The cryptocurrency market has been depressed recently, with altcoins falling for three consecutive months and Bitcoin stagnating. The downturn is expected to continue until August, when the launch of the Ethereum ETF, preparations for the presidential election and potential interest rate cuts may lead to a market recovery. This is just my personal opinion.
Limited recent activity, except holding ETH, participating in Pendle and Gearbox revenue farming, and signing angel investment agreements, no other matters. Trading is difficult, and most airdrop projects are sold off, with only a few exceptions, such as ENA, which has risen by about 50% since TGE.
Unlike 2021 and 2022, the tokens launched in the past year have less price fluctuations after the TGE, and the fluctuations are in the private stage. Unless you are a specific role, this bull market is difficult. Although there are exceptions, most people think it is one of the most difficult bull markets. OGs have not fully utilized their advantages, and ultimately fund management is their own responsibility.
In 2023 and early 2024, I was often immersed in the trading interface. Recently, I have a calm attitude towards the market because it is difficult to do anything other than short-term trading. The market situation reminds me of the collapse of Terra in May 2022. I still believe that DeFi will revive, and Farming points and airdrop hunting will become new forms, such as Ethena. I hope that the new stablecoin protocol Usual can seize the opportunity like Ethena.
Stablecoins are key practical scenarios, providing fund storage and convenient transfers. There are already stablecoins with yields, such as Ethena, Open Eden, Usual, etc. The stability of the yields is yet to be discussed, surpassing the UST period of Terra. We look forward to the emergence of stablecoins that are safe and provide 5% sustainable yields, which have great market potential.
In this bull market, I look forward to EigenLayer, Pendle, Gearbox, Hivemapper and related protocols, and miss the high-yield mining projects in the last bull market. I tend to support innovative products, doubt the necessity of some forked versions, and consider starting my own project. Due to the sluggish market, I have more time to read. Share the books I read recently.
Venture funds are funds specifically used to invest in start-ups, commonly known as "dry powder", which is the main investment tool. Each fund is managed as a limited partnership in accordance with the partnership agreement for a period of about 7 to 10 years.
The fund's single objective during this period is to make a profit, which it achieves in two main ways:
A performance fee on fund returns, usually around 20%.
Management fee, usually around 2%.
This explains why you’ve heard of the 2/20 model.
The management company, also known as the venture capital company, is responsible for the day-to-day operations of the venture fund. It is different from the venture fund itself and is a business entity established by the company's partners.
The management company uses the management fees received to pay for the costs of company operations, including rent, employee salaries, etc. These management fees are used to support the deployment and growth of the fund.
Venture capital managers receive performance commissions only after limited partners receive returns.
GP, or general partner, is a core member of the management company, responsible for leading and overseeing the operation of the venture fund. GP may be a senior partner of a large venture capital firm or an independent individual investor.
GPs’ responsibilities include raising and operating venture funds, making investment decisions, evaluating potential investment opportunities, recruiting teams on behalf of the fund, assisting portfolio companies in achieving exits, and deciding how to effectively use the funds they manage. In general, the role of GPs can be summarized into two key tasks: investing in high-quality companies with potential, and raising more capital for the fund.
The GP’s remuneration comes from the fund’s performance commission and management fees. For example, if the performance commission ratio is set at 20%, then 20% of the fund’s profit will be used as the GP’s remuneration.
The actual source of funds for venture funds is limited partners (LPs), who are the financial pillars behind the fund. LPs usually include the following types of institutional investors:
University Endowment Fund
Pension funds
Sovereign Fund
Insurance companies
foundation
Family Office
High Net Worth Individuals
The core assets of a venture fund are its portfolio companies, which are start-ups that receive preferred shares in exchange for investments from venture funds. While specific requirements vary by fund, companies that receive venture capital generally need to meet the following conditions:
They should operate in markets with broad potential
Achieved product-market fit
Have excellent products that are loved by customers
Demonstrate strong economic performance and the potential to generate significant returns for investors
Here is a list of some of the largest crypto venture capital firms.
Angel Investment
Angel investing usually refers to investing at an earlier stage before venture capital, and angel investors tend to operate independently and write relatively small checks. This investment behavior mainly occurs in the "pre-seed" or "seed" round of a company, that is, when the product or service has not yet taken shape, or in its early stages of development. Although angel investing is riskier because most startups may not be able to develop sustainably, it also offers huge potential returns if the invested companies can successfully grow.
I am passionate about the angel investing field because it is a field where, regardless of one’s background, one can become an influencer in one to three years by investing time, effort, and consistent action. This field is new and dynamic, and even without a background from a top university, you can become an expert through trial and error and curiosity.
So how did I get started in angel investing?
To explore this question, let's go back to the beginning of the story. Before I got involved in cryptocurrency, I was a member of the stock market, focusing on stock trading and improving the quality of life. In January 2019, I created a Twitter account to mainly share these contents. Before Twitter, I also ran a blog to discuss investment topics and wrote some press releases (these manuscripts have now been deleted). In 2021, I quit my 9-to-5 job and devoted myself to the cryptocurrency field full-time a few months later. At first, I just randomly invested in NFTs, DeFi projects, and some niche currencies on Binance. But as I continued to share my insights, I began to receive opportunities to participate in transactions. At first, I declined these opportunities due to my lack of experience, but I soon realized that many people who were more inexperienced than me were already involved.
This experience made me realize that although I knew very little about cryptocurrency at first, through learning and practice, I was able to gradually accumulate experience and find my place in this field.
As you all know, I’m a KOL, even though I don’t really like that title. With 300k followers on Twitter and 30k subscribers on Substack, I’m approached by many founders of projects asking if I’d like to invest in their projects, usually with no strings attached. There’s an unwritten rule though, that you should post something for the project, which totally makes sense. Project gets exposure → people start paying attention → more people buy → price goes up.
Therefore, I think there are more KOL rounds in this round because many founders feel that VCs don't contribute much. Yes, they do have network resources, but usually don't have a huge audience. KOLs have a huge audience and usually have solid network resources. Therefore, many VCs have also transformed into semi-KOLs to share more benefits. To be honest, I don't blame them.
Basically, I’ve followed my curiosity and dabbled in multiple areas in the Crypto and Web3 space. I wouldn’t call myself an expert in any field, but rather a well-rounded person who knows a little bit about a lot of topics. If I don’t have an answer myself, I’ll use my network in the field to find it. Many opportunities come from people reaching out to me after seeing something I’ve written or posted. However, I do think I have a certain advantage in some areas. In the DeFi space, I’m personally most interested in trading DEXs, stablecoin protocols, and yield narratives, such as EigenLayer, Pendle, Gearbox, Mellow, Symbiotic, etc. I’m also very fascinated by trading, whether it’s on a CEX or a DEX. My dream is to have a competitor to Binance/Bybit one day, so I also like to work with teams that have this goal. I also have an advantage in marketing, and I know what works and what doesn’t work as a KOL.
How should I obtain transaction flow?
In the Crypto space, it is essential to either have specialized niche knowledge or build a strong personal brand. Ideally, it is best to have both.
Angel investors who have a significant personal brand or a large audience base perform well because businesses value their support, which not only enhances credibility but also helps with product promotion and distribution. When reputable individuals align themselves with a business, the association itself sends a positive signal and helps spread the word about the business's products or services.
Additionally, seeing your name when founders mention their list of investors in pitch materials is a strong trust indicator in itself. For example, if you see Cobie is also recommending this project, many people may choose to invest without a second thought, even without doing in-depth due diligence. After all, if a project can attract a well-known person like Cobie, it should be a good choice for you too.
When deciding to make a transaction, the main factors to consider are
When I consider whether to enter a transaction, timing is definitely a key factor. I need to carefully evaluate the transaction conditions, including our current market conditions and market expectations for the next 3 months, 6 months, 12 months, and even 2-3 years. This is especially important given the potentially long vesting schedule.
I also think deeply about whether the team is building products with innovation and market fit, and whether those products are sustainable. I explore how they fit into the market narrative and which VCs might be involved. Next, I talk to people in my trusted network to get their perspective, including why some VC friends didn’t participate or why they didn’t invest at a larger scale.
I also consider the competition, assess the current TVL and future potential. In addition, I need to ask myself whether the protocol can sustain itself after the incentive program ends or will it be abandoned by the market. These questions are an integral part of the decision-making process.
I’ve outlined the role of venture capital firms and a basic understanding of angel investing. Here’s a more in-depth look at angel investing from Ben Roy:
The cumulative effect of social capital can be just as powerful as the growth of your financial capital, and perhaps even more impactful.
I believe that social capital is a key driver of professional success in any career pursuit, whether it is sales, technology development, academic research, or philanthropy.
It’s critical to have a network of well-rounded friends who not only have broad connections, capital, and new insights, but also the wisdom and ability to spark change. If you make friends with people like this, you’ll be able to work together to truly improve the world.
What do you think of DeFi? Welcome to leave a message in the comment area
