The Web3 field is undergoing a new “God-making” movement in the Internet era, becoming the only bright spot in the investment circle in 2022.
When its development is truly restored to the core needs of mass users, a disenchantment about Web3 will be completed.
2022 is officially over halfway through, and there is no new outlet in the investment circle. The big consumption track is misfired, TMT investors “change careers”, the threshold for hard technology is high, and the investment in biomedicine is taught by the secondary market to be a man.
This sentiment is also directly reflected in the data – in the first half of this year, the data was quite sluggish whether it was fundraising or investment. In May alone, the newly established funds dropped by 36.15% year-on-year, and the investment scale dropped to freezing point.
The only bright color may come from Web3.
Recently, Sequoia Capital has launched two new funds with a total of nearly 3 billion US dollars. It is worth noting that the investment scope of these two funds will be expanded to the Web3 field. Prior to this, a16z, a top Silicon Valley venture capital firm famous for its successful bet on the Web3 track, just announced the establishment of a $4.5 billion crypto fund, which is also the largest of its kind so far.
Not only that, but this year, behind the new round of financing of many well-known Web3 projects and even “unicorns”, well-known veteran VCs have appeared. They once cast a lot of Internet giants in the Web2 era, and now they have turned and plunged into the vast ocean of Web3. Some people even say that at this point in time, Web3 has made it rare for the USD fund and the RMB fund to reach a consensus.
Compared with the more “familiar” concepts such as Metaverse and NFT (digital collection), what does Web3 mean?In this huge ecology, which link is most likely to become a breakthrough? What opportunities are the investment circles “occupied” by Web3 paying attention to?
Capital and giants are accelerating their influx into Web3
Wayne is a partner in a U.S. dollar fund. In June, nearly ten colleagues in charge of investment from the institution he worked for went to Silicon Valley in unison. They are respectively responsible for investment in different tracks, but the purpose of the trip is the same: for the ongoing Web3 trend on the other side of the ocean, VC’s ever-present FOMO (fear of missing out) sentiment makes them unable to sit still.
“In fact, we have participated in the investment of Web3 projects before, but because the fields covered by Web3 will be distributed at various levels and links in the future, everyone also wants to see the evolution and opportunities in the direction of Web3 related to their own fields.” Wayne told “Daily” economic news”.
Alex is the co-founder of another U.S. dollar fund. In the eyes of many people, he is an investor who pays attention to the TMT track, leading his team to invest in a large number of well-known companies with cutting-edge technologies.But as early as a few years ago, Alex set up a small team to explore opportunities in the Web3 field, and has also participated in the investment of many star companies in a low-key manner.
Looking around, you can find that the most mainstream domestic dollar funds, especially multinational dollar funds, have been very active in the Web3 field.
Not only that, RMB funds are also silently paying attention to the Web3 track. The founder of a well-known RMB fund told Shijing reporter that his investment team has been researching investment opportunities related to Web3. “Web3 is still in a very early stage of development in China, and it is difficult to form a better business model due to the current policy environment. But we have been looking at the opportunities arising from the combination of Web3 and other industries and fields, and have done a lot of research.”
In his opinion, the layout of domestic institutions in Web3 can be traced back to around 2017, when the currency circle was last hot, but now the atmosphere of “promising Web3” is formed at the beginning of this year. Previously, many mainstream investors disliked this field for various reasons, but with the increasing attention of Web3, everyone has also put aside their arrogance and doubts, and began to actively embrace Web3-related industries.
Public information shows that a Web3 boom is sweeping. At present, there are nearly 900 cryptocurrency funds in the world, distributed in more than 80 countries. Crypto Fund Research, a research firm that focuses on crypto institutional capital, estimates that the total size of global crypto funds is as high as $69.2 billion, including crypto hedge funds, venture funds and index funds.
In a recent speech, Chris Dixon, a partner of a16z and known as the “King of New Venture Capital”, publicly stated that more than half of the startups looking for funds in the market are related to cryptocurrencies, which shows that Web3 has become the most current One of the hottest investment areas. In the first quarter of 2022 alone, investment in this field reached nearly $10 billion, more than double the level of the same period last year. Some institutions predict that the market size of Web3 on the application side will exceed $50 billion in 2022.
The giants are not to be outdone. American Internet giants, including Meta, Google, and Amazon, have successively put into action to explore Web3, and the domestic “big factories” have followed suit. Tencent has previously invested in the $200 million financing of Web3 NFT game company Immutable; at the same time, Alibaba and Tencent are also building localized NFT products to promote the Chineseization of Web3.
In addition, in recent years, various encryption-related companies and platforms have emerged in the Web3-related industry, and the new generation of “creating gods” in the Internet era is in full swing.
In May of this year, Fortune magazine announced the 2022 US Top 500 list, and Coinbase became the first encryption company to enter the list, arousing strong attention from all walks of life. You must know that the news that a16z invested in Coinbase to earn 4,000 times in eight years has already been popular in the investment circle, and there is no one who does not want to catch or become the next Coinbase.
In this context, a large number of executives from Apple, Amazon and other companies have resigned to invest in the Web3 project, and there are also a number of “high P” (senior managers or senior technical talents) in domestic Internet manufacturers who have given up stable high salaries and considerable options. Competing to join the Web3 entrepreneurial tide. Similar cases of job-hopping and poaching are numerous, and news comes out almost every few days, stimulating people’s sensitive nerves.
(Source: CICC Research, public information)
What is Web3 behind the “creation of gods”?
All roads lead to Web3, so what exactly is Web3?
In fact, “Web3” is not a new concept. In 2014, Gavin Wood, co-founder of Ethereum, coined the term to distinguish it from Web1 and Web2, but it has only received high attention in the circle. With the development of blockchain and NFT in the past two years, Web3 has been able to quickly become popular and out of the circle.
According to Yu Jianing, Executive Director of the Metaverse Industry Committee of China Mobile Communications Federation and Co-Chairman of the Blockchain Special Committee of China Communications Industry Association, Web1 is characterized by “readable”, while Web2 is “readable + writable” . In these two stages, users’ digital life is highly dependent on network platform enterprises. Although users have become producers of network content, the rules for data use and value distribution are completely formulated by the platform, and users have no autonomy. In the Web3 era, the Internet has shown a new feature of “readable + writable + owned”. User data is stored on the chain, and users can choose whether to share, with whom, and how much information to share.
“Compared with the current Internet, based on underlying technologies such as blockchain, Web3 will create a high-dimensional digital world led by users and open source developers, featuring open collaboration, privacy protection, and ecological co-construction, bringing a new paradigm to Internet value. It is also the infrastructure and application of the future social, commercial, entertainment and financial markets.” He told every reporter.
(Characteristic comparison of Web1, Web2, and Web3 Image source: Grayscale, Research Department of CICC)
Compared with the definition of too fundamentalism, Zhu Tianyu, managing partner of Lanchi Ventures, has his own unique understanding of Web3. He pointed out to every reporter that Lanchi’s focus on Web3 is to focus on the essence of investment, which is to use technology to create trust, and then continue to use different underlying technical tools to adjust production relations. “This category may be larger than the narrow definition of Web3 that everyone agrees on, but it is also the general direction we are more concerned about. The Web3 discussed by many people is more of a definition that inherits the definition of Web2.”
Under the guidance of this big framework, Lanchi Ventures’ attention allocation to Web3 is very significant at present.Zhu Tianyu introduced that the current investment teams are more or less concerned about the Web3 direction in their field.
Liu Jianing, Managing Director of China Renaissance Capital, gave an example: In the Web2 era, the user’s right to use, transfer, and flow information is in the hands of the apps that everyone uses on a daily basis. Even two food delivery apps cannot share user preferences and habits, and search engines cannot find the data in these apps.
“In fact, the features of decentralization that Web3 emphasizes, and the right to use and flow of information are handed over to users. If the entire industry and enterprises can reach a consensus and respect customers’ privacy, then it can also be realized in the Web2 era. The problem is that there is no such consensus and privacy protection, so the emergence of Web3 is a natural result.”
But in his view, for users, Web3 is not a necessity. “On the whole, most applications in Web2 and Web3 belong to the service industry, and the service industry is created by supply to create demand. Only when new services are created can users know that there is such a service, so it is not in the mind of users. A required consumption has been generated.”
In fact, Web3 currently has multiple definitions and elements, including blockchain, Metaverse, VR/AR, etc. If the “decentralized” technical attribute of the Metaverse is inclined to the “front-end” that directly interacts with consumers, then Web3 is more likely to be a “back-end” innovation in production relations, and its development will inevitably integrate the synchronization of other technologies. progress.
Zhu Tianyu said that Web3 itself cannot be established alone. The Web3, blockchain and a series of new tools that people are seeing now must develop hand in hand with cutting-edge technologies in many fields such as artificial intelligence and 3D interaction. , in order to bring a generational difference experience improvement to end users.
“We have an important point of view when we do Web3 research ourselves, that is, Web3 and related technologies such as blockchain are naturally prepared for production relations in the 3D era. It is a good solution to 3D interaction and artificial intelligence in the future. Times, productivity and production relations. Blockchain technology has been developing like an independent world since its birth in 2008, but in the next cycle, it will begin to intersect with other technologies. In the future, Web3 will definitely Other technologies are intertwined and move forward to produce new things that are more valuable and disruptive.” He judged.
Landing, disenchanting for Web3
In May of this year, Zhu Xiaohu, managing partner of Jinsha River Ventures, posted a Moments, saying that he was trying to run to make money, and successfully brought the virtual shoes produced by Web3 company StepN in China.
The mobile NFT game StepN was established in October 2021. The company advocates a carbon-neutral lifestyle and provides a Move to Earn mode. As the name implies, it is to make money by running. Players need to wear “NFT sneakers” to walk, jog or jog outdoors. Run to earn rewards.
Although StepN announced its withdrawal from the Chinese market a month later, this surge in popularity may be another large-scale Web3 application after Jay Chou and his NFT avatar “Boring Ape”, which was stolen and sold for about 3 million yuan.
Yuga Labs, which belongs to “Boring Ape”, was established in January 2019. In March this year, the young company completed a $450 million seed round at a valuation of $4 billion, setting a record for a single financing in the NFT field.The latest news is that Yuga Labs’ footsteps don’t stop at picture NFTs, they are marching into the Metaverse.
(Image source: Screenshot of China Fund News’ public account report)
In the hierarchical structure of Web3, the application layer is the closest to the C-side users (in a broad sense, the C-side, not only refers to individual users), and is most directly perceived by the latter, because this layer is delivered by delivery. The data product composition used. In other words, the application ecology is a key element for Web3 to enter the mass market.
In the past two years, Web3 applications have grown rapidly at a rate visible to the naked eye. According to a report by data research firm Apptopia, the number of Web3 applications available for download in 2022 will grow almost five times faster than in 2021. Year-to-date, apps available for download have grown by 88% and are growing rapidly.
However, Liu Jianing pointed out that although there has been an investment boom in the Web3 field this year, if you look at the flow of funds, you can find a structural difference: non-financial and non-public chain business projects for individual users, although Institutions have made a lot of shots, but most of the project financing for a single project is limited; enterprises and public chains for B-side technical services, not only the financing amount of a single project is high, but also the overall financing amount. It is invested in the construction of infrastructure and technology.”
(Source: Forbes China, public information)
In June this year, Web3 infrastructure provider InfStones announced a new round of financing of $66 million, led by SoftBank Vision Fund Phase II and GGV Jiyuan Capital. After the financing, InfStones’ total financing amount has exceeded 100 million US dollars, officially becoming one of the “unicorns”.
Who are InfStones? According to public information, the company was established in 2018. The technical team consists of senior engineers from former Google, Oracle and Microsoft, providing the most widely used Staking (staking) and infrastructure platform as a service (PaaS) in the blockchain industry. If you open the list of past investors of this company, you can also see the names of well-known VCs such as Qiming Venture Partners and SIG Haina Asia. Everyone invariably aimed at the same segment – Web3 infrastructure.
Infrastructure is a necessary condition for the prosperity and development of an industry. Just like the popularization of the Windows system for the PC Internet and the popularization of smart terminals such as the iPhone and the operating systems such as iOS and Android for the development of the mobile Internet, the development of Web3 cannot be separated from the infrastructure. established and popularized. Although many people in the industry refer to Web3 as the “Cambrian innovation explosion”, many technical elements and infrastructure are still incomplete, and there are many hidden opportunities.
Taking InfStones as an example, the platform supports tens of thousands of nodes on more than 50 chains such as Ethereum, and developers can quickly deploy scalable infrastructure through one-stop InfStones. As the company’s product director Rudy Lu introduced, if enterprises want to obtain data of various blockchain protocols, they can use the InfStones data API (application programming interface) service to obtain them; if they want to participate in blockchain protocol consensus accounting, You can start the validator node of the blockchain protocol with one click on InfStones; if you want to issue your own NFT, you can also issue NFT on different protocols such as Ethereum through InfStones.
In these ways, various types of enterprises, including application developers, custodians, asset management institutions, and data analysis companies, can more easily expand their business into the Web3 field.
“Multi-protocol parallelism and interconnection are the current mainstream form and future development trend of Web3. Whether developing or using Web3 applications, you need to use infrastructure on different protocols at the same time. How to provide unified services based on hundreds of different protocols , and quickly support new protocols, which is both a challenge and an opportunity for Web3 infrastructure.” Rudy Lu pointed out.
Blockchain expert Yu Jianing also said that in order to build a complete Web3 ecosystem, the deep integration of a series of cutting-edge information technologies such as 5G, cloud computing, distributed storage, artificial intelligence, big data, Internet of Things, and blockchain must be accelerated. , promote integrated innovation and converged applications, and accelerate the construction of new infrastructure.
In the future, based on a complete and mature infrastructure, Web3 can also be applied to many scenarios including finance, authentication, bills, government affairs, copyright, traceability, medical care, public welfare, games, and art.And this process, as Zhu Tianyu said, can truly restore the development of Web3 to the core needs of mass users, and it is also a process in which Web3 is gradually disenchanted.
VCs and Entrepreneurs are on the runway, but the real Web3 is far from here
For traditional VCs, investment in Web3 is quite different from Web2 in terms of investment form, cycle or logic.
Shaun Maguire, a partner of Sequoia Capital, previously stated 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 encrypted investment, Sequoia, which started as a venture capital business, has obtained the SEC’s registered investment advisor (RIA) qualification earlier this year, so that it can carry out trading businesses such as stock assets in the United States.
Behind this is the evolution of the investment strategies of traditional VC giants. In Silicon Valley, equity investment is no longer the only option for these institutions, and VCs have begun to use tokens to invest in startups in the Web3 field.
Zhu Tianyu told every reporter that VC itself uses innovative financial tools to support technological innovation, and everyone is actively embracing the new rules of the game for investment in Web3. However, he also emphasized that investment institutions are also in the exploratory stage of new ways of playing in the Web3 field, and it is not only a black-and-white choice such as centralization or decentralization, investing in equity or tokens.
“There may indeed be some changes, but it will not be an extreme situation such as one or the other. There are multiple grayscales between centralization and decentralization. In the future, the way of equity + token investment is likely to coexist for a long time. It mainly depends on different projects, application scenarios in different industries, and whether this is the most efficient way to invest.”
In Liu Jianing’s view, whether to invest in the form of equity or token is not an essential issue for VCs and other institutions to consider. It can be adopted under the premise of allowing and controlling transaction risks in the fundraising agreement. What kind of investment method is adopted depends on the consideration of the project party. The ultimate goal is to maximize its own valuation and raise more money and influence.
However, some people in the industry pointed out that from the current situation, some projects with very high valuations have never issued tokens, which can also explain some problems.
Of course, organizations of different types and backgrounds put different weights on Web3. Looking at the market situation, it is easier for new funds made by partners from mainstream dollar funds to focus on Web3 as a key investment direction, and All in is nothing new. But for large comprehensive funds, Web3 is only one sector. Statistics show that for a large PE like Tiger Global Fund, the Web3 position may only account for about 10% of its overall capital allocation.
On the one hand, it is the rapid attack of institutions, and on the other hand, the group of entrepreneurs of Web3 is also undergoing great changes.
According to Zhu Tianyu’s observation, in the Web3 track, there are relatively more teams abroad that really have the underlying value creation logic and are practical at the same time, but there are also strong entrepreneurs and strong teams of engineers in China. “There are more mature teams. Entrepreneurs, as well as engineers and technical masters from big factories have also begun to come off. They have more experience and have experienced the currency circle cycle around 2017, and can deeply understand how to use new tools and grasp the opportunities brought by the new cycle.” .
There is no doubt that in the future, digital technology will have an increasing impact on our daily lives. Although the real Web3 era is far from coming, the capital bubble brought by the virtual world has also begun to emerge. Recently, the legendary cryptocurrency hedge fund Three Arrows Capital (3AC) fell into bankruptcy and liquidation, which has sounded a wake-up call for the industry.
However, this did not stop the influx of participants. Everyone is betting on a bright and hopeful tomorrow, and it is not the bubble that worries people, but the slowness of their own entry.
In this regard, Yu Jianing suggested that ordinary entrepreneurs should firstly understand Web3 accurately, break through the barriers of thinking, and master “Web3 thinking=technical thinking×financial thinking×community thinking×industrial thinking”, otherwise it is very difficult to It is easy to fall into the trap of “new wine in old bottle”.
In his view, the bonus period of mobile Internet Web2 has come to an end, and the next ten years will be the golden decade of Web3 development. “Entrepreneurs need to deeply understand the various possibilities emerging in the window period, in order to calmly understand the future of the Web3 era. trend”.
Reporter’s Notes | The Web3 story has just begun
The Metaverse in 2021 and Web3 in 2022 are the most popular keywords in their respective years. If last year everyone’s attention to the Metaverse was still at the conceptual stage, then this year, both institutions and entrepreneurs have invested a lot of real money in the Web3 track, and they have truly entered the game.
In fact, looking back, in addition to some institutions that have long been deployed in the Web3 field, many VCs are actually being “pushed away” in this wave. As mentioned at the beginning of this article, compared to the lively track and investment in previous years, this year’s primary market can be described as bleak. Facing the pressure of raising, investing, managing, and withdrawing from the whole chain, investment institutions also urgently need an exit. The vast world of Web3 just gives everyone a stage to show their strengths.
Therefore, even though there were some doubts and even a split of opinion at the beginning, the reality is that we see more and more investment institutions, whether US dollar or RMB funds, have begun to invest in the sea of stars in Web3. There are some well-known VCs in the industry who mainly invested in consumption and TMT track before, but also turned to actively deploy Web3 when the track they were good at encountered periodic challenges, and have begun to gradually form their own methodology. More institutions have begun to combine Web3 with the fields and industries they have been involved in before, and have found solutions that “upgrade” the original industry while “landing” Web3 at the same time.
So what exactly is Web3? In this report, the reporter interviewed a large number of VCs, entrepreneurs and industry experts. Everyone gave a definition of Web3 from their own perspectives. But the fact is that so far, there is no unified and standardized answer to this question in academics, and everyone’s understanding of Web3 is still at the stage of “the benevolent see benevolent”. During the reporting period, the Web3 world was undergoing upheaval, and some of the risks also surfaced.
However, this is the only way for any industry to develop from its inception to maturity. When everyone discusses more and more fully, the future development direction of Web3 may be clearer, which is also the original intention of us to do such an in-depth manuscript to discuss Web3.
In any case, when there are new changes in technology, new industries, new models and even new giants may be born. What’s more, Web3 is just getting started.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/web3-the-internets-new-machine/
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