With the concept of the Metaverse coming out of the circle in 2021, Web 3.0, a new generation of Internet protocols, has also ushered in an explosive period.
Recently, veteran venture capital institutions have appeared behind the financing of several Web3.0 projects. These VC giants who have successfully bet on Internet star companies such as Facebook, Alibaba, and ByteDance in the Web2.0 era have already Start laying out Web3.0.
At the beginning of June, GGV Capital (GGV) announced that it has joined with SoftBank Vision Fund Phase II to lead a new round of financing in InfStones, a Web 3.0 infrastructure provider. In the same month, the decentralized exchange ByteTrade also announced that it had received a new round of financing of 40 million US dollars, led by SIG Hainer Asia Venture Capital Fund.
Sequoia Capital has a bolder layout in Web 3.0. In October 2021, it launched a crypto fund with a capital scale of 500 million to 600 million US dollars, focusing on cryptocurrency investment.
Although some VC giants in the Web2.0 world are late compared to professional crypto investment institutions, they have already carried huge funds and started to lay out the Web3.0 territory at a faster speed.
“Unqualified” small institutions in the Web2.0 era have become the frontrunners
“SoftBank’s investment will be significantly reduced by 25%-50% this year.” Masayoshi Son, CEO of SoftBank Group, revealed after the 2021 fiscal year results conference held recently.
In the past one or two years, mobile Internet technology companies have experienced multiple uncertainties such as the peak of traffic users, global anti-monopoly and privacy security supervision, and the investment fever of Web 2.0 has cooled down significantly. After the traditional Internet field has been dominated by technology giants such as GAFA (Google, Amazon, Facebook, Apple) and BAT (Baidu, Alibaba, Tencent), and has formed a pattern that is difficult to break, Web2. Institutions have already lacked the imagination of excess returns, and VCs have begun to set their sights on the next generation of the Internet – Web3.0.
“Web 2.0 and Web 3.0 are not completely separate fields, they both involve the construction and development of platforms and applications. The two Internet development stages are both software and hardware update iterations.” A Web 3.0 investor said to “Lianxin” stated that it is difficult for Web2.0 to show high return on investment, and blockchain and Web3.0 have become places where funds pour in.
According to the statistics of Crunchbase, a data analysis agency, 152 venture capital institutions around the world have invested in Web3.0 unicorn companies in 2021. Coinbase Ventures, Digital Currency Group, a16z, Ribbit Capital and Pantera Capital will invest 19, 14 and 12 respectively. , 9 and 9 investments round out the top five.
Among them, Coinbase Ventures and Digital Currency Group are professional crypto investment funds, Ribbit Capital is an investment company focused on financial technology under Jeff Bezos, the founder of Amazon, and although a16z and Pantera Capital were born in the traditional Internet era, they are invested in crypto because of their Fame.
In the impression of industry insiders, a16z can almost be equated with crypto investment. This institution, which can be called a monopoly in the field of crypto investment, is the supporter of well-known blockchain projects such as the first share of the cryptocurrency exchange, Coinbase, the world’s largest NFT trading platform OpenSea, and the blockchain game Axie Infinity. However, to count its predecessors, a16z, which was founded in 2009, is actually transformed from a mobile Internet VC. Although it has also invested in Facebook, Twitter, Airbnb and other companies, it is not enough in the Web2.0 era. Sequoia, Softbank and other established VCs are on a par.
Recently, a16z announced that it has raised $4.5 billion for its fourth cryptocurrency-specific fund, which will be used to find promising Web3.0 startups, of which $3 billion is for venture capital and $1.5 billion for seed. invest.
Following in the footsteps of a16z, veteran VC Sequoia Capital has also launched a “Sequoia Crypto Fund” with a capital scale of US$500-600 million, focusing on cryptocurrency investments.
This is the first industry-specific fund launched by Sequoia Capital since its inception. According to public information, from January to April 2022, Sequoia Capital made 17 investments in the Web 3.0 field alone.
There are only a few traditional VC institutions that can set up special funds for encryption. Most institutions are still exploring Web3.0 on the basis of the existing investment framework. For example, SoftBank has also invested in many Web3.0 projects through the second phase of its Vision Fund.
Web 3.0 Investment Logic: Equity vs Token
For traditional VCs, the investment in the field of Web 3.0 is logically different from that of Web 2.0.
Shaun Maguire, a partner at Sequoia Capital, said in an interview with the media that the Sequoia Digital Cryptocurrency Fund first invests in liquid tokens, that is, tokens that have been issued on cryptocurrency exchanges and are about to be listed.
In order to better promote crypto investment, Sequoia Capital, which started out as a venture capital business, has also applied for a registered investment advisor (RIA) qualification. According to the information on the official website of the U.S. Securities and Exchange Commission (SEC) in January 2022, Sequoia has been officially approved to register as an RIA. license. According to relevant regulations, only investment institutions with RIA licenses can carry out trading businesses such as stock assets in the United States.
Therefore, behind Sequoia’s move to apply for an RIA license is the evolution of the investment strategy of venture capital institutions. After entering the Web 3.0 world, the traditional Internet VC’s strong equity investment method will no longer be the only choice. In addition to investing in growing start-ups, VCs will also add encrypted asset trading services, that is, investing in various blockchain tokens such as homogeneous tokens and non-homogeneous tokens.
In October 2021, The Sequoia Capital changed its name to The Sequoia Capital Fund. The subtle change from “capital” to “fund” reflects that traditional VCs are already following the trend.
Unlike traditional VCs, which have an investment cycle and an exit period, Sequoia Fund will continue to track the entire life cycle of encrypted investment targets, and it is no longer necessary to strictly follow the so-called expiry exit mechanism.
Roelof Botha, head of Sequoia US and Europe, said, “We are breaking the fund cycle that traditional institutions rely on and reorganizing Sequoia Capital – the Sequoia Capital Fund – around a new, sustainable structure.
Zhu Tong, senior investment director of Huaying Capital, analyzed to “Lianxin” that under the premise of complying with national regulations, not all Web3.0 projects accept equity investment, and many equity investment projects will also transfer equity to corresponding equity after TGE Proportional conversion to currency rights. “It can be said that token investment is the main investment method of Web3.0.”
In fact, VCs have made multiple investments in Web 3.0 startups through a combination of equity and token investments.
Shaun Maguire mentioned, “While we have invested in equity and tokens over the past five years, more and more founders are asking Sequoia to take a more active role in managing tokens, and the new fund provides us with a deeper engagement. flexibility.”
The investment strategy of traditional VCs must be changed after entering Web3.0, because this is determined by the decentralization requirements of Web3.0.
Although the definition of Web 3.0 has not yet been settled, according to the concept proposed by Ethereum co-founder Gavin Wood in 2014, Web 3.0 is considered to be a new generation of decentralized Internet based on encryption and blockchain technology. If Web 1.0 is a read-only network monopolized by a few portal websites, and Web 2.0 is a read-write network dominated by Internet giants despite higher user interaction, then Web 3.0 will create a place where everyone participates A decentralized read-write network that contributes and independently owns digital assets.
Due to the decentralization characteristics, the network ecology of Web3.0 naturally has the community attribute of equal participation by everyone, and the token economy tends to a decentralized decentralized organizational structure rather than a traditional centralized organization.
Therefore, some Web3.0 investors mentioned to “Lianxin” that in this sense, the role of traditional VCs in Web3.0 is actually weakened, because TGE’s funds can be directly targeted to the public, unlike the The traditional Internet industry needs to form market advantages for scale development.
What can VC contribute to Web3.0?
Jay Eum, co-founder of venture capital institution TransLink Capital, has publicly stated that there may be conflicts between traditional equity investment and token investment, because token transactions are public, and the conflict between long-term investment and short-term investment will change over time. Increasing.
Right now, the crypto market is halved from the high price in 2021. Has the violent fluctuation of the market also affected the entry of VCs? According to Dove Metrics, a platform for tracking crypto funding information, total venture capital investment in the crypto space fell 38 percent from $6.829 billion in April to $4.219 billion in May.
In Zhu Tong’s view, in fact, the bottom of the market is precisely when VCs can work hard, unlike in the bull market where projects are quickly TGE, and investors quickly exit with profit. Huaying Capital, which is known for investing in TMT, plans to start investing in Web3.0-related fields in 2022.
Comparing Web3.0 with traditional Internet projects, it can be found that there are some similarities between the two. They are based on platform and application development, economic system or business model innovation. Compared with asset-heavy industries such as manufacturing, investment The threshold is relatively low, and it is not difficult to understand why those venture capital institutions that have been deeply involved in Web2.0 began to bet on Web3.0.
However, the decentralized Web3.0 platform and applications are built based on blockchain technology, and are not monopolized by a few platform-based corporate giants like in the traditional Internet era. Since everyone can also contribute to raising funds for Web3.0, what role can VCs play in Web3.0?
Zhu Tong told the reporter of “Lianxin” that a very important point of Web 3.0 is “consensus”. Whether it is individual investors, institutional investors or developers, everyone’s participation is a process of consensus building, only the more consensus , the project will grow better, and the participation of VCs is an important part of strengthening the consensus.
“If you only consider funding, there are indeed many financing methods in this field. However, the investment role of VC is more resource-oriented, that is, VC can help the entrepreneurial team of the Web3.0 project to do many things, such as community maintenance, brand endorsement, Create influence. Therefore, the Web3.0 project pays more attention to the resources behind the VC.”
In the Web3.0 project, whether it is equity financing or TGE, financing is only the starting point, and its ultimate purpose is to serve platform construction, application development, and marketing strategies. The current investment around Web 3.0 has extended from infrastructure to games, social networking and other fields.
As Sequoia has successfully transformed, Sequoia will no longer just invest and hold tokens, but will begin to participate in the process of token pledge, liquidity provision, governance and trading.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/web2-0s-vc-giants-have-been-eyeing-web3-0/
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