The Unsung Heroes of the Investment World: The Current State and Challenges of Crypto Asset Venture Capital

Recently, venture capital (VC) in the Crypto Assets space has become a hot topic of discussion. On one hand, opinions in the community about the so-called "VC coins" are mixed, while on the other hand, news regarding VC rights protection and closures is also frequently heard. However, the VC industry has always had a high elimination rate, and this is not a new phenomenon that has just emerged.

The Prosperity of VC in the ICO Boom

Looking back at 2018, a financial institution held an industry conference in Chongqing, where awards were presented to professionals in the field. Among them, the "Outstanding Token Fund" award recognized the top 40, but the podium could hardly accommodate all the winners. This reflects the VC boom caused by the ICO frenzy in 2017. At that time, the number of VCs in the Shanghai area alone exceeded 100, with very low entry barriers. Nationwide, the number of VCs may have reached several hundred.

However, as time goes by, many VCs on the award list from back then have vanished without a trace. This phenomenon vividly showcases the brutality of the industry, while also reflecting the dynamic process of the old giving way to the new.

Breaking the Misunderstanding about VC

Retail investors often have a biased view of VCs. When there are VCs involved in popular projects, people tend to think that VCs are all making profits. In reality, the failed projects in a VC's portfolio are often unknown. It is precisely because of the high failure rate that VCs need individual projects to have high return potential.

On the other hand, when VC investments fail, the community may criticize VCs for colluding with project parties to "cut leeks", while overlooking the fact that VCs may suffer greater losses than retail investors.

Criteria for Evaluating the Excellence of VC

To measure whether a VC is excellent, two key factors should be considered:

1. Performance: The primary task of a VC is to create returns for investors. Interestingly, some larger, well-known funds may not perform as well in reality.

2. Industry Contribution: In addition to financial returns, it is important to assess whether the VC investment projects demonstrate technological innovation and contribute to industry development. Institutions that merely invest in hype projects or enter star projects at inflated valuations cannot be considered excellent.

Challenges Faced by Crypto Assets VC

1. Valuation Bubble: Some well-funded institutions have driven up project valuations, resulting in fewer entry opportunities for retail investors and limited upside potential.

2. Professionalization Demand: As the industry matures, various tracks are gradually occupied by giants, and VCs need to engage more deeply in project operations and provide more resource support.

3. Decentralization Trend: Ideally, the Crypto Assets industry should gradually reduce its reliance on VCs and move towards a more decentralized direction.

In the face of these challenges, VCs need to continuously adjust their strategies and enhance their professional capabilities to contribute more to the development of the industry. At the same time, platforms such as exchanges can also consider taking measures, such as establishing a price limit mechanism or promoting a community fair sale model, to balance the interests of all parties and promote the healthy development of the industry.