Asia-Pacific entrepreneurs really do not need to be arrogant, the next development of the crypto industry needs people with different modes of thinking to work together, and there are many opportunities for the traffic layer and application layer.
In 2022, the most popular game in the Web3 industry is STEPN, as its early lead behind the scenes, Folius Ventures (Chinese name “One Leaf Ventures”) has also become one of the most eye-catching emerging venture capital institutions this year, and other representative investment projects include Project Galaxy, Scroll, CyberConnect and many other star projects.
It is worth noting that Folius Ventures’ investment targets are limited to Asia-Pacific and Chinese entrepreneurs. The agency’s founder, Jason Kam, Chinese named Jin Qiu, is a Chinese who grew up in Hong Kong, China. Jason, 32, has a deep investment banking background, having worked in Wall Street investment banking, New York family offices and hedge funds, and has a long-standing focus on emerging markets in the Asia-Pacific region.
Jason believes that the next chapter of Web3 will be written by B2C applications, and in the next 5-10 years, entrepreneurs in the Asia-Pacific region will have a huge advantage over European and American competitors.
Here’s a detailed conversation between ChainCatcher and Jason:
ChainCatcher: Tell us about your journey into the crypto industry and the story of Folius Ventures.
Jason: My Chinese name is Jin Qiu, born in 1990, lived in Hong Kong before high school, and has been in the United States ever since. I graduated from Carnegie Mellon University in 2012 and have been working on Wall Street since then, working in investment banking and family offices. For the past four to five years, I have worked for a hedge fund in New York with a primary focus on secondary small-cap companies in emerging markets around the world, where I have been responsible for China-related companies and have done many in-depth research. This is my professional experience.
I became interested in cryptocurrencies at the beginning of 2018, when the market turned bearing, and after I started paying attention, I opened an account on Twitter (@MapleLeafCap) to anonymously do some analysis of cryptocurrencies in the traditional financial way. When I was in DeFi summer, I thought it was very interesting and made a lot of sounds. As a result, I met a lot of industry partners through Twitter, and later found that they were all executives of some funds, even GPs, and the communication was very close at that time. Later, they began to encourage me to jump into the industry, and after gaining their support, I made up my mind to quit my job and do it professionally.
I quit my job in May 2021 and founded Folius Ventures in September of that year, with investors including Framework, Galaxy, Dragonfly and others. For investors, my identity is more like their bridgehead in the Asia-Pacific region, and they will have their presence behind our investments. We are also raising funds this year and there will be a considerable amount of money to continue to invest in the crypto market.
ChainCatcher: What are the main differences between Folius Ventures and other investment institutions?
Jason： There are three main differences between Folius and general investment institutions:
First, we have a geographical preference, and we focus on investing in entrepreneurs and projects in Asia Pacific and the Mandarin-speaking region.
Second, although our company name is Folius Ventures, it is actually a Cayman hedge fund structure. 2/3 of our investment targets are secondary markets, 1/3 are primary markets, which have a three-year lock-up period per se, plus a quarterly gate, which is a structure of primary and secondary mixed investment. At the same time, we are actually more inclined to small and medium-sized early-stage companies. In the primary market, the corresponding is the seed round and the A round, and the best valuation is less than $200 million. In the secondary market, it is hoped that during the bear market cycle, companies below the $500 million FDV (fully diluted valuation) can be bought. Throughout the cross-cycle period, we are more inclined not to hold tokens such as BTC and ETH.
Third, I will regard the crypto industry as a meat sandwich bun, the middle layer of meat is very technology-oriented, and our company is more inclined to the upper and lower buns of the meat sandwich bun, that is, the lowest infrastructure and tools, with a SaaS business model, which can accompany the growth of the industry; Or the topmost application, can bring great traffic to the industry.
Overall, Folius is actually a first- and second-tier hybrid investment institution that focuses on the Asia-Pacific region, favors early-stage investment, and pays more attention to business logic and application.
ChainCatcher: Specifically, what is your investment strategy and style?
Jason: My last job was mainly looking at secondary companies in emerging markets around the world, which has several similarities with many companies in the crypto market today:
First, the crypto market is also an emerging market, but it is not an emerging market in reality, but in the virtual world.
Second, in emerging markets, general corporate governance is very poor, probably with a majority shareholder holding structure, not knowing much how to communicate with investors in the secondary market, and possibly doing dirty things that harm the interests of secondary shareholders. In the crypto market, token holders themselves do not have any retroactive rights to the company, in other words, it is very important in the crypto market to examine the character ethics of a founding team, or the founding team’s commitment to its stakeholders.
Third, there are indications of what kind of companies will perform better in any country going through different development cycles. In addition, many business models can be transplanted from a post-developing country to a developing country in a relatively complete way. In the process, local investors may not have seen these business models, and may create arbitrage space in terms of price or value discovery. At the same time, the crypto market is not only an emerging market, but also undergoes a journey from infrastructure construction to the final business boom.
Combining the above three points, a lot of experience in investing in emerging markets in the past can be replicated in the crypto market.
Personally, my investment strategy mainly includes four aspects:
First, examine the character and ethics of the founding team, because this directly determines whether there will be value capture in the end, and whether it can go long;
Second, whether the track selected by this project will have a long development in the future;
Third, under this framework, examine whether its business model is sustainable and whether it can really make money in the flow;
Fourth, whether the project has a team and ability to solve the problem.
In fact, this is still based on my past investment thinking in the secondary market to do crypto market investment, very similar. If the industry continues to move forward, I think the Web3 market will become more and more similar to Web2 Internet or NASDAQ companies, and the same methodology of business logic used to apply.
ChainCatcher: How do you evaluate Folius’ investment performance since its inception? Can you talk about the most successful and regrettable investments?
Jason: Since our inception last September, we’ve made about 50 moves in the primary market, half of which are very small positions, corresponding to some strategic small investments that can help the entire portfolio, that is, I make a friend with you. The other half is a solid large amount of investment, generally between $250,000 and $2 million, of which only 5 tokens are currently listed, of which 2 are losing money, and the other 3 are STEPN, Project Galaxy and Sportium, which probably have returns ranging from several times to 100 times.
Private placements in the primary market account for 20% to 25% of our current total investment, which is still quite good. For the secondary market, we have lost a little 10%-20% since September last year. This is mainly due to the consideration of the encryption cycle, always want to hold more cash, and the style is also very conservative.
In terms of results, STEPN is one of the most successful investments. STEPN is very much in line with Folius’s founding purpose, which is a mobile to C product that can bring traffic to the entire industry, and the founding team is a very typical Chinese entrepreneur with rich Web2 experience, and we are very fortunate to find such a project.
Unfortunately for Magic Eden, I met the founding team through a few friends when it was first founded, but I just wanted to recruit for Folius, and I didn’t strongly follow up and invest after hearing about the project. Looking back now, if I had sat down and taken a hard look at it, I would have invested in this project and am very sorry to have missed such an opportunity.
ChainCatcher: Now that the market has turned bearish sharply, how has this affected your investment rhythm? How long do you think this bear market will last?
Jason: In general, the pace of the secondary market is slowing down, waiting for opportunities; The pace of the primary market remains unchanged and investment will continue. In the secondary market, we have been very conservative since last September. Now that the secondary layout is very slow, I hope that when the bear market is at its lowest point and the valuation is very low, I can invest in 15 to 25 small and medium-sized coins and accompany them through the next bull market cycle. In the primary market, I feel that there is no big problem, the pace is unchanged, and I will continue to invest, with the goal of investing in 25 to 35 very good startups in the next 24 months.
My personal view is that in the current situation of high leverage and the possibility of a recession, the probability of the Fed making a mistake is very high. Once the Fed makes a fatal mistake, it will bring the world economy into a deep or shallow recession, which could happen next year.
Until then, I think the potential shift from the Fed and the speculation about that shift will allow us to enjoy a pretty good risk rally over the next 3-6 months, so it’s probably a process of rising first and then falling. Why the shift from risk rally to a recession next year? It is possible that the Fed will turn again after this turn, and when risk assets reach the next peak, it feels that it must suppress the strong investment sentiment in the market and re-tighten policy, which will lead to very negative effects.
I judge that this bear market cycle will eventually end next year, when governments around the world will re-inject liquidity into the market, helping the market itself recover economically while reviving the price of risky assets. The final bull market could begin again in late 2023, 2024, as Midland releases water.
Why say liquidity on this issue? That’s because I’ve always thought that the Web3 industry, which is the continuation of the NASDAQ, is the early Nasdaq in the small-cap market, is at the forefront of risk assets, and there should be a strong correlation with risk assets.
It’s also important to think that in the next bull market cycle, Bitcoin will be completely decoupled from the overall Web3 industry, and the future encryption cycle will not advance with a Bitcoin halving cycle of three or four years. Web3 will become more and more like the NASDAQ, and there will be a rhythm out of its own, and as Bitcoin’s advantage declines, the halving cycle will become less and less obvious, in fact, it is difficult for me to judge how Bitcoin will go in the future.
ChainCatcher: Web3 is hotly debated in many industries these days, what do you think are the main misconceptions about Web3 in the Web2 industry?
Jason: The first misconception is that what’s right in this industry is right, what is native is good, and that’s actually not right. I talk to a lot of entrepreneurs who feel that there are some specious methodologies for Web 3 right now, and assume at the beginning that these methodologies are correct, such as having to do a community, having to do some airdrops, and having a whitelist for NFTs. They believe that entering Web3 is the same as entering Web2 at that time, there is a methodology and a way of playing.
In fact, there is no paradigm in this industry, it is a very chaotic, very early industry. Entrepreneurs should think from the first principle, do not be arrogant, feel that their experience in Web2 is wrong, new things are right, he can think and examine new things, and have the courage to come up with some of their own original play.
The second misconception is that they think they have to find some good capital to endorse. Of course, this may have been the case in the past, after all, many projects are still in the era of a big infrastructure, B2B. However, in the future, if the industry is more and more inclined to apply, capital may really be capital, and the founder of the product himself understands the product to a large extent to determine whether it can eventually run out, rather than looking at capital endorsement. So in many cases, if you’re going to raise money, I think you should focus more on how to get the product right, which will be more helpful.
Others such as: the crypto industry has a lot of Ponzi? Is the business model of the crypto industry not running out? Is it to be centralized? These doubts and reflections I find very healthy.
ChainCatcher: What are your favorite directions for Web3? And what are not optimistic?
Jason: I am most optimistic about the four directions:
First, a new to C entertainment and technology sector. These include: games bordering Web3, gamified applications bordering Web3, and consumer goods, luxury goods, and IPs willing to carry Web3 modules, corresponding to the familiar Axie Infinity, STEPN, and Yuga labs and Azuki. Because entertainment does not have to border with real life, it can carry huge traffic, and its users themselves are potential consumer groups, even in Web2 or other industries in the past, this is also the most profitable, fastest, and most capable of capturing value.
Second, digital organizations. Web3 is actually very suitable for “illegal financing”, if you have the idea and experience, through the value network of Web3 to finance and diversify, you can get one thing done. This is tantamount to capital giving wings to dreams.
Third, Web3’s native financial sector. If the uppermost business model of Web3 has made great progress in the future, the demand for finance will inevitably expand, and the financial industry that cannot be supported now will be supported in the future. For example, companies that integrate insurance, underwriting, and final auditing, or companies that borrow directly from the unsecured category.
Fourth, how Web3 logs in. That is, the all-in-one account holds all its information and can make direct payments. This kind of account system is actually far better than the previously segmented, information-only Web2 account system.
I don’t like two directions very much:
First, homogeneous basic financial products. These products exist alone on different public chains and do not make any sense. For this kind of incremental innovation of DeFi, I am personally less interested in investing.
Second, develop SaaS tools and the infrastructure to serve upper-level applications. Perhaps these entrepreneurs saw the great success of SaaS companies in Web2 and rightly thought that Web3 should do the same at this stage.
Of course, I don’t deny that this kind of company may be very successful in the future, but to do this kind of infrastructure in the budding stage of the industry now, especially when the end-end application has not yet been discovered, I think this is a very thankless and relatively lazy direction in thinking. Of course, there are some needs that are very obvious, and we are also very optimistic about the unique direction of infrastructure and tools, mainly talking about some of the obvious path-dependent plates.
Startups should now push applications directly and integrated, to find use cases. Really good companies can be explored in the fog of war, and must be integrated for now, and they don’t really need an infrastructure to help him do anything, he deserves these capabilities.
ChainCatcher: Why did you say on Twitter, “The next chapter of Web3 should be written by B2C applications”? What should be the direction of innovation for B2C products? How can we better connect with consumers and the real world?
Jason: I think it should eventually start with a small application, maybe with some of Web3’s current profit sharing system or business model, and iterate on it. In other words, it is to find a scenario that can apply Web3’s account system and apply Web3’s profit distribution method, and constantly carry out some business model trial and error on it.
Specifically, in addition to financial applications, it may be a Web3 native browser, which is equipped with a Web3 wallet, and the final monetization method may still be through advertising, but the revenue from advertising will not be native to shareholders, may be to some people who browse the website. Anyway, I have to browse the website, each browser looks similar, it is better to use one will give me money.
Or you need to find some entertainment and non-entertainment high-frequency scenes, to see if the interests of the user itself, whether you can give a part of the user from the equity, and let the user to pull new and increase the application advantage in a reasonable and fair way, which needs to be explored.
ChainCatcher: You cast Jambo, an encryption app with roots in Africa, what do you think of this Web3 super app? Will this become a new centralized monopoly product?
Jason: Investing in Jambo is actually optimistic that it can unearth a lot of interesting native Web3 projects in Africa, which I can’t see in China or Southeast Asia.
I think Jambo needs to think about what kind of applications can be better embedded in Web3 components to provide a better experience in the African countries where it is located. This slowly needs to be found, maybe an app to do, but also worth trial and error. After all, doing B2C in Africa, it is difficult to imagine that a European and American team can do better than a local team. As for what to do, you also need to think about it all the time, it may be a very simple function of paying electricity bills, or a very simple x to earn application, and so on.
As for whether there will be a Web3 super application, or what it looks like? To be honest I don’t know. Because the reason why Web2 super applications in the past can become super applications is because after complying with the low cost of information transmission, several explosive applications with network effects have been produced, and these applications have occupied an absolute market share and are equipped with many other functions. For Web3, I don’t know what this explosive app will look like, or even if it will have a strong network effect like in the past.
It needs to be added here that centralization is a problem. At the lowest level of the resource layer, appropriate decentralization is very necessary, if not through the game equilibrium way to make the cost of tampering and profit greatly unequal, in fact, this industry has no significance.
But for the top companies, what can be landed? What can bring more users to the industry? What kind of products do you make with Web3 components? I think this is a spectrum, in the end what the industry looks like, not to say that the current crypto-native Web3 industry has the final say, but the final winner has the final say, it is the winner who finally controls 100 million users, and history is written by the winner.
Therefore, there is no need to be too rigid in what the industry likes now, or what the industry feels is orthodox, which is to imprison the entrepreneur’s own thinking, in fact, there are not so many rules.
ChainCatcher: What would a more reasonable Web3 application look like that you expect?
Jason: An application with Web3 functionality must do the article on what the user owns, and has a very strong binding to some financial scenarios. This financial attribute does not mean that it can make money, but that it is a community of interests with users, or that this application has a strong value capture orientation. In contrast to an equally competitive Web2 application, Web3 applications are able to do some very intuitive different benefit-sharing models, which I think is the most worthwhile direction to explore.
What does it look like? It should be a new attempt to minimize the cost of value transfer, what can users try?
First, I have things that allow me to enjoy different conveniences in many different scenarios. For example, I have an NFT, and since this is an account system that anyone can observe, the scenario of commercial derivation above can become very practical based on the fact that I do have this NFT. In the past, Pinduoduo’s account system could not be applied by Tencent, Tencent could not see what Pinduoduo had, and Pinduoduo was not willing to open it. But now if everyone recognizes that your NFT is on the blockchain, you can call it to give you some unique product experience.
Second, in fact, the Internet has a lot of homogeneous products, why should I use your products instead of other products? Now Web3’s resource allocation system gives a new way of playing, which used to be free to use, and now I use a self-created currency to generate money out of thin air and let you use my products, and the final value of this token or distribution system is part of the original shareholder. I gave this shareholder gain to the user consumer in a more volatile way, and finally the triangle between the developer, the consumer and the contributing shareholder became a more likely cooperative way similar to the past, allowing the three to work together and synergize. This is actually a dimensionality reduction blow to the Web2 application of the past.
Of course, this model now has a lot of shortcomings. The biggest drawback is that it is too easy to show in a Ponzi-like way. In addition, the first comers stand on the heads of the latecomers to seek rent, and the first comers can continue to obtain benefits without contributing value, which is urgently needed. But I don’t think that’s a bad thing, because there can be a lot of different interesting innovations in the model.
For example, if the user does not contribute value, then his profit should also be relatively reduced, and even eventually may come out of a model where the user needs to invest, and the investment does not necessarily make money, but there is a chance to get a lot of benefits. These models can actually develop very quickly under a homogeneous competitive business system, and many things can be built on it. In both areas, Web3 applications can think a little more, and my cognition is not necessarily higher than that of entrepreneurs, I am more waiting for entrepreneurs to tell me what they should look like.
ChainCatcher: How do you see the Ethereum 2.0 upgrade as a prospect? How will this change the industry?
Jason: It may be a bit contrary to the mainstream view, but the Ethereum upgrade has basically no impact on our future investments, especially the direction of application. Because Ethereum eventually made a PoS upgrade, after some changes to the entire architecture, it may become easier to use and more convenient for the top developers. This may also have a big impact on the price, and the price of Ethereum will fluctuate very much. But Ethereum is now facing a lot of competition, and the application layer or other companies in the industry will choose the public chain or resource layer that is most suitable for them.
In general, I think that this kind of technology-oriented change and upgrading is actually of no decisive significance for the promotion and development of the entire industry, and the decisive significance should be that the top-level application runs out.
ChainCatcher: In your Twitter profile, you said, “In the next 10 years of Web3’s development, the Asia-Pacific region and especially Chinese will certainly not be absent, and it will shine.” In connection with Folius Ventures’ commitment to supporting the Asia-Pacific market and Chinese entrepreneurs, you personally seem to have a lot of confidence in the Asia-Pacific market and Chinese entrepreneurs, why are you so optimistic about Chinese entrepreneurs?
Jason: It has a lot to do with what I founded Folius. The Asia-Pacific region or the Chinese-speaking region has lacked development in the Web3 field in the past, and I think it is largely because the crypto industry has not yet reached a point where the Asia-Pacific region can explode. In the past 5 to 10 years, the development of Web3 has been laying the foundation, and more importantly, the product category and status, which is a 10-year focus on ecology, infrastructure, tools, and consensus-building. In other words, 10 years of a B2B product.
There are three generations of extremely good engineers in Europe and the United States, who are very good at building this B2B ecology. However, the Asia-Pacific region is mainly post-80s and post-90s young engineers, and their career path development is actually accompanied by the tide of China’s B2C industry that began in 2005. In other words, their engineering experience is in the B2C aspect, in the application aspect, which is incompatible with the entire blockchain development process, so they may not do well in the public chain and infrastructure.
If we look at the next 5-10 years, the crypto industry needs to make great progress, and it will inevitably make more people enter the game in a to C way. At that time, entrepreneurs in the Asia-Pacific region will compete with entrepreneurs in Europe and the United States. I don’t think there are any disadvantages for entrepreneurs in the Asia-Pacific region, and they even have advantages, the advantage is that they have a lot of product experience, and they are very aggressive to grab market share. Most importantly, they are used by men as cattle and women as men. The quality and time of a month’s work may be two or three times that of European and American engineers, but the cost may be half or even 1/3. Therefore, in a new paradigm that requires rapid iteration, and requires product ideas, entrepreneurs in the Asia-Pacific region have a great advantage.
Unfortunately, the advantages and prospects of entrepreneurs in the Asia-Pacific region are very unequal to the capital endorsement they face. The direction from which the capital of entrepreneurs in the Asia-Pacific region comes from, one is the traditional Web2 institutions in China, but the pace of these capitals entering Web3 is not resolute, and there are many constraints in investment, which may not necessarily help entrepreneurs in the end. The second is to look for foreign capital, but foreign capital may not be able to see, and ultimately may not be able to understand and truly trust these entrepreneurs, due to language and cultural differences, I do not even think that European and American investment companies have the ability and willingness to find entrepreneurs in China in the seed round. The third is the domestic Web3 native fund, in the past most of these funds from Bitcoin, mining or cutting leeks, and the future development of the industry is not consistent, this kind of crypto-native Asia-Pacific investors may overdraft their own credibility, temporarily do not strengthen the idea of a new direction, and for short-term capital returns there will be relatively high requirements, not necessarily suitable for a new batch of Asia-Pacific Web3 entrepreneurs who really want to do a career.
For these reasons, while this is a very ambitious track geared towards B2C applications, the help of capital in Europe, the United States and Asia Pacific is completely unequal, and there is a huge mismatch in valuation and opportunity, so I think it is worth betting on. If anyone is interested in communicating, especially if you want to do long-term things, you must find us, we are committed to building a brand with a reputation and credibility to work with long-term entrepreneurs.
ChainCatcher: In the context of overseas entrepreneurship, what are the difficulties for Chinese entrepreneurs to start a business on the Web3 track? What advice do you have for that?
Jason： B2B is hard to do, and if you look at it from the top of the spectrum, from a consumer-to-consumer traffic perspective, I think entrepreneurs in Asia Pacific will face three major constraints:
First, cognitive improvement. After all, there will be a time lag between the transmission of information from the English area to the country, and there may be a pain point in cognition to learn cutting-edge information in the industry and discuss with industry people.
The second is the deviation of understanding of overseas markets. If the entrepreneurial team only went to the volume in China in the past, and did not really understand or create an overseas and universal explosive product, then his understanding of the product, or UI, UX, or the final construction, his understanding may be biased. If it is to go to overseas markets, this deviation is likely to be fatal.
The third is a new way of playing small and beautiful. Similar to the second point, for a very niche and scattered, or even temporarily no practical application of the international market, China’s survival of the landing GTM and product development model is not necessarily applicable, this large and complete cover is not necessarily suitable, but suitable for some small and beautiful attempts, and one aspect to the extreme. The style of play is a little different and requires strong adaptation.
These three points are common problems faced by entrepreneurs in the Asia-Pacific region. How to solve it? I think we can only improve from the team building, and the entrepreneurial team really needs some members with overseas vision. In fact, it is very recommended to try and make mistakes, start with a very small function, find that point and then slowly roll up. You can also communicate with some good institutions or investors with a reputation in the industry, it is very recommended to talk early and find the direction together, which will be very helpful.
In addition, entrepreneurs really need to think hard before doing what is crap in the Web3 native scene, what can be borrowed, and abandon a lot of things that look right in the industry. I think entrepreneurs in the Asia-Pacific region really don’t need to be arrogant, and the next development of the crypto industry actually needs people with different modes of thinking to work together to make the user volume another order of magnitude. In the next cycle, there are many opportunities for the traffic layer and the application layer.
ChainCatcher: Which cities in the Mandarin area are you optimistic about the development of the crypto industry?
Jason: Shanghai, Hangzhou and Singapore. The density of potential entrepreneurs and existing Web3 entrepreneurs in these cities is the highest in the Chinese-speaking or Asia-Pacific region. Shanghai and Hangzhou are two cities with a high density of capital, startups, and large factories, and from an executive with more than p8 or p9, the talent density in these two cities is also the highest, and you can see a lot of excellent programmers who want to jump out and start a business.
After this year’s New Year, it is clear that the level, thinking and background of entrepreneurs in the Asia-Pacific or Chinese-speaking regions are more than one notch higher than all the time last year or even in the past. More likely to be that they see an opportunity in the crypto industry, and that the Web2 industry in which they live is also being suppressed. Starting a business in the Web2 industry, there are no special opportunities, and VCs will not invest. Going to work for an overseas Web2 company may not be very willing. In the Web2 industry, equity incentives may have gone to zero or fallen miserably, which is not interesting.
With so many options, trying your luck at Web3 is an important reason that drives many entrepreneurs in the Asia-Pacific region to jump out. Under the premise of a large jump in quantity and quality, it is a 6 to 24-month process from early ideas to startups, products, market share, and even discourse.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/in-1-to-n-eve-web3-next-10-years-chinese-will-not-be-absent/
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