Recently, I suddenly feel that if a project has a valuation over 100 million, it becomes a significant watershed. The community also believes that having a valuation over 100 million is a kind of original sin. Because now all the leading exchanges require some project tokens as liquidity margin or platform token airdrop activities to ensure that prices do not fall below a certain point and to maintain liquidity and enthusiasm for a period of time.

But this margin is charged based on the token ratio. Assuming 5% is required, a 1 billion project would be 50 million dollars, and a 100 million project would be 5 million dollars.

Many projects with valuations over 100 million usually spend more than a year building products and generating hype. The expenses during this period are actually quite substantial, and when combined with the costs for market-making or token listing, there isn't much left for price protection.

Against the whole industry.

Yes, when a project has a valuation over 100 million, it faces many problems.

For example, at many internal meetings of funding parties, it may be immediately passed over with reasons like: 'We don't want to take over from the last one, we think this won't recoup costs, we think this is too absurd...'

And at exchanges, according to Binance's recent listing logic, projects with valuations over 100 million are easily delayed in listing reviews because large investors don't like them, communities don't like them, and exchanges worry about opening market values being too high, leading to subsequent secondary markets not keeping up.

And community participants in the project may have high expectations because they spent effort, received airdrops, or participated in locked staking. If the final market value falls below the last round's valuation price, it will lead to everyone's curses.

Looking at it today, when a project has a valuation over 100 million, it is highly likely to receive criticism from the community, funding parties, and exchanges.

Blood-letting price protection.

I had the honor of visiting Singapore at the end of last year during the early bull market, where I met many smart, continuously successful entrepreneurs. Although the market's hostility towards high-valuation projects wasn't as strong at that time, these smart individuals all believed that high valuations would be a significant problem.

Therefore, their projects ultimately all approached a valuation of 100 million, sending projects to Binance or Bybit.

At first, the market was still willing to take on these projects, and market makers would synchronize daily regarding the buying situation in the secondary market. The project parties themselves hoped to drive up prices through market-making within a year before unlocking for investors.

But everything changed.

No new users were taking over VC coins anymore, all VC new coins were falling, and the data synchronized from market makers daily showed significant losses. The money in the project party's account couldn't last half a year before going bankrupt.

So some VC coins began to fall freely after they couldn't withstand the margin requirements. Founders spent their days high on drugs and drunk, and I knew quite a few founders who developed depression, and this was just for projects that had just surpassed a valuation of 100 million.

Looking at it today.

Not long ago, when the market slightly warmed up, I had the honor of communicating with some leading fund owners. When discussing investment decisions for projects with valuations over 100 million, everyone expressed regret and reflection. We believe this will help improve investment decisions for projects in the next stage and assist in the market's emergence of more low-valuation, small and beautiful projects.

Some also asked, what about North America or the Middle East? In fact, many of them also regret their high-valuation investment decisions. For many projects that were invested in, when they sought higher valuations to poke these old owners, their replies were, 'We will not consider the next round, you can go raise funds in Asia, or look for Binance Labs.'

So, although today, VC investment frequency is much lower than before, everyone is adjusting strategies, seeking projects that have already generated data in the community or have already launched products, which are low-valuation, small and beautiful.

And bloggers and communities are no longer pursuing KOL rounds with valuations over 100 million; everything has returned to rationality, back to the normal industry state before the pandemic's excessive liquidity.

AB KUAI DONG
December 1, 2024