Leaping to Web3: How do Web2 entrepreneurs enter Web3?
Original source: Zonff Partners
Original source: Zonff Partners
"Go big and go fast"
At the end of the first quarter of 2022, we launched a podcast called "Getting Started". We hope to use these four words to express our attitude: In the ups and downs of the global business market environment, we always maintain a heart of "going forward bravely", saving all our strength all the time, and ready to "roll up our sleeves and work hard" at any time ". There is no doubt that in the era of Web3 that has arrived, we are ready.
"Leap Forward to Web3" is a sub-column of the podcast program "Get Started Fast", which will open up your imagination of Web3!
The following is the script of this podcast program, nearly 20,000 words long, and the estimated reading time is 30 minutes.
Overview of topics in this issue:
Differences between Web2 products and Web3 products, and differences in evaluation standards
For product managers, what are the changes in ability points in the process of entering Web3 from Web2
The case of Web3 winning with products
Thinking from the perspective of product design, the balance between decentralization and centralization
The operation and operation ideas of the Web3 project
From multiple dimensions such as cycle and customer acquisition, the difference between the birth and iteration of Web3 projects and Internet products
Thoughts on Airdrop
Thoughts on Tokenomics
Guests of this issue:
Guests of this issue:
Colin (host)
Founding Partner, Zonff Partners
Will
Colin has extensive venture capital experience in the Web3 field, focusing on blockchain infrastructure, public chains, DAOs, Web3 apps, etc., and invested in projects including Polkadot, Conflux, IOST, Algorand, FTX, Meson Network, MASK Network, DODO, Fortube, Phala Network, DoraHacks, rct.ai, BCA, Realy, Dehorizon, etc. Colin used to work for Netease and Matrix Partners, and is good at finding structured investment opportunities in cycle switching and technological evolution.
BAI Capital Partners
Bosen
NXG Labs Founder & CEO
Will (Wang Tianfan) joined BAI in 2012 as the champion of the most prestigious Talents Meet Bertelsmann Campus Business Planning Competition. He is an investor who grew up from BAI graduates. In the past 10 years, he has invested in more than 50 companies in early rounds, mainly focusing on next-generation networks such as Source, Chaowanzu, Yahaha, Oasis, consumer and retail revolutions such as Keep, Dingdong Maicai, Mobike, Guangliang, cross-border and international opportunities such as Outer, Wholee and related digital infrastructure such as Dipu Technology. Will has always maintained his sensitivity to innovation and change, established deliberate practice of refining and summarizing through texts and podcasts, and conducted self-criticism at all times. He has won many honors in the industry, most recently including Entrepreneurship 2021 "40 Investors Under 40", Business Card 2020 "Investor of the Year", 36 Krypton 2019 "36under36 Great Investor" and so on.
A serial entrepreneur, Bosen has founded several companies that have been successfully acquired. Founded Counter Attack Technology in 2016, and the new project BOO! Video Messenger was officially launched at the end of 2016. In 2018, both BOO! and Boomoji were on the Top 20 list in the United States. The peak DAU of BOO! exceeded 1 million, and the peak value of Boomoji was nearly 500,000 in a single day. NX Messenger AR/VR social products will be launched in 2019. From 2019 to 2021, more than 100 tools, social apps and games will be launched, with more than 50 million global users and a cumulative revenue of more than 30 million US dollars. In 2021, newly established NXG Labs, leading the team all in crypto.
The following is the transcript of the program:
Wang Xiang
Hello everyone, I am Wang Xiang Colin, the founding partner of Zonff Partners, welcome to this interview podcast program "Leap to Web3" produced by Zonff Partners with opinions, attitudes and emotions, and explore with us The new world of Web3.
Today we are honored to invite Wang Tianfan Will, partner of BAI Capital, and Bosen, founder of NXGen Labs, to have an in-depth discussion with you about the phenomenon of "Web2 entrepreneurs joining the Web3 wave".
Bosen
First of all, please Will and Bosen make a brief self-introduction respectively.
Will
I am actually a very traditional Web2 entrepreneur who only joined the Web3 entrepreneurial wave last year. I am very happy to be able to participate in this program today. The two guests are my guides in Web3. The product we are making now is very similar to the product we made in the Web2 era. It is an acquaintance social product on a digital platform based on Avatar users. Users use their own Digital ID to communicate and interact. This is actually a common thing in the Web2 era. a product. We are now in the process of learning Web3, and today we hope to learn and discuss with you, thank you.
I am Will from BAI Capital. We are a venture capital fund that has invested in China for 13 years. From mobile Internet to now, we have invested in a lot of early-stage startups.
Why are we concerned about Web3? On the one hand, it is because our foreign counterparts are aggressively entering this field. At the same time, it is also based on the investment perspective of Metaverse, or from the investment perspective of games, VR, and AR. It is not just pure artificial intelligence or new interactive interfaces. Changes in new production relations are also driving the progress of mankind. We found that although the field of Web3 is still in the narrative stage, innovations are likely to emerge. We look forward to observing what is happening in this field from the same perspective whether in China, Europe, or the United States.
Wang Xiang
The introductions of the two are relatively modest. Will has a very outstanding VC experience in the past ten years and is a frequent visitor on the annual investment lists of various institutions. Bosen is a serial entrepreneur sought after by many funds in the field of social networking and games. Last year, he quickly captured the opportunity of Web3 and just completed a new round of financing.
Our topic today covers the entrepreneurship and investment of Web2 and Web3, and the perspectives of the guests will be opposite or unified. In fact, the idea of this dialogue began after New Year's Day, and we also heard the argument that "Web3 is a new way out for Internet people". I just recently saw that many domestic game companies cut off some of their own projects. It is foreseeable that Web3 will absorb another batch of fresh blood. It is not too late to start this dialogue now.
Wang Xiang
Now let's get to the point. First of all, I want to talk about product design, which is also the closest to users and the first threshold for Web2 entrepreneurs to enter this industry (Web3).
Bosen
First of all, we ask Bosen, who has the most product experience among the three, to talk about the differences between Web2 products and Web3 products, as well as the differences in evaluation standards.
I think this question should be considered from two levels. The first is the underlying logic of the product, and the second is about the user experience of the product.
The first thing to think about is how do we define a Web3 product, and what aspects does it have core competitiveness? I think the core keyword of Web3 is ownership. Especially for social products like what we are doing, compared with Web2 products, users can have their own identity system on our platform, which includes the ownership of all digital assets on the entire platform. We can see some Web3 products. They allow users of the entire ecological community to participate in the entire network through issue tokens, so that users can truly own a part of the network. I think from the underlying logic, this is a brand new technological innovation.
Of course, from the perspective of user experience, I think that the current stage of Web3 is actually just the beginning. I think many excellent Web2 teams, including teams with crypto backgrounds, are still in the trial stage. We think that in fact, Web3 should also first meet the needs of user experience and create a product that meets Web2 user experience. I think this is a central point.
Wang Xiang
Will
What does Will think?
right. I think the environment faced by Web2 and Web3 products is different. If you want to make a product in Web2, the first thing you will think of is its general environment. If you are a pure ToC product, it may already face a relatively stalemate market environment in terms of customer acquisition. If you are a community-driven product, you may have users first, but you have already spent the money, and at the same time, to a large extent, you still have to face the problem of how to realize it. So that's why? In the past five years or so, this field has basically been lackluster, because no one has been able to break through such a bottleneck.
I think the tolerance for innovation in Web3 is extremely high, and everyone is holding money to encourage innovation. We even say that we have seen some works in the NFT market, as long as there are some narratives and a certain community Operation, you can get a high degree of attention and fast cash flow.
I think that in the field of Web3, any innovation-led thing will be recognized by the market in the first place, which can give entrepreneurs and product managers a good sweetener. But I also worry that when Web3 entrepreneurs make products, they may be largely influenced by the perspective of financial orientation. Financial orientation may have some positive feedback in the short term, but whether the product will be effective in the long run, ( Relying solely on financial attributes) This is a place that needs to be questioned.
Wang Xiang
Bosen
clear. So to sum up, the entire Web3 is currently in a state where good demand is better than good design. It is necessary to quickly let users get to potential products, rather than doing more elaborate transformation and design processes. In fact, recently, whether it is from the perspective of investment or entrepreneurship, we will see many people with Web2 product background enter the industry and slowly learn. I would like to talk about this phenomenon. For product managers, the whole process of learning and transformation What are the changes in ability points in the process?
First of all, I think that Web2 product managers should quickly learn some of the underlying operating logic of the crypto world, which must be to quickly make up for homework. Of course, we should also inherit the accumulation of products in Web2. As Will said, the core is how we can make a truly valuable product that can meet the long-term high-frequency needs of users in the Web3 era. Of course, we may have a learning process when we enter this market. I think most product managers will magnify the value of tokenomics design, but will ignore the basic needs of some products. A PMF or product experience, I think I think this should be paid more attention to.
Wang Xiang
Bosen
Bosen is actually highly rated by many colleagues. As an entrepreneur who learns quickly, do you have any good experience or skills?
I think it is still necessary to communicate with the leaders in the industry. Communicating with excellent people is the fastest way to learn. Of course, I also think that we should find the corresponding learning channels to quickly understand high-quality projects. I think high-quality projects and good products are a process of quickly recognizing the market and user groups.
Wang Xiang
Will
Did Will observe any interesting phenomena during this process?
Yes, I have always had a few questions, because we also have a lot of Web2 portfolios looking at opportunities, and there are also All In ones. So I'm not sure about a few points right now.
First, should we use traditional traffic thinking to look at the success of a product? Because the number of users in the entire market (Web3) is not large, it is actually very difficult to rush to push traffic at the beginning.
Second, I also think that the financial attributes of Web3 products may still be very strong. My own understanding is that all the products currently encountered in Web3 are most likely inseparable from finance. So this is quite demanding for founders. If it is purely a product manager of a certain type of product that was relatively vertical or partial in the past, he may not be able to handle a relatively large product that combines finance, social networking, or data, so it is largely for them. The challenge is here.
Finally, we can also discuss the cases where Web3 is really led by products or wins by products.
Wang Xiang
In the past two years, I have seen several typical products. The first one is Uniswap. In fact, this is a demand that has been discovered for a long time. As a better solution, in fact, in 2017, everyone was already talking about decentralized exchanges in the market, and there was such a demand at that time. Entrepreneurs are constantly doing this in this process, but Uniswap has made a brand new solution, using lower computing power consumption and consensus consumption, to make a product that can meet that stage at that time.
Will
The second one I think is Axie, which to some extent is a victory for the understanding of technology and product architecture. Because in fact, from the recent observation, during the transformation process of some Web2 entrepreneurs, I found that many needs can be seen by everyone. As a senior product manager for more than ten years, especially for ideas that are biased towards Web3 and social content, the needs are the same, and no additional needs have been generated. But the difference in this process is that these new product managers do not have a good understanding of the entire public chain technology and cryptography. In the process, he can effectively convey his needs, but he has no way to effectively communicate What public chain technologies should be used to convey your overall solution, should you develop a side chain wallet, and what should the interaction of the wallet be like? In fact, these overall architectures also require PM to design, but at present I think this is a relatively large gap in the process of transforming demand into products. After all, the infrastructure of the entire industry is actually imperfect. If everyone can see For this requirement, for the overall architecture, the excellence and efficiency of product solutions are actually a very important criterion for consideration.
Yes, I have been observing recently. For example, products that are not directly ToC, such as Nansen or Messari, which are peripheral products in the industry, tend to use various SaaS we see in Web2 enterprise services. Product perspective to measure. You can look at how well the product is doing. The final result may be the user's repurchase, continuous use, or the response speed of the data and so on.
I think that a particularly classic Web3 product will have some subtleties in terms of logic. A logic that is quickly paired with a simple product captures humanity. For example, the Axie you just mentioned, the game products can be very large, very 3D, and heavy, but they can also be very simple. Most of the products in this world are not pursuing extreme complexity, but are pursuing a state. Using a relatively simple interactive interface can make users flock to it, and then generate a fomo mentality. So at first, as a layman, I was very excited when I saw games like Fomo3D, a very simple routine, and then made many people crazy about it. In fact, this product was very successful as a product manager because he attracted very With a large amount of funds, there is a large amount of traction, but he was later attacked or solved by a scientist, so this is a long-term problem. In the short term, I feel that all kinds of small volcanic eruptions in this world are composed of some exquisite logic and simple interface.
Wang Xiang
Bosen
interesting! Speaking of the differences with Web2 products, I just mentioned that for many tool-based products and products that are biased towards enterprise services, their original intention may actually be to meet the current needs of better tool-based products, but in this process, there are actually many fundamentals. Facilities are not fully supported. I want to talk about where is the balance between decentralization and centralization? How should we think about this matter from the perspective of product design? Bosen can talk.
I think centralization and decentralization must find a balance for us to do ToC-side products. We cannot blindly pursue fairness at the expense of efficiency. Of course, I think that if you really want to make a product with a large number of users, product experience is the most critical. I think one of the opportunities we are actually facing now is that Crypto is constantly going out of the circle, and more users in the traditional world are also paying attention to this emerging market or new category of products, so how can we not only serve existing ones that have already entered circle of users, as well as new users, how we expand new users is also very critical. So I don’t think it’s actually a blind pursuit of decentralization. Instead, I think that products, especially in the early stages, may pay more attention to returning to the product experience, how to truly meet the user’s usage scenarios, and to acquire users.
Wang Xiang
Bosen
But in some links, for example, the community may have some doubts about this point (decentralization). How is this process usually balanced? Or what kind of trade-off relationship will there be?
I think it may be in the community, especially in the early days, that Web3 companies must operate and operate. Of course, I think that in the first stage, it should be team-led or community-led to quickly launch products, Iterating products, I think this must be a balanced process. I think that for the Web3 entrepreneurial team, it is necessary to quickly pursue efficiency.
Of course, the spirit of Web3 is that no matter you are a user, a contributor, or a participant, everyone must be able to participate in the entire ecosystem, so I think it is necessary to balance the relationship between users and your community users and teams here. I think users must be allowed to participate in governance and the construction of the entire ecosystem.
Wang Xiang
Yes, in fact, from the observation of a phenomenon throughout 2021, I think the whole community's requirements for the degree of decentralization are actually getting lower. Since 2017, there were actually many Ethereum fundamentalists in the market at that time, and they would continue to tout Ethereum every day, and then go to diss some decentralized exchanges. In the past one or two years, this behavior has gradually weakened, including in the past year or so, during the influx of large-scale users, we have also seen more public chains appear, such as Solana, usually we You may see various problems in these public chains, such as node instability and downtime, but most new users have relatively low awareness of these things at present, which is actually much lower than that in 2018. The vibe of the whole community.
To understand this issue, I think it is necessary to give priority to ensuring security during the application promotion stage. Security is actually the first priority, especially for scenarios such as infrastructure and public chains. It needs to ensure a feature, that is, There is no centralized link that can obviously do evil. For example, some on-chain tool services and cross-chain tool services are actually on different chains and cannot do cross-chain settlement (at least the current technology cannot do cross-chain settlement) , and then a neutral settlement tool is needed, and at this time it needs to have no obvious evil links. So I think this is a more important consideration in the future. Because it may be two or three years in the short term, the entire infrastructure still cannot be so sound.
Will
Next, let's talk about the operation and operation ideas of the whole project. We were mainly talking about products just now. I would like to ask Will, what is the difference between the birth and iteration of a Web3 project and Internet products? From the perspective of cycle, customer acquisition and other aspects.
Although we also hope to become the Buidler of Web3, I have not fully experienced the birth of a Web3 product. I was thinking about the question you just mentioned Wang Xiang. I have always been curious. Everyone is saying that decentralization can ensure security and prevent hackers, etc., but we have also seen a large number of hacking incidents. So I have been telling our team that it seems that Buidler and hacker always win in this industry. Maybe investors and ordinary people are not necessarily the same. There are winners and losers in terms of funds, so I am also curious why there is no 360 for Web3 in this industry, or It is said that someone may be doing it, but I didn't find it. I even said that clicking the phishing link of Metamask in Discord caused everyone to lose many tokens, and there was a lack of such a thing as a Metamask assistant.
So I am curious, in addition to achieving a certain degree of security on the chain in the entire ecology, various unsafe things are happening every day. How to solve this problem? Wang Xiang, you have seen a lot of projects, do you know if there is such a solution in this industry?
Wang Xiang
I think that first of all, each of our DeFi or decentralized projects needs to be audited. Usually, we are actually auditing two modules. The first is whether the code has a back door, and whether there are obvious loopholes that can be attacked by technology. The second is a logical loophole. For example, some projects may have no technical problems, but they will be forced to be exploited by some hackers, such as flash loan arbitrage. This is not a technical problem, but a business logic that has been hacked The problem of arbitrage.
At present, I think there is no motivation for a 360 company, and it does not have such a strong demand. Just like before, we felt that in the entire DeFi field, insurance may be an important scenario, but if it needs to be done in a decentralized manner, in terms of the compensation review mechanism, loss determination and other processes, there is no such strong interest to drive this. thing. The second is that it is much easier to find a loophole than to make up for it.
As for the more direct phishing links, in fact, whether it is Web2 or Web3, there will always be people who can't do this well in any cycle, but I think there will be such a tool opportunity in the long run in the future.
Will
In the end, I think there is another point. There are some cases of deliberate evil in certain links, including evil by the project party. Because in fact, frequent closures or similar scenarios occur continuously every period of time, and they will appear concentrated at a fixed point in time. There are also such reasons.
Yes, very interesting. Then back to your question just now, I often tell the team that because many outsiders or peers in the industry used to feel uncomfortable about entering this industry or looking at this industry, they often said that there are people in this industry. There may be speculators and hype scammers in the majority. Later, I told you that maybe from 12 years to now, I found a change. The most interesting point in this industry is that it is in the process of migrating from 100% liars to 90% liars. Its better point is that Slowly there are more Buidlers and the proportion of people who want to do things seriously for the community is constantly increasing. This is the opposite of Web2. What we see in Web2 is changing from good to bad. We used to be in the age of Wikipedia and Yelp. Everyone contributed to the community and believed in the spirit of selflessness. But later you will find that with the superposition of network effects, the final result is censorship, monopoly, and even fewer and fewer opportunities for entrepreneurs, and then big companies are reinventing the wheel. This thing is changing from good to bad. of.
So I often tell the team that when we look at projects, select projects and do things in this industry, it depends on which side we are on. I am on the 90% side that has not improved yet, or on the side Among the speculative team, or I stand among the 10% Buidlers, which one do we believe will become bigger, because many times we will face a choice. I also often hear other investors persuade me, are you too idealistic? This industry is likely to say that you and the 90% go to cut everyone's leeks, maybe going is the real way of money making. This is also the way many funds have done things in the past, or earn money back and stay with the 10% Buidler. If you stay on the non-consensus side for a long time, you will stay away from money for a long time or it does not conform to the Web3 gameplay. They think this is the industry’s gameplay and is very financial oriented. This will challenge my judgment. So in the final analysis, we have to look at the project we saw today, where does the product start from? Do you start from that 10% or from the other 90%?
Wang Xiang
I understand that the overall industry trend is actually positive, because if most of the products are dominated by 90% of the products here, there is actually no way to go from the state of the past few years to the current state. I think the overall industry is still a long-term positive development trend, whether it is the standard of genes, the thinking of entrepreneurs, or the standard of the community.
Bosen
Bosen can chat, you are actually an entrepreneur with very mature experience in both Web2 and Web3, what kind of thoughts do you have in the whole structure and operation process?
In fact, I think that after entering Web3, what we may be better at is to become the 10% to do a good job of our business and our products. I still believe that even in the era of Web3, finance or tokenomics design must not be given priority. I believe that some of the best products and company services you see in Web2 must be product driven and product-first. I believe that doing a good job in Web3 The premise of community operation is that you can make a good product.
In fact, this is the case in Web2. To make products, it is necessary to serve and unite early Alpha users, Beta users, early seed users, and angel users. As long as your product needs are real, through this rapid iteration, Must be able to make a good product. In this process, you have actually accumulated your angel user community.
Wang Xiang
Bosen
In this process, community airdrops are actually a main feature of Web3. In the early stages of product design, we will weigh them, such as how to do airdrops, and the motivation of users or the motivation of using the product, including the motivation of making money. During this process, you What kind of consideration will be taken to ensure better seed user quality and start-up effect.
I think that the design of airdrop may indeed be the biggest challenge for traditional Web2 teams, that is, people cannot understand it as a simple way of growth, as we also had a lot of this kind of growth when we were in Web2 The method, for example, we saw that these online earning products include the extreme version of xx products (the specific products are not mentioned here!), in fact, they directly distribute money to users, but here you go to get the value of airdrop with users on Web3 It is different, Token is part of the entire network ecology.
So I think when designing airdrop, you must consider how to motivate your core users, users who have long-term contribution value to your ecology, not just users who come for short-term speculation. So how to distinguish between your target users, your long-term users, and these users who come to quickly grab their wool, I think this may be a relatively big challenge for the Web3 team to face.
Wang Xiang
Will
I understand. I suddenly thought of a point. I think there should be a product that analyzes online address behavior and address portraits in the market, and then show these project parties which users are coming to collect wool, and which ones may pay more attention to the project itself. Such a tool.
It seems that I have seen a similar project recently, which is specifically looking at the ROI of airdrops. I guess it involves the profiling of addresses on the chain.
Wang Xiang
Will
learn. What do you think about this question just now?
I think I didn’t understand airdrops at the beginning. Airdrops didn’t happen just now. The industry has been talking about it for many years. Your stuff should be worthless. Until the appearance of SOS, I went to collect it myself, and then found that so many people were buying in the secondary market, some people might think that I am optimistic about this project and think there is still room for improvement.
So I later traced back, probably because the Token of People of ConstitutionDAO will be recognized by everyone, because of its larger narrative, or purely in this industry, everyone will allocate 10% of their assets to these biased ideals cultured type of thing, contributing as part of a community. So I think this is a very interesting thing. I think it is highly related to DAO. I personally think that the premise that all airdrops will be meaningful in the future is that Tokens are given to users. In addition to arbitrage and speculation, users may really be able to do something with Tokens.
I understand the other two values, one is Utility and the other is Governance. If I get the Token, I can still go to govern and affect the development of things, then I think it is meaningful to hold it, or this Token is a kind of ticket, a kind of Membership, a kind of right, I may think that I hold also makes sense.
So in this way, the selling pressure of arbitrage can be avoided. In this case, Token can be held, and the value of the secondary market can last for a while. I think this kind of airdrop is quite interesting, and it will generate A community that derives governance behavior will be more meaningful than Token Airdrop, which was purely for marketing to attract users' attention in the past, so we are also exploring how to do such an airdrop that increases the value of Token to a certain extent.
Wang Xiang
I actually went through the same process as you. When I first entered the industry, I would inexplicably see some strange Tokens in my wallet every day. I was also thinking, you spend this Gas fee to airdrop me What is the ten dollar bill? I don't know what you do?
The process of my transformation is actually when DeFi broke out. At the time when Sushi just started, I concluded from that time, including some recent competing products like OpenDAO and Opensea, that the market demand for products that have been verified The demand for the track or product is established. What needs to be achieved at this time is better brand voice and better user attention, and community airdrops are a very simple means to gain attention. While it's not the best, it's a very simple means of achieving this effect. Then, for example, in addition to the recent SOS, and earlier DeFi, the online derivatives trading platform dydx has completed the work of the Token Issue, and the follow-up actually helps the entire product on the same track to establish a relatively stable synchronicity. Sexual benchmarking, because the free loss and wear-and-tear benefits of the entire derivatives are relatively predictable. This is the same type of funds, and then new projects can be effectively airdropped to attract the attention of funds, which can help themselves better. Do a cold start.
For the requirements that have not been verified, I feel that I have not seen them yet. Without verified demand, it is difficult for the market to generate a relatively stable expectation and consensus. During this process, I think the effect of the airdrop may not be so good.
Bosen
Now that we have talked about the allocation of community airdrop tokens, let's talk about the capital and financing system, which is actually a process of information asymmetry for many financing Web2 entrepreneurs. I would like to talk about the key points and changes in the financing system of traditional investment compared with Web3 projects. Bosen just completed financing, you can chat first.
In fact, we still have a relatively Web2 team background, so in fact, we had more connections with VCs before. When we newly entered this industry, we still use equity financing. In fact, we have not started Token financing. Of course, I think the core lies in the fact that what we are taking money at this stage is actually taking resources. What we need at this stage is to use money to build a team, and then build an excellent product through a good team. I think we are still newcomers to the industry, and today I would like to hear the two suggestions on the financing of entrepreneurial teams.
Wang Xiang
Will
Would you like to talk about the financing of stocks and tokens.
First of all, the following remarks do not constitute any investment advice. This is a podcast for technical discussions. I have a recent trend that may be extreme. I have recently tended to use Token Financing for all projects. Of course, I am referring to the Web3 project. With a high probability, it may not be a pure enterprise service like Nansen, because its business model is no different from traditional SaaS. I think Equity Financing is normal for this kind of project, it is serving an ecology. This exists in any industry, no matter what industry you serve, you will have such an enterprise service infrastructure, so I don't think it is necessary.
Whenever you want to have long-term and effective interaction with the community, and your Token has other utility value or Governance meaning besides pure storage of value and pure speculation, I suggest you Completely use Token for financing.
why? In fact, there is a worry from the perspective of Equity Invest. Of course, this worry is based on an assumption that this project will only have Token Value in the future. If this is the case, I actually think that there is no need for Invest to invest in equity, because you will have the same shares and rights at that time. If you dilute it into Token, your valuation will actually increase in disguise. So I think that investors in Equity should think about one thing. To invest in Equity is to expect whether the company's Equity will have value in the future. If there is no value, then don't invest.
I think in the past, it was mainly because of the internal control requirements of many funds, or the regulations of LP, or the policy supervision of the market. Everyone tended to hold Equity first, and then Token, but recently I found that it is not logical. Of course, for example, we have seen some companies, such as Bosen’s company, which may also have a lot of business. They have their own platform business, distribution business, and content production business. If it is a large holding, then use Equity first. Park here, and then hold the company. If any project is hatched in the future, and each project may be tokenized individually, that is another matter.
I used to prefer to take the Equity first, give a convertible bond or something, and then look at it later, if there is no chance, I just give a Convertible and then look at it later, but at present I don’t think it is necessary to make it so complicated, of course the premise is It’s legal, it’s not aimed at Chinese users, it’s not mining, it’s aimed at the international community, and then doing this with the international community, I think it’s better to have a more extreme Tokenization, and it’s easier to see for future investments Your valuation and price don't make the negotiation so complicated.
Wang Xiang
Will
I would like to ask, have you encountered any projects in the early stage that only need to raise shares, such as SaaS or projects that can perform financial calculations.
I think that maybe a few years ago, we saw that this field was mainly based on Equity Oriented. I don’t think it will be rejected now, because now I feel that if the ecology is improved, more people will sell water, and Equity will also increase. I think Not a big problem.
In fact, I also want to discuss with Wang Xiang, because Token and Equity are two tools, and in terms of the value it provides to investors or owners, I understand
First, Storage of Value has it, right;
The second is Governance, both are fine. There is a board of directors in Equity, and Token can also vote through, for example, Snapshot;
The third is potential benefits. For example, you may have dividends in equity, and there may be deflation in Token, burn or staking, liquidity mining, etc.;
These three aspects are almost the same. The only difference is that the Token may have a Utility Value. Someone told me that Gas Fee is actually the simplest Utility, such as tickets like Friends with Benefit, or NFT avatars. Well, the fact that the avatar itself is worth showing off may also be regarded as a utility, but it is only at the level of elementary humanity.
So I was thinking, in fact, the biggest difference between these two things is Utility, not other financial-oriented things, so I have been thinking that the real value of technology and applications should be in Utility.
Wang Xiang
In fact, I have several criteria for whether the project will be able to finance equity,
The first case is to compare earlier projects, and then sign a Convertible;
The second is actually more tools than SaaS, with traditional financial processes. This kind of project, such as Nansen, is a normal and traditional business model. This type of project can actually have Token, such as the Graph, which can actually be used as a fiat currency entrance, or a traditional charging model entrance, as a decentralized network to stimulate more extensional development needs. I think for tools and SaaS, I think I have a certain degree of acceptance for stocks.
The third situation is that some projects are actually single-application products at the moment, but whether it is traditional investment or Web3 investment, single-application products have a ceiling on the valuation level, at least for now. It will be relatively low . Like Sandbox or Axie, they first rely on a product that can eat the market, and then extend it to a Holding structure to expand. After all, judging from the current preference of the entire market, it is actually difficult for a single application to enter the top 50 rankings by market value. So I think Bosen and others have applications like this, and have a structure similar to Holding, which is an acceptable way of equity financing.
Then I just talked about Utility. In fact, someone asked me two days ago whether SaaS companies should issue tokens, or how to do this with issue tokens. I thought about a few points at that time.
The first is to turn it into a DAO, and then do Governance, which is a conventional idea;
The second idea is to nodeize the entire SaaS service, and then turn it into a utility, or a wide supply that needs to be collected and decentralized, and then inspire more people to provide services. The motivation for using Token as a utility is generally in these two directions. If Token is used for Fundraising, Utility is one point;
Then there is whether you need a broad mass base. I don’t think SaaS tools are actually needed, so they are not very sensitive to this matter as a whole;
Will
Therefore, it is necessary to look at how demand and supply are leveraged in the business process of the entire business. It is a bit like Didi, which needs incentives and subsidies. Token is a means of better liquidity.
Yes, I simply echo.
I found that the most wonderful value increase in this industry is the increase in valuation, because in this case where Demand is greater than Supply, the value of ecology has actually never been in equity. I would not say that I want to use Apple’s stock, so I bought Apple. , and then Apple’s stock price rose. I think this is a huge difference in the entire Token Market. And now I see that most of the projects that failed in the past, although investors or early investors may have a wave of personal benefits at the beginning, the reason why they have not stood up for a long time is because they put the projects equivalent to the A round in the equity market directly. pushed towards capitalization. When the project was still in its infancy, it was pushed to the secondary market. If the secondary market is in a good mood and has good liquidity, you can turn your valuation into a C-round and D-round project, and then everyone will harvest. In the end, when I returned to the business, I felt that it was not good, because the market was too volatile, and a lot of new things came out, so the attention was quickly taken away again. Then everyone may feel that this project is tasteless and a pity to discard it. This is an obvious phenomenon.
I think in the long run, it is likely to return to what I just said, because of the influx of users (supporting the value of Token). If you look at the head public chain, I think pure speculation may only be a matter of one month, but in the long run The currency price support is to use ecological Token to do something, whether it is used for trade or other things. I also often advise our Web2 founders to switch to Web3. My suggestion is that when you think about your own Tokenization, please think as much as possible about the role of using this thing in the ecology.
Then it must be remembered that the steady rise in Token prices is due to more users, not more speculators. So I think this is a relatively long-term thing. Because in most cases, we found that a project obviously has a logic of use value, but because the founders were too impatient to operate capital, or the investors were also impatient, they pushed the company to the Capital Market during the A round. At this time, the Capital Market The fluctuations caused a lot of interference to its use, and then made its entire ecology impossible.
It turns out that everyone said that the price of Bitcoin fluctuated so much that it was too inconvenient and troublesome to buy things. I think this problem also plagues many Crypto projects that entered the capital market too early, so it is quite difficult. As an Investor, the fund cycle is limited, what should we do about this matter? How to accompany the founder to go far? If we go far, what kind of posture should we take to accompany the founder?
Wang Xiang
I think this question just now leads to a new question, that is, many people are asking me how to determine the valuation of Token, because the entire traditional financial system, its valuation is based on the method of cash flow discounting, but cash Flow discounting is not applicable to most projects in the entire Web3.
Going back to the question just now, I think the supply and demand relationship you mentioned is a very important criterion. Whether it is from the perspective of Benchmark or demand analysis, a Token valuation system may gradually appear in the future. The second is, I think the phenomenon you describe may not exist for a particularly long time. In fact, this phenomenon existed in 2017, and I was also thinking about why Opensea didn’t use USDT for payment? I think that if it is a Utility Token, it needs an exchange scenario with a stable currency, at least an exchange scenario that is relatively less volatile, and this gradually leads to a dual currency circulation like Axie.
Then the second type of Token is Governance. I think this is a solution. From a longer-term perspective, I think the US dollar system and the Token system will exist relatively independently on the same product. I think this is currently a more common solutions. Because the users who have poured in in this wave of trends in the past one or two years are actually not Developers, they are all geeks like before. A generation of interesting Internet products or cultural products to use. Looking at it in the longer term, for example, some Web2 entrepreneurs will tell me about buying volume, going to Facebook and Tiktok to buy volume. I think in the longer term, if there is a larger-scale infrastructure improvement and leading category If the project appears, I think it may be to use Token to go to a large C-end project to buy volume, and then use fiat currency to buy volume on Tiktok. I think these two things are also a coexistence scenario.
As for how capital can stay with the project party for a longer period of time, first of all, I think that in terms of mentality, reduce speculative positions. In fact, most of the time, especially in the recent market, there are many funds, including when I first entered the industry. In fact, I was very panicked at this time , and then what should I do at this time? Including the wave in 2018, many domestic funds lost very badly. One of the important reasons is that when BTC fell, they panicked and started to urge projects. You have to go to the listing and enter the capital market as soon as possible. A project is not as good as a project. But in fact, in that wave, there were still some project parties who continued to make products in the bear market. This round can still be launched, but this type of investor is no longer there. In the past two years, it will be much better. Everyone is not so flustered about the overall market fluctuations, and the perspective of capital. I think the better trend in the long run is that both parties are becoming more professional, and the tolerance of the entire capital market will become better. .
Will
Then the second is to try to make the project party lock up as long as possible. For example, I personally invested in FTX and only locked it for three months, and then it became the token I have done the most in the past three years. I got on and off. So for a long time, I will tell the project side that you decide the lockup yourself. I hope you lock it for a longer time, or this matter is not an important consideration for me. Follow the development of the project or the planning cycle of the project itself, and do not give entrepreneurs more intervention in this regard.
I think it’s right. I also saw a project owner yesterday and told me that they were a group of very geek people working on things. They also locked positions at that time, and the timing of listing was also very good, but they locked everyone and then forgot to lock it. The employees in front of the warehouse have become a loophole, and then it is a mess, which not only hurts the current employee incentives, but also causes great losses to the current investors.
So I feel that if these basics are the capital market, these basic capital market practices in the equity market are still hold for true in this market, so the market is also responding to various loopholes in human nature. All kinds of loopholes need to be filled, and the market also needs some mechanisms, otherwise everything is released, and everything will be short-lived.
Wang Xiang
Bosen
Speaking of financing and Token design, Bosen, have you considered these issues recently?
I think just now everyone is talking about whether it should be financing equity or financing Token from the perspective of investors. In fact, I still want to ask Colin (Wang Xiang) for a suggestion to entrepreneurs, that is, I think that many Web2 teams around Many friends are starting to start a Web3 business, so what kind of financing strategy should be better at the beginning.
Wang Xiang
I think we must first distinguish between Web2 and Web3. For Web2, there is a book called Lean Entrepreneurship. As for Web3, I think entrepreneurs actually need radical entrepreneurship. I think this standard is that you have to invest all your resources at the beginning, and then you will succeed. The degree is actually relatively high. Why be radical? I think that you need to give the market an explosive expectation quickly, with a brand’s reputation and rapid growth of users. After all, the iteration cycle of the entire industry is also very fast. In fact, many times it does not have so long for you to try. Wrong, it is better to start a new project than to try and make mistakes. I think this is an important feature. So in the early days, I felt that you need to invest all your own resources, and then invest all your abilities to raise money is the first priority.
Second, on the basis of the money raised, I think there are two ideas, that is, whether the money can help and complement your business, that is, the value added of the funds. After all, there are a lot of hot money in the industry, and it is purely financial investment. Not much value. For example, some teams are actually biased towards product background and technical background. They are relatively weak in the whole operation and Token planning, or weak in the market. In fact, I would suggest that they integrate Token to integrate all over the world. The capital and some DAOs in the community help him make up for his shortcomings in the market and operation links. In addition, some projects may have very mature operating experience and strong product capabilities, but the team may not have such a strong background. At this time, what he may need is the endorsement of a head capital.
Bosen
I think the choice of the two depends on what the project lacks, that is, you need to complete your quick planning for the first 9 months and the first 12 months. Then, from the perspective of Equity and Token, if you really don’t have any future value that can be empowered in equity, in the scenario that Will just talked about, I think the priority is to melt Token.
Yes, it is. In fact, I think the priority for many entrepreneurs nowadays is whether they can get financing, whether it is the money from Equity or Token Fund, the most important thing is to be able to quickly start the project, make the product, and then build the community. I think this may be the first stage for everyone to consider. Going back to the question Colin asked about how to design Tokenomics, I think this is also what some traditional Web2 entrepreneurial teams may need to make up for quickly.
We need to communicate and discuss with the seniors in the industry, and design together. In fact, it comes back to us, because we are still in the stage of making products. Tokenomics may not be our first priority, but we are also considering it now. How should this Token be designed in the future.
I think a Web3 product must use Token to pull users in the entire ecological community into the network. This is a very important part. I think this is also the spirit of Web3. Our current considerations are the most direct. There should still be a governance token. In addition, as Will said, we must also find a utility. Of course, there may be no utility in the first stage or there are not many utility scenarios, but I think the entire product should continue to improve the ecology , in the process of improvement, consider designing more Utility scenes.
Wang Xiang
I think there is a simple idea that, first of all, you have to motivate resources beyond the boundaries of your own capabilities, and have a value estimate for this resource, including different tendencies and expectations for different types of products, such as C-side application tools. For products, NFT series, developer-oriented products, and DeFi products, some may require more developers to come in, and some may need more capital TVL to come in and more liquidity to come in. I think these resources themselves are differentiated.
The overall plan is actually divided into three parts,
The first is the incentive for the community and the market;
The second is the incentive for investors and resources;
The third is its own operation;
Secondly, the Governance Token just mentioned is the function of the upper layer of these functions. The lower layer is actually to help the business run better. Governance is a purpose, and Utility is also a purpose of designing Token. I think this is a Suggestions on the overall general direction, but I think it is still necessary to case by case for a specific category.
Wang Xiang
Bosen
The last big question is, for entrepreneurs in transition, what are the important suggestions? , Which type of team would you prefer to invest in or cooperate with?
OK, I'll still answer the first question. Recently, I communicated with many Web2 friends around me. I think we should find our position or our advantages when entering Web3. I think maybe our advantage lies in the product, making innovative products and building up the volume of users. I think this is our advantage.
We need to make up for the shortcomings. In fact, we have talked a lot before. I think the suggestion should be to inherit the original accumulation and not to be overly superstitious about the design part of the economy. What kind of problems can be solved in the long run? What kind of valuable products can be brought to users. I think everyone should return to the original intention of making Web2 products, and I think it may be more important.
Wang Xiang
Will
In fact, I have observed one thing very well about Bosen in the past six months. In fact, he may not have noticed it himself. I think Bosen's attitude and perspective rhythm are very correct. First of all, in the initial state, Bosen is breaking away from his original circle, and then he is finding his own position and rhythm in this industry. I think this is very important. In fact, after many people come in, they will bring in their own resources from the very beginning. From the perspective of resources, everyone will pay more attention to team structure, technology and product development capabilities, but they do not have hands on to obtain information. And rhythm, it is actually very difficult to find your own position. The entrepreneurial atmosphere and information acquisition habits of the two ecosystems are actually different. I would give priority to recommending that everyone who wants to enter the industry should first find their own position and rhythm with hands on, and then cultivate the habit of information acquisition. When you find your own personal position, think about what you are good at and your own resources, and then build an entrepreneurial project. I think it will be more accurate.
Yes, I'll think about it from a VC point of view. The first is that this problem is not only applicable to Web3. At the beginning, I also mentioned that in the Metaverse narrative, it actually involves using AI to solve problems in the game world, or using new VR/AR interactive graphics to solve new problems. However, if you find that the founders of these two sectors are very tired and difficult, the thinking model he uses is the same problem as everyone in Web3.
What's wrong? For example, in AI, we have seen many founders think that their AI can solve many problems, and in the end it will become a state of selling capabilities without productization. So we see that in the field of AI a lot, we are actually copying the homework of openAI and deepmind. After seeing their new papers and new inventions, we do commercialization in China. Usually this behavior is actually When you implement a capability of others, then you take this hammer 🔨 and tell all the big customers, I will help you hammer this and that, and then others will cooperate with your project alone. So we found that the problem encountered by many so-called AI founders is that they only sell capabilities but not products, so this is a common problem on both sides.
Then there is a common problem when returning to VR/AR. They think that VR/AR can accommodate everything, such as VR plus medical care, VR plus education, VR plus others. There are also many companies in this, but they often forget one point , when we look at VR/AR, what we pay most attention to is that it is essentially a new means of production, which renders a layer of virtual space outside the real physical space, either superimposed or reconstructed. This is actually VR/AR essence. Therefore, the Virtual Objects here are new means of production. The way to deal with the new means of production determines how far the business model can go. Many people may only think of VR/AR as a tool, but never thought that this is a category of means of production. In the end, you will find that in the three directions, the difference between the companies that do the hardest and the companies that do the best is almost the same. What kind of difference? That is whether you capture the network effect.
I often tell our team that in Web3, companies that we admire or find interesting usually have such characteristics. Opensea with 30 people, Uniswap with more than 10 people, and 155 lines of code solve billions of dollars in transactions a month. The thing, really this one is a huge ergonomic change. Because we found that the final result of many business models is actually human efficiency. What is the difference between, say, Bertelsmann as an old media company and Byte? We are already a media group with the highest income in Germany and Europe, with an annual income of more than 20 billion US dollars and 110,000 employees. If you divide more than 20 billion US dollars by 110,000 employees and you calculate our human efficiency, it may be greatly surpassed by Byte. Everyone’s income may be similar. Byte may also have an income of tens of billions of dollars, and ours may also have an income of tens of billions of dollars. Maybe their number of employees should be the same as ours in the past two years, but their income may be one of ours. times.
In the end, you will find that they are both media companies and content companies, the difference lies in this. So we will find that new business models come out, and it is accompanied by things that replace people. Whether it's a robot company or a social platform company, it's a big replacement for people. Do you believe that the human efficiency of Facebook will definitely be much higher than that of the past web era and media portals, so this is a result we are looking at, so why is it in such a powerful state? The core reason is because it has a strong self-propagation-network effect. On the one hand, in the business model, new users are valuable to old users, the existence of old users is valuable to new users, and they are valuable to each other. The final result is that there is no friction between new users and old users. If there is friction, the value of new users to old users will be reduced by the customer acquisition cost, so in this case, self-propagation is very important. .
The emergence of self-propagation in any field is a very strong signal, so we actually pay attention to self-propagation from an investment perspective. I also mentioned to Bosen before that social products without self-propagation are consumer goods. Its linear development is the same as the linear development of general consumer goods we see. How much money you invest, how much GMV you produce, and finally the marginal effect diminishes, and then you will be trapped by being exploited by the platform, so we will always pursue a strong The network effect thing.
No matter in AI or VR/AR, this kind of self-propagation exists. For example, in VR, the game that may have the most network effect is the shooter game, which is a game category with more network effect. In AI, maybe you have to look at it in combination with the content community. For example, TikTok is typical for everyone to contribute data. It is the same as a search engine. The more people click, the more accurate the configuration rank is, and then The more users benefit, this is also a network effect, so the most beautiful business model we have seen cannot escape this point. This is something we are crazy about pursuing and supporting, and it also means that this type of thing is likely to be slow at the beginning, and it is largely based on infrastructure construction, which is not groundless.
The second is to keep people coming in. The predecessors planted trees and the descendants took advantage of the shade. This matter also needs time to accumulate and a consensus needs to be established. Because the people behind have seen such an effect, they will slowly be willing to come in. So the initial Curve will indeed wait for a while, and I believe that Opensea did the same at the beginning. Opensea insisted on the Taobao model, but we have also seen many other NFT sales platforms, and they emphasize creation. But just like there are vertical e-commerce and self-operated e-commerce, Taobao is the largest in the end, so it is particularly difficult for the founders to insist on this kind of thing with two-sided network effects. And there are also requirements for the background. If you are a designer or an artist, you may not choose a model with network effects like Opensea, and you may choose a trading platform with creation.
So speaking of it, for us, we will be very eager to pursue this type of assets and innovation. Usually it is difficult in the front, but there will be explosive growth in the future, a typical VC Eye Sight.
Wang Xiang
Bosen
I think I have just mentioned this point. The content of this conversation is very similar to the stage when I just entered the Internet. In the past few years, it seems that few people in the industry have talked about content that is partial to network effects. I think there is another possibility. The wave of mobile Internet Many entrepreneurs have not actually experienced it. Earlier, for example, Renren and Tieba gave money, and everyone would pay attention to it to solve ecological problems, rather than the problem of network effects caused by single-point demand. Another point is not to make it large and comprehensive in the early stage. In fact, there are two characteristics of generating network effects. The first is to find a single scene where users connect. I think this scene and the needs of connected users are very important; The second point is self-propagation, which is the part that Will just talked about. What further insights would Bosen have on these during the design process?
Yes, I very much agree. I think that since I entered this industry half a year ago, I have received more information on how to do a good job of Money Effect and attract the community through the financial level. In fact, I really agree that a good product should be How to create a Network Effect is where you create your network effect. Returning to the product, I think it is still satisfying users. Cut in from the scene of social products, find some high-frequency scenes, or find users who have a strong desire to show off points, self-propagated points. I think the product should be extremely simple at the beginning, the user's self-propagation model should be as few as possible, and then the product experience should be as extreme as possible. I think this is a core point that triggers the Network Effect.
Wang Xiang
Bosen
Speaking of self-propagation, is there any idea for Web3 to learn from Web2 products?
Yes, one of the issues I’ve been thinking about recently is that if we really want to create a Network Effect, I think it must not only target crypto’s existing community users, but also bring in traditional Web2 users. This is what I think is very important. A core point, because your volume must be large enough, and your chain of communication must spread fast enough, so that you can quickly form a network effect. We can see social products, and there will be explosive models every year. From House Party to Clubhouse, we will see this kind of self-propagation and self-growth of products.
So I think there are many good Web2 products that can be used for reference, but essentially what users want is a product that has never been seen before, an innovative product, so I think it is more suitable for the Web2 team to do things in Web3. In fact, it is the same as the methodology of making products before Web2. You cannot just copy a product and add Tokenomics to become a Web3 product. It’s about whether you can create a great product based on the underlying logic of Web 3 without doing Airdrop, regardless of the economic system. This is a big challenge, even surpassing the existing product form of Web2. Innovation is required.
Will
In fact, just now Will mentioned that in the field of Metaverse, I think the brand-new product interaction brought by AR/VR and the innovation of people-to-people interaction are an entry point of opportunity. I think maybe social products should be here. On the one hand, we will work hard to come up with products that really make users shine.
Yes, the network effect can actually be disassembled. It is very simple. User A can easily use this product. User A likes to use this product. User A wants to attract user B to use this product. User B also likes to use this product easily. , when user B comes in, user A and user B also benefit when using it, and then both of them are willing to pull user C in again.
So in fact, what does this step disassemble it look like? That is, in the physical world, there is only one product that has a network, which is wine. I drink it easily, and I am happy after drinking it. Still addicted? So I think wine is the physical product with the most network effect in the world, which is why it is enduring. And the network effect usually brings intangible assets, brings its brandability. When choosing this type of product, it is important to consider his social value to others and his own identity. So we also pay attention to the brand, you don’t invite others to drink a bad wine, you suddenly invite others to drink a good wine, and then when you invite others to drink this wine, he has a hidden meaning, saying that it is a wine The social bureau, the friends bureau, the wedding bureau, etc. The understanding of wine products can be mapped to the understanding of all network effect products. I find this very interesting, and I often understand problems in this way.
Founded in 2016, Zonff Partners is an investment holding group that achieves diversified business development through investment and mergers and acquisitions. It continues to focus on Web3, cutting-edge technology, medical health, new consumption, corporate services and other fields, and adheres to primary and secondary Ecological linkage, focusing on the investment strategy of industrial structure cycle, practicing the investment philosophy of in-depth research, technology-driven, and structured post-investment empowerment, committed to using capital and resource advantages to help companies maximize their potential, and jointly promote global business innovation and technological change .
About Zhongfu Linkage Investment
Founded in 2016, Zonff Partners is an investment holding group that achieves diversified business development through investment and mergers and acquisitions. It continues to focus on Web3, cutting-edge technology, medical health, new consumption, corporate services and other fields, and adheres to primary and secondary Ecological linkage, focusing on the investment strategy of industrial structure cycle, practicing the investment philosophy of in-depth research, technology-driven, and structured post-investment empowerment, committed to using capital and resource advantages to help companies maximize their potential, and jointly promote global business innovation and technological change .
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Since its establishment 13 years ago, BAI Capital has invested in more than 200 Internet companies, and achieved 17 IPOs and more than 40 unicorns. The investment fields cover retail, consumption and services, content and media innovation, industrial technology and software, and cutting-edge technology and underlying technologies. BAI is committed to finding and continuing to support market leaders, innovation pioneers and trend leaders from the early stage to the growth stage. It will continue to use the huge European resources and global network of the Bertelsmann Group and its ecology, and give full play to the advantages of the team's long-term cultivation in China. Assisting the development of invested companies in China and around the world.
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About NXG Labs
