This is Whistle’s 17th article, about whether there is something wrong with VC coins.
Author | Beichen
A few days ago, many friends forwarded the article "Return to Growth Drive: How Can VC Coins Get Out of the Dilemma of Narrativeism?" written by Loki of BeWater Venture Studio. The analysis of growth in the second half of the article is very exciting, but I think some of the views and details of the previous discussion of VC coins are worth discussing.
Let me first say the point that I agree with and think is very brilliant:
“The prosperity of 2020-2021 allowed some funds that should have closed down or should have closed down in the future to survive, and they also received money that they should not have raised. This money allowed some projects that should not have existed to continue to exist in 2021-2022, and even raised unreasonable amounts of money at unreasonable valuations, which ultimately led to these projects appearing in the secondary market at unreasonable valuations in 2023-2024.”
“‘Real growth’ should be highly integrated with product strategy, match the operational route, and maintain a high retention rate while eliminating non-sustainable factors (such as sweepstakes, short-term incentives, and points).”
“A truly outstanding CMO should spend 70% of his time on strategic observation and thinking, 20% on planning, and 10% on execution and achieving 100%+ results.” (Beichen Note: Although I think the proportion of execution here is a bit too low…)
“Make agreement revenue the highest priority growth metric” and “real sustainable growth comes from sustainable revenue generated by a sustainable business model.”
"90% of projects have not established a real economic model." "The problem faced by most "VC" coins is the mismatch between the growth of token circulation and the business." "A real economic model needs to meet the following conditions: 1. It can earn or can earn sustainable protocol income in the future; 2. The token cycle matches the project growth cycle; 3. Incentives are regarded as investment behavior rather than consumption behavior; 4. The class solidification problem of the chip structure is solved."
From the above analysis on growth, we can definitely feel that the author has been involved in many projects for a long time and even paid tuition fees in the market, so he can give advice closely following the actual operation of the projects. However, I really cannot agree with the discussion on VC coins laid out above.
1. The author believes that it is not just VC coins that are in crisis, but the entire crypto market.
There is nothing wrong with this sentence itself, but the point that the author elaborates on later is actually saying: It’s not that VC coins are not good, but that the overall environment is not good. You can see that other assets (such as memes) are not performing well either.
In fact, all the criticisms of VC coins in the market are focused on those VC coins that have raised hundreds of millions of dollars and are valued at more than one billion dollars. They are accusing the big VCs in the East and the West of inaction or even creating crises. These criticisms have nothing to do with small and medium-sized tokens. Just like the Occupy Wall Street movement in 2011, the spearhead was directed at the inaction of the US political and capital elites during the economic crisis, not a certain community bank. Otherwise, except for meme coins, almost all the coins in the market have received institutional investment, but do they deserve to be called VC coins?
These VC tokens that were so successful in the last bull market eventually fell by more than 95% from their peak (the statistical average is 93%), while the average decline of new coins is only 78%. A decline from 78% to 93% means there is still a 68% decline (1-(1-93%)/(1-78%)), but this decline may require a long period of unlocking and a bear market to achieve.
"Comparison of new and old VC coins: these new coins have "fallen out of cost-effectiveness""
This is a quote from the conclusion of "Comparison of New and Old VC Coins, These New Coins Have "Falled Out of Cost-Effectiveness"" written by Nan Zhi and published on Odaily Planet Daily on September 3. I think it is enough to explain the performance of VC coins. If VC coins are not only unable to resist the downward cycle, but also fall more sharply than ordinary coins, then what do LPs want VCs to do? Invest money directly in smart contracts, and then automatically invest a portion of it every time a new coin is issued, and the effect may be better in the end.
In addition, the author should not use the decline of meme coins to excuse VC coins. Meme coins themselves are a meme behavior that expresses emotions, a joke that makes community members smile, and early participants also follow the trend with the expectation of zero return.
However, comparing those VC coins that create grand narratives and occupy industry resources with the meme coins that are generated by following posts and leaving comments in communities that may only have a few hundred people, this thing itself is very meme-like.
2. The author believes that VC is not the culprit for the bad environment. In fact, due to contract and vesting restrictions, VC is the weaker party in this battle royale game.
I think anyone with a little financial knowledge would not blame VC for this round of market downturn. After all, the fundamental reason is that liquidity in the interest rate hike cycle flows back to the banking system. What everyone criticized was those highly valued VC coins, whose final landing was far less than the expectations of the grand narrative at the beginning, and the large selling pressure further undermined market confidence.
Secondly, how could VC be the weaker party in the battle royale? It is true that VC has a longer lock-up period, but it is also true that VC has lower costs, more chips, and greater influence on the team. Why is there so much selling pressure on those VC coins after each round of large-scale unlocking? Is it because retail investors are dumping the market?
Moreover, the author believes that VC is at the bottom of the crypto market hierarchy pyramid. The mistake here is to mistake the upstream and downstream relationship of capital flow for the superior-subordinate relationship of the pyramid.
This kind of reversal of the Tian Gang is like saying that commercial banks are at the bottom of the financial system because they have to wait until the due date to fully recover the principal and interest of the loan, so banks are at the bottom of the exploitation... It is also like saying that the devil Mephistopheles can only get Faust's soul when Faust defaults, so the devil is the exploited...
3. The author believes that it is a wrong view to think that technology or products are more important than the market.
I think the author's view is more suitable for analyzing industries that already have stable markets, such as beverages, milk tea franchise stores, and smartphones in 2024. Rather than industries that are still exploring the market driven by innovation, such as smartphones in 2012, AI in 2023, and Web3 payments in 2024 (by the way, Whistle's next blockbuster article is about Web3 payments!).
Why did the crypto market not take off, but AI did? There is only one reason, that is, AI has broken through the critical point of technology and can already bring in revenue, or has great hope of bringing in huge revenue. Crypto is far from reaching the critical point. Except for a very small number of useful products on the market, the vast majority are useless, and even those useful products are very homogeneous (for example, in theory, a chain only needs one DEX).
In short, crypto is a cutting-edge field and the market is in a chaotic state. It requires innovations in technology and business models to create new markets, just as Steve Jobs created the smartphone market.
The author’s brilliant analysis of growth in the second half of the article solves the problem from 1 to 10. It is very important, but it cannot be denied that the problem that the industry needs to solve more urgently is from 0 to 1.
4. The author believes that the founder or team members must have at least one one-on-one communication with each important KOL.
This view is actually difficult to refute because it is a false proposition in itself.
Unlike traditional industries, the KOL composition of the crypto industry is very complex, and it is difficult to understand the KOL of the crypto industry using the traditional definition of KOL.
For example, in a very traditional industry like automobiles, the KOLs who can influence consumers in the industry are all professionals. If you have to find a counterexample, it might be Zhou Hongyi who doesn’t have a driver’s license…
In the crypto industry, KOLs who can really influence consumers in the industry are often the founders of the project, investors of large institutions, or people who have worked in any position in the industry. For example, CZ destroyed Luna with a tweet, which directly led to the collapse of Three Arrows, the bankruptcy of FTX, the collapse of Silicon Valley Silver, and a series of chain reactions... Which professional KOL has this influence?
Therefore, for the crypto team, instead of cooperating with KOLs, it is better to directly build an ecosystem with "industry partners with industry influence", and then cooperate with the media to produce in-depth articles that can clearly introduce the products, and finally cooperate with the matrix account to forward it.
As for how the product can maintain long-term stable growth in the future, the author has conducted a wonderful in-depth analysis in the second half of the article, which you can refer to directly.
This article is mainly to discuss the author's views on VC coins. Friends are also welcome to share their own views and discuss in the comment area~