would it be?" he asked knowingly.

"The first thing is to be smarter and cheat."

This heuristic (with a slight modification) can be applied to most crypto funds you've probably heard of. However, a new framework has now been proposed that can help us understand these funds, which can be grouped into three categories. As Richard Malone, Head of Operations at Advanced Blockchain AG, put it eloquently,The current funds are divided into three basic categories: Brand Funds (brand funds), Specific Value Add Funds (special value empowerment), All-Purpose Service/Value Add Fundsimage description

A Quick Fact About Crypto Venture Capital

You can think of those funds that launched first as Brand Funds. They have their own rosters, they have their own big shot investors; they have an LP base that will last forever; they are the funds everyone knows about. Getting an investment from these funds is like going to an Ivy League college, owning the most exclusive Hermès Birkin bag or a Bugatti, and so on. These Brand Funds became self-fulfilling prophecies - when other funds heard they were investing, they would try to join the deal, triggering an unprecedented level of FOMO, which in turn brought more resources and a network effect. (This is not a new phenomenon, it is also true in traditional venture capital.)

Like stereotypes, Brand is important because they are often steeped in reality, but Brand isn't everything.If people want to criticize Brand Funds, it is to criticize Brand Funds that sometimes it seems to others that they are "eating their laurels."Also, over time, economies of scale would make it less likely for Brand Funds to do early-stage deals. The larger the AUM, the smaller the checks they write.Recently, Paradigm stated that it would not write checks for less than $2 million. This automatically eliminates the vast majority of pre-seed transactions from the market.

Brand is also sometimes associated with the cult of personality of Twitter profiles and general partnerships that often turns out to be only a superficial indicator of actual business activity. I once interviewed an investor-turned-operator and asked her why she did this.She replied that she didn't want to be part of the "dirty fight between Twitter's thought leaders." She speaks so well!

Let's talk about who comes first, and why order matters. I love thinking about cryptocurrencies and watching mafia movies, so I've been thinking a lot lately about who are the top five (or, for us, the top four) mob families in the cryptocurrency space. If cryptocurrency is a mafia like we all know it (you get the idea),So who will be the most VIP of all VIP funds?

For me, the answer is obvious.

Blockchain Capital is a "veteran fund" whose roots can be traced back to 2013, and Brock Pierce is one of its three founders.This big brand, commonly known colloquially as "BCap," has one of the largest AUMs in its field, and it has some of the biggest success stories.

Then there is Pantera Capital.It's hard to compete with this fund spearheaded by renowned macro investor and early crypto enthusiast Dan Morehead, one of the most successful (in terms of returns alone) to date, and one of the first to invest in cryptocurrencies One of the well-known funds, the Bitcoin Fund launched in 2013 was its first attempt in this field. Even better, they are now innovating with a new rolling fund structure and setting a goal of raising billions of dollars.

In third place is Fenbushi, which was founded in Shanghai in 2015 and also has billions in AUM, as well as superstar young partners who are launching personal funds.A lot of their AUM comes from early days in the field.

Founded in 2015 by Barry Silbert and now valued at $10 billion, the Digital Currency Group is one of the oldest, storied and best-known cryptocurrency companies in the world. They don't accept external LPs, so they aren't technically a base, but I had to include it on the list for the reasons stated above.

However, Brand Funds isn't just known for being in the T1 tier. Some Brand Funds have become very powerful because they can bring specific value. (If they were not so powerful, they would be classified as All-Purpose Service/Value Add Funds).

Paradigm, which started in 2018, is not just an early fund or a brand, but also one of the best funds during the period.The legendary Fred Ehrsam went from co-founder of Coinbase to an absolute top-notch investor. Paradigm has now raised the largest cryptocurrency fund ever, and they are notoriously hard to beat. Among founders (and investors), they have earned a lot of favor for their unparalleled technical expertise.(Justine Humenansky [justinehy.eth] asked all the founders with me at the conference what their dream crypto VC was, and they all said Paradigm).

A16Z Crypto also started in 2018, so it can be regarded as an early launch fund in this field.While many funds deliberately operate under the radar, A16Z is doing the opposite. It has developed an unrivaled media and PR machine. Until now, with former Assistant US Attorney Katie Haun at the helm, their regulatory/legal/lobbying expertise and clout have been considered the best in the industry by other investors.

Parafi Capital, founded by Benjamin Forman in 2018, is also an example.They have a clear focus on DeFi (in fact, they were one of the first DeFi-focused funds ever), but they also have unparalleled participation in the protocols they support through governance. My friend Justine Humenansky, referring to this list, pointed out that they are, in a way, the new activist investors.

Multicoin Capital was founded in 2017, and their first fund went up about 200 times.They are, you could say, both brand and smarter: it's known for its Contrarian positions (Solana), which are usually successful, and we can't ignore them.

Speaking of companies that are not brand-based (or not old enough to be automatically classified as Brand Funds), there are a few companies that are relatively smart (smarter), and their added value is not super specific. It is a self-contained brand.

Miko Matsumura's Gumi Cryptos started in 2017 and it has one of the best lists out there.They just closed their second fund in October, and they invested in top category funds like OpenSea, Yield Guild Gaming, Celsius Network and Agoric at the seed stage. I have known some of their founders myself and they would keep themselves open to invest with Miko, a deep thinker leading multiple fund investments. As a personal friend of Miko, I have yet to find anyone who matches his breadth of knowledge, his critical thinking, and his ability to understand, foresee, and tie trends together.

Arrington Capital, also started in 2017, is another fund that has managed to grow into billions in AUM, and it has some of the brightest and most nimble investors on its roster.Their founder, Michael Arrington, is known as a savvy Silicon Valley investor and named the brand after himself. As someone who has co-invested with the company, I can attest that the research they conduct is extremely in-depth, and their team Brilliant and intelligent, and their ability to pull together deal flow, do due diligence, and close investments quickly is amazing.

Here we cannot fail to mention Polychain Capital, Dragonfly Capital, Reciprocal Ventures, Digital Finance Group, Bixin, Nima Capital, Kenetic Capital, Republic Crypto, Blockchange, Galaxy Digital (technically it is a cryptocurrency commercial bank, Not just a cryptocurrency VC), Coinfund, Distributed Global.

These funds are relatively smart, and they can also be regarded as brand funds (but the basis for classification may be because they are relatively smart, not just based on the time of establishment). They were founded in 2013 (Nima Capital), 2014 (Bixin), 2015 (Digital Finance Group, Coinfund), 2016 (Polychain, Reciprocal Ventures, Kenetic Capital), 2017 (gCC, XRP Arrington, Distributed Global, Republic Crypto, Blockchange), 2018 (Dragonfly, Galaxy Digital).

Then we get to companies that are smartly positioning themselves to be useful to founders looking for investment. In fact, our head of operations, Richard Malone, even said on a conference call a few weeks ago that just as venture capitalists ask founders “what is your tech stack?”, founders end up asking venture capitalists"What is your venture capital stack?"，full stack"full stack"venture capital.

Funds that understand this reality can be considered smarter. Regarding the specific value adds that we didn't talk about under "specific value adds silo", we see a value add that has become very popular:Providing Liquidity for Decentralized Finance. It is more in demand in those projects that have not yet established a foothold, and (sometimes required for investment now) have investors to provide liquidity support for the project. GSR, Jump, Alameda, Efficient Frontier, Spartan, Wintermute, CMT, and CMS are some of the largest market makers that companies launching (DeFi) protocols work with.

Many specific value-added funds that have popped up in recent days have been formed in the form of DAOs. 0xDAO exclusively provides liquidity to its DAO members and friends. Santiago Ramos recently started a venture DAO with his friends. Some DAOs exist to help certain types of founders (Komorebi Collective is for women and non-binary in crypto). Carrier DAOs began to emerge. Even Shitcoins-focused DAOs have gained popularity. ByBit DAO forms a DAO as an example of a decentralized trading platform, which is seeded by Pantera, which can be seen as a big cycle from centralization to decentralization - which will become one of the most interesting social experiments , will involve how VCs in this field generate a large amount of AUM in a decentralized manner.

Sometimes, the fund is not the carrier of investment, but the company itself is still a brand.For example, Kenetic Capital (helmed by the great Jehan Chu) and NIMA Capital (mentioned earlier) are family offices, but they are known as the most active and successful investors in cryptocurrencies. HOF Capital is another family office that has carved out an elite niche over the past few years and has a reputation as a crazy activist investor, led by Corby Pryor.

Another specific value-added item that has emerged recently is design. IDEO Co-Lab specializes in helping founders design their product and marketing materials and Twitter presence.

Electric Capital is known for publishing amazing research that developers, investors rely on when researching the market.

Variant Fund focuses on investing in Web3 and the creator economy and connects its founders with others in the creator vertical.

Known for its machine learning technology, Tribe Capital is top-notch at finding deals.

Another type of specific value-add fund that we can think of is a Silo Specific fund. Recently, NFT funds have sprung up. SFermion can come to mind here, as they specialize in NFTs and will soon be developing into a DAO. It is said that Wave Financial also has an NFT fund. Collab + Currency has also pivoted to focus primarily on NFTs. And some of the metaverse funds even invest in in-game assets and have gained popularity (Galaxy Interactive is probably the most notable of these funds, as is Gemini's metaverse fund. Metaversal's joint venture with CoinFund, and Republic Realm are just emerging funds). Katie Haun's new fund will focus on the metaverse. Some topics are even linked to geography. Folius Ventures has East and Southeast Asia as its primary focus, as do Sky9 Capital, GBIC, David Gan's OP Crypto, and a few others.

Ecosystem funds are another example of specific value-add funds. Their main purpose is to support an L1 ecosystem. Hypersphere will give you exposure to DOT as they are primarily focused on investing in the Polkadot ecosystem. Parity Ventures is also a DOT ecosystem fund. Cosmos has a new fund called Tendermint. Terra has a Heart Ecosystem Fund called Terra. Avalanche has several ecosystem funds. Algorand has Borderless Capital. Zilliqa has Zilliqa Capital. Solana alone has at least three related funds, namely Solar Ecosystem Fund, Solana Foundation, and Evernew Capital. NEAR has MetaWeb.VC. Even companies in this space have their own related funds, for example Chainlink is rumored to be launching their own ecosystem fund. Most large trading platforms have their own venture capital departments (including Coinbase Ventures, Huobi Ventures, OKEX, etc.).

[Sometimes the fund is focused on certain ecosystems, but it doesn't just exist as an ecosystem fund. For example, our friends at Valhalla Capital are very concerned about the Algorand ecosystem].

Grants programs themselves are a kind of ecosystem fund with no returns.It's worth mentioning that they bring a lot of value to the ecosystem itself, they don't operate as investments, so they're lightning fast. Certain charities are more active than others (Polygon has a well-known, albeit controversial, charitable program. NEAR has an active charity program where grants below 10,000 are automatically funded, and Flare Network sets up a large charitable fund , and Uniswap, and other funds that are adding charitable projects...).

There are also some more general, vague"value-added fund"Advantage"Advantage". These funds are often made up of young, nimble members who work hard and have good networks, but they don't scale. In fact, many of these managers are investing for business growth.

Finally there's the All Purpose Value Add Funds, which are usually started as incubators or accelerators. Consensys' Ethereal Ventures is the most obvious example. Thesis is another example, as is Delphi Digital.

hotspot"hotspot"experts."When we invest in projects, we look beyond providing capital. We love being involved with projects that want to work with us and offer our guidance and advice on tokenomics, governance and content, but we also have a full range of niche specializations."Original link

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