Author: Armonio, Kelsey; @armonio_liang, @KelseyWeb3VC
AC Capital's investment philosophy: insist on independent thinking and create industry benchmarks.
Crypto professionals deeply entrenched in the industry may have heard: AC Capital has participated in a series of well-known project investments, including @CetusProtocol, @Scallop_io, @MyCoralApp, @swellnetworkio, and @TakoProtocol. However, beyond this, it is less known that nearly 100% of our 2024 token launch projects have achieved success.
Although the market environment is no longer as smooth as in 2019-2021, we still submitted a proud report card. This achievement reflects not only the professional capabilities and relentless efforts of our team but also the trust and support of industry partners. In the face of a challenging market environment, we understand that every achievement is inseparable from our long-term commitment to the industry and the spirit of collaborative building.
01 Through the surface, delve into value
In this year's market, many may attribute our success to the 'all-KOL' model, which is indeed easy for the outside world to perceive. However, what the market fails to see is the in-depth research and systematic support we invested to achieve these results.
In this year's market, many may attribute our success to the 'all-KOL' model, which is indeed easy for the outside world to perceive. However, what the market fails to see is the in-depth research and systematic support we invested to achieve these results.
Behind this is not just simple market operations, but also reflects our consistent adherence to the following core values:
Independent thinking and in-depth research: We never follow the market's clamor; instead, we discover the truly overlooked value through rigorous analysis and insights.
Long-termism and idealism: Investment is not merely about short-term economic returns but also a profound commitment to the future of the industry.
Theory-driven and builder mindset: We act not only as capital providers but also as industry builders, growing together with projects.
People-oriented, discerning the subtle: Investing in a project means investing in people. The creativity of individuals is the driving force behind emerging industries. Self-driven entrepreneurs with leadership qualities can maximize their team's execution capabilities. In addition to due diligence on the founder and team background, we also assess the project's founder and team's quality through their execution capabilities in online and offline activities, grasping project planning rhythms, and project delivery capabilities. Excellent founders and teams, even if they face temporary setbacks, can make a comeback.
02 The essence of VC: the ability to think independently
We firmly believe that independent thinking is the foundation of venture capital institutions' survival. If independent judgment is lost and one merely follows the crowd, venture capital institutions will ultimately become 'chives' of the market, paying for the industry's overheating and irrationality.
At AC Capital, we always approach the industry with a rational attitude, deeply understanding the logic behind each track and project. This insistence not only helps us stand firm in turbulent markets but also allows us to create long-term value and promote the sound development of the entire industry.
At the beginning of 2024, BTC ecosystem investment is booming in the industry. AC Capital ultimately gave up all investment opportunities in it. On one hand, this is indeed because most projects are overvalued; on the other hand, we believe that many people still have not clarified what differences decentralized BTC or the absence of Satoshi’s PoW mechanism bring to the market.
We believe that decentralization is a special service. It is fundamentally different from centralized services. Openness and permissionless access are the core values of decentralized services. Anti-censorship is the cornerstone of decentralization for permissionless access. An anti-censorship product is not meant to confront the law, but to gain opportunities for negotiation with the old production relations through confrontation. If a product actively complies from the start and integrates into the old system, what reason do the high-ranking rent-seekers have to share benefits with you? How can such a structure change production relations? If production relations cannot be changed, the greatest economic externalities of blockchain will vanish. Currently, only networks like BTC that are PoW and lack a true dominant party have anti-censorship properties. Early BTC layers actively made PoS, passively lowering their anti-censorship nature. Indeed, we can migrate BTC to other networks, inheriting the market value of BTC as a token. The core value of BTC is its decentralized value, not its market value. All current L2 networks cannot inherit the decentralized network value of BTC, which is the ability to resist censorship. The future of RGB may be bright, but it is too early to be an investment target at this stage. The spirit of independent thinking in the BTC ecosystem investment track has helped us avoid certain externality shortcomings and poor positioning in PvP battles.
Most Chinese VCs are trapped in 'short-termism.' Limited by our financing cycle and the yield of funds, AC Capital also considers the cycle of capital turnover. However, our asset package does indeed include long-termism and thesis-oriented investments.
This year, the best return for us has been our long-term support for @CetusProtocol. We invested in Cetus during 2023, as the industry entered a dark age. We recognized the future planned by Sui but were constrained by insufficient funding and strength, thus could not participate in Sui's main investment at reasonable costs, choosing what we believe to be the most likely leading DeFi on Sui. At that time, we noted their execution capacity and product delivery capabilities. In the new language environment, rapidly delivering complex DeFi products, they secured the top position in Sui's DeFi ecosystem. Specific investment considerations are reflected in our article: AC Capital: Why we’re investing in Cetus【1】.
@CetusProtocol
This investment is one of our successful investments that have traversed the bull and bear markets this year. Throughout our long-term post-investment collaboration, our relationship with Cetus has gradually deepened, with trust continuously strengthening. Due to our relationship, Cetus also introduced us to quality projects like Scallop, Navi, and others.
We have found that projects within the Sui ecosystem maintain harmonious relationships. Mutual praise among projects is not uncommon; during workshops hosted by Sui and Navi, we discovered more of this mutual recommendation. This is, in our view, a very good phenomenon that a builder's ecosystem should have: collaborators who recognize each other forming a builder community. It is not the exclusion and competition seen in other ecosystems, and we have also gained opportunities to invest in quality projects due to our long-term good collaborative relationship with Cetus.
@MyCoralApp
This year, another very successful investment for us is CoralApp. DePIN+2C is a brand new attempt in the crypto industry. Not only has Solana launched its own phone, but Ton and Sui are also developing their own crypto phones and gaming consoles. This indicates that DePIN+2C is a consensus among different ecosystems in the industry. So does the Binance ecosystem also need a similar product? Therefore, CoralApp has carved out a niche in the BSC ecosystem, as if all BSC ecosystem projects have twisted into a rope, working together to expand ecological effects; CoralApp is the best amplifier. In a phase where the industry has not achieved significant technological breakthroughs, the logic of this industry cycle is attention. When Solana was disregarded by others, it doubled down on the meme track, seizing the attention of all gamblers in the industry. The underlying business logic of consumer-oriented DePIN is to seize the attention of enthusiasts of fragmented plates in the name of consumer goods. The rules of engagement are different, even if it is the same meme. BSC has fallen silent in this round of meme gameplay innovation; we believe that the DePIN + meme launcher may be one of the innovative points in the application track.
Doing the right thing also requires finding the right people. From our understanding, CoralApp not only has a mature and experienced Web3 team but also has the backing of Binance's investment and incubation, which will at least double the effectiveness of market promotion in the current cycle and operate traffic effectively. The hardware is directly connected to Shenzhen's mature supply chain, ensuring delivery capacity. A team capable of delivering reliable hardware and operating the attention of Web3 is sufficient to support innovation in DePIN + Meme.
@swellnetworkio
With the upgrade of the Ethereum network and the popularization of applications, LSD (Liquid Staking Derivatives) has become one of the core narratives of its ecosystem. Although the market has always had doubts about the price of ETH, the author believes that the current exchange rate of Eth is approaching the bottom. Looking ahead to Q1 2025, the Ethereum ecosystem may welcome a huge window period for both exchange rate and activity to rise, with the potential for several months of significant increases, releasing enormous growth potential for related tracks, including LSD.
LSD is one of the important drivers of DeFi ecosystem development. By releasing the liquidity of staked assets, it allows users to gain staking rewards while participating in DeFi activities. This not only enhances the utility efficiency of assets but also brings Stake and DeFi closer together. Currently, Ethereum's staking volume accounts for about 11% of the circulating supply, and significant growth has yet to come.
Compared to the leading player in this sector, Lido, the most significant difference for Swell is its integration of atomic deposits: allowing users to directly deposit ETH into their chosen validators, thereby creating the first de facto staking market.
AC Capital's layout in the LSD field focuses on Swell Network, a flagship project that exhibits extremely high investment value:
The unique advantages of Swell Network
As a newcomer in the LSD field, Swell Network stands out due to its innovative design and market potential:
Decentralized non-custodial model: providing secure, low-threshold staking services to ensure user asset safety.
Liquidity optimization: After staking ETH, users can obtain swETH for DeFi applications or overlay strategies to enhance returns.
Technological innovation: the first to adopt distributed validator technology (DVT), enhancing the capital efficiency of node operators and the decentralization of the network.
User-friendly: launching the 'Voyage' program, enhancing user stickiness through rewards of 50 million SWELL tokens and gamification mechanisms, and supporting node operators in building custom front-ends (white label functionality).
With comprehensive advantages in technology, security, and incentive mechanisms, Swell Network has the potential to become a core player in the LSD track. During Ethereum's recovery cycle, combined with AC Capital's support, Swell is expected to bring substantial long-term returns to investors through innovation and growth.
@memeficlub
The explosion of the Meme track is not only the current market focus but may also be an important prelude to the revival of DeFi. The on-chain trading characteristics of meme tokens exhibit high frequency, low latency, low cost, and high stability; these advantages are underpinned by the continuous improvement of underlying blockchain technologies, including advancements in the Solana communication protocol, the ETH Cancun upgrade, and the popularization of asynchronous consensus and concurrent execution. MemeFi not only follows this technological trend but also opens up a brand new track with its unique positioning.
MemeFi is a Web3 game based on Telegram and Sui, deeply integrating social interaction with PvP/PvE gameplay to build a dynamic economic ecosystem. Players enhance their strength by obtaining social keys and $PWR, completing tasks, challenging bosses, and participating in clan activities to earn the core token $MEMEFI as rewards.
MemeFi lowers the barrier for users' on-chain interactions, allowing management of on-chain assets through social media or Web2 accounts, achieving more efficient transaction aggregation. This design not only bridges the experiential gap between DeFi and CeFi but also aligns with the current trend of user habit shifts, further expanding potential market space.
Its outstanding data performance and market potential
User base: with 55 million users, 28 million monthly active users, and 7 million daily active users, it is the 5th largest community on Telegram worldwide.
Strong income capability: user in-app revenue reached $11 million within 30 days; B2B advertising network earned $9 million in 5 months.
Ecosystem integration: ranking first in revenue among Telegram mini-games and first in user activity (UAW) on DappRadar, demonstrating its leadership in the integration of social and blockchain.
Strategic significance and industry position
In the blockchain field, where 'traffic is justice' is a common sentiment, MemeFi has become a pioneer through deep cultivation of the community and efficient conversion of traffic. For AC Capital, investing in MemeFi is not only about deep layout in the track but also actively contributing to the profound integration of blockchain technology and social economy.
In addition to projects that have already been listed, we are also optimistic about some projects in our investment portfolio that are expected to be listed by the end of this year or early next year; everyone can pay attention to them:
@TakoProtocol
@TakoProtocol is a leading project in the social track. Its position in the Web3 social ecosystem and its connections with capital and projects need not be elaborated. We at AC Capital are fortunate to support the core infrastructure of the industry, which is the harvest of our long-term vigilance over the industry. The advantages of the project need not be repeated; we focus more on how social interaction can provide intangible assets for the future world. (From this perspective, Memecoins are merely a second-best choice after short-term goals fall through: seeking an asset that is not anchored in value.)
Social interaction is an important traffic entry point for the internet, especially on the value internet where attention can be directly monetized, making it even more strategically valuable. Currently, although Meme and prediction markets have taken the lead, the broader direction of social applications is ultimately valuable. These applications, like Tinder and Snapchat, approach a social sub-track related to value from a specific dimension. Tako also has this potential, especially with on-chain reputation being a focal point of social value. We look forward to Tako's exploration bearing fruit.
@0xpioneer
This is a hardcore ZK gaming track project.
The current investment returns in the ZK track are not ideal, but like many VCs, AC Capital still sees a promising future for the combination of ZK and cryptography. One of the core technologies that allowed BTC to establish itself is cryptographic signature technology, which is a special case of zero-knowledge proof (the prover does not need to tell others what the private key is, but can prove to the verifier that the prover holds the private key of a certain public key). The rise of the crypto industry is largely due to the spread and development of cryptographic technology. The progress of productivity originates from the departure of cryptographic technology from traditional applications such as information confidentiality. Native cryptographic technology projects, such as ZK games, are projecting cryptographic technology into entirely new fields. We remain optimistic about the coins that such innovations may yield.
Moreover, in terms of industry trends, ZK has been one of the important development directions in the industry, capturing the attention of capital and investors. Whether it's the global tour, the first stop in Chiang Mai's Invisible Garden, or this Devcon, ZK is under the spotlight of industry development. Recently, the ANON that Vitalik purchased also has ZK background, and the underlying technology continues to break through with increasing efficiency. An explosion may happen in an instant.
0xpioneer is a team that roots itself in the entire chain game using ZK technology. This level of technological strength is rare in the blockchain gaming sector. The technology and efforts have been recognized by Scroll and Movement.
We know ZK is a very challenging technology. The technology itself has great prospects and can form a brand new gaming information environment. However, not only is the development difficult and the reusability low, but it is also currently very hard to find effective commercial use cases. Gaming is the most significant use case apart from zk-rollups. We hope that an open, fair, and transparent information environment can create a brand new business model.
0xpioneer has done something remarkable; it has leveraged its strengths in ZK technology to achieve an independent world without compromising the gaming experience. We often say that gaming is the entry point for Web3. All ecosystems hope for massive adoption by users. Without some 'special skills' that Web2 cannot solve, why would users come?
0xpioneer’s ecological position in Scroll is also worth noting. Anyone doing projects knows that resources are mutually leveraged, 0xpioneer has relatively hardcore technology and a mature, experienced operations team; such a combination is sought after in any ecosystem. From our perspective, we believe that 0xpioneer and Scroll will bind and collaborate more deeply in the future.
In the early stages of the Scroll ecosystem, projects like 0xpioneer, which have distinctive ecological characteristics, will share glory with Scroll. Investment should focus on this type; if I lose, the big players lose even more.
@POMONetwork
The bull market that began in 2023 is a dual-growth bull market of intertwined lotus flowers. On one side is the meme frenzy that is anonymous and legally permissible; on the other is the Web2.5 expansion that is rooted in tradition and thrives together.
If the industry is based on gambling, then the current users already encompass the vast majority of target users; how to bring target users to your gambling table is massive admission. If it is to serve the global economy and become the backbone of the next-generation global economic system, then our massive adoption has just begun.
We at AC Capital believe: POMONetwork is a small 'open economy' experiment in this economic movement, an attempt at massive adoption.
The term 'open economy' used here is derived from 'open finance,' which aims to bridge the gap between physical world data, social data, and economic behavior data through encrypted accounts, enhancing the intrinsic value of information, and enabling data mining. It is anticipated that open data will lead to more effective resource allocation, allowing Web3 to truly connect to the trillion-level consumer market.
POMO uses a user management system CRM to connect merchants, employing PayFi infrastructure to put consumption data on-chain, and attracting ordinary users through geographic information-based social and lifestyle displays. It combines DePIN for data collection with social advertising as data application scenarios, forming a logical closed loop for business. The integrated high-dimensional data also surpasses web2 data sets, providing users with more value.
In the logical closed loop of business, whether consumers evolve into data producers, merchants receive better data services, or AI computing power extracts more information value, all parties benefit from the POMO network. This model, coupled with a highly capable execution team, already presents good odds.
Such products are projects with cash flow, new users, and new narratives. In the wave of memes, we know that making memes is simple and low-risk. Perhaps it is expectation or a sense of mission; we especially look forward to the birth of blockchain products with economic externalities. As a VC, such projects embody our mission.
@honeypotfinance
In addition to recognizing the project team's operational execution ability and other aspects, we are more optimistic about Berachain's dedication to liquidity solutions. The largest industry on the blockchain is DeFi, and the biggest issue facing DeFi is insufficient liquidity. To solve the liquidity problem, on one hand, it is necessary to improve the network's performance and reduce the operational costs of liquidity strategies, and on the other hand, liquidity must be incentivized. Berachain emphasizes liquidity from the network layer and integrates incentives for liquidity into its consensus infrastructure. Liquidity as a service, I like it. As Honeypot is a deeply bound DeFi ecosystem project of Berachain, it will inevitably benefit directly from the ecological liquidity strategy.
As a long-term investor in Honeypot Finance, we believe that its strategic foresight and innovative capabilities demonstrated before the launch of the Berachain mainnet will drive the project to achieve long-term value. Here are our investment logic and focus points:
1. Innovation-driven core product
Honeypot Finance has redefined the functional value of DeFi platforms through its innovative 'meme launchpad':
- Modular centralized liquidity integration: endowing meme tokens on the Pot2Pump platform with long-term value.
- User incentive mechanism: The announced $4 million market incentive, combined with innovative liquidity solutions, has greatly stimulated user interest and market attention.
2. The deep integration of DeFi and GameFi
Honeypot Finance cleverly combines DeFi and GameFi, forming an eco-experience that is both entertaining and profitable:
- The reward mechanism links to real DeFi activities, providing staking rewards while enhancing the reward pool through Dreampad's reward flow.
- Users gain the experience of 'earning while playing' through this mechanism, while also enhancing their dependency and loyalty to the platform.
3. Cross-chain expansion and globalization strategy
The project's cross-chain flywheel strategy demonstrates its ambition beyond Berachain:
- By connecting multiple ecosystems, Honeypot Finance aims to attract a wider range of users and liquidity.
- Such cross-ecological layout enhances the project's cyclical resistance and market penetration, laying a foundation for long-term growth.
4. Commitment to technical refinement and ecosystem building
Honeypot Finance demonstrates a high degree of focus on technical details and ecological collaboration:
- The code written from scratch reflects the team's dedication to safety and originality.
- As a 'Crypto Native and ecological builder', the team has deeply engaged with Berachain, driving overall growth in the ecosystem.
Honeypot Finance's innovative capabilities, strategic vision, and attention to detail make it one of the most promising projects in the Berachain ecosystem and the broader blockchain field. We believe this project can not only stand out after the mainnet launch but also provide stable and substantial returns for long-term investors.
In addition to introducing ecosystems and projects, our connections with many quality projects are also due to our positioning as ecological builders. During the darkest market times in 2023, when many builders withdrew and capital lay flat, AC Capital initiated and organized several events such as BuilderCon 2023, Fueling up HK 2023, and Genesis Demo Day in Hong Kong and Bangkok over the course of a year. In the deepest darkness, what is tested is the most sincere crypto faith. These meetings have allowed us to meet some of Asia's most talented and steadfast crypto builders. For instance, quality Sui ecosystem projects like Scallop, Movebite, and Typus were connected during that time. Didn’t investment targets just jump into our bowls?
As 2024 approaches its conclusion, reflecting on the successful experiences of the entire cycle, we believe the key can be summarized in the following three points:
1. Emphasizing influence building: not just investment, but deep participation in the industry ecosystem. AC Capital shapes itself into an industry thought leader and value disseminator through continuous voice and action.
2. Combining idealism, long-termism, and pragmatism: Distancing from traditional VCs by adhering to a value-driven investment logic, balancing idealistic and realistic needs, and forming a unique 'investment taste' in the industry that is both forward-looking and focused on implementation.
3. Crypto Native and ecological builder positioning: deeply rooted in the crypto industry, anchored in core ecosystems, not just playing the role of capital but also promoting project growth and ecosystem improvement with a builder mindset.
These three points are not only our winning secrets for navigating complex cycles but also crucial cornerstones for continuing to expand market space and influence in the future.
Reference link
[1] AC Capital: Why we’re investing in Cetus
https://medium.com/@ACCapital1/ac-capital-why-were-investing-in-cetus-5fcbbd92fe34【2】Event Recap丨BuidlerCon2023 Successfully Held, Non-EVM Builders Gathered in Hong Kong
https://medium.com/@BuidlerCon2023/event-recap丨buidlercon2023-successfully-held-non-evm-builders-gathered-in-hong-kong-2376e172d7d0
[3] Event Highlights丨 Fueling up HK 2023
https://foresightnews.pro/article/detail/30913
