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Had a little over 75 in-person meetings last week in Singapore.
Crypto, in its current stage, rhymes equal parts with an MLM industry and the future of the web.
Here is the distilled, TL:DR version of what I learned in Singapore, mixed with photos as is tradition.
1. Why Events
There were 700 side events because it's the easiest way for a CMO to justify the job. In-person events are measured with footfall, instead of on-chain value creation (which is harder).
Signaling linkages to others in the industry, helps close deals. Most importantly, free food and booze is the oldest trick in the game. They work. If anything, it's a sign of broken incentives in the industry.
The current pipeline for capital looks like this:
Fund of funds -> VCs -> Founders - > CMOs -> Night clubs. I think it really highlights what's broken with distribution and incentives. Or its globalisation.
Not my monkey, not my circus.
2. Token Comps
Tokens being down 70-80% on average has a dual sided impact on employee morale. People feel burnt out, and over-worked. Crypto's original promise was exponential upside, for limited risk. Last year's token performance flipped the promise. It's boundless work, for declining upside.
For some ecosystems (like SOL), the story is different due to price action (and focus on community). You can see how this variance in comp affects decision making and morale within teams. Some teams, thanks to where the price is, have a disproportionate edge over others.
I think there's a loop - where lower prices, lead to worse off decisions, which in turn leads to worse off decisions.
3. VCs, DPIs and tokens
Most VC funds are either raising, or set to raise. It makes me wonder where all the idle capital from a few years went back. The alt-coin sell pressure from the past few quarters are likely funds selling off alts that are vested to produce returned capital before raising a new fund.
Will they succeed in raising new funds? Yes. Will that new raised funds go to existing tokens or themes? Probably not. I think a lot of VCs are burnt from the past two years and will (i) suppress valuations or (ii) push for earlier liquidity. You can see this play out with consumer app valuations. Few biters.
For the VC model to work - you need multiple tokens, listing at high FDVs, with low floats, to mark-up books, and raise new funds (before vests). That pipeline, relies on eigen, berachain, monad - so there's a lot of eyeballs on it. Unlike last cycle, between perps and OTC, that market has evolved too - so its an interesting time for VC overall.
4. All eyes on consumer
One of our own portfolio founders added a million users last quarter. Each day, he's adding another 10-15k users. I don't think it will remain the exception. Consumer apps with founders that are non-token first, will likely blitzscale. The same applies to RWA founders with a fintech first focus.
As VCs are token oriented and these founders are outsiders, many of them will remain undervalued (and as pariahs). My honest ask to many of them have been to avoid talking to gatekeepers. I think between MPC wallets, L2s and better on-ramps, we are at the cusp of seeing a new generation of consumer apps that have very little t do with existing token economies.
Will they be valued as high? Will they create token returns the same way? Probably not.
I think they will need a new class of equity first VCs. Or existing ones will flock to equity, and here's the reason why.
5. Exchanges have reduced listing VC backed bags.
This is voodoo-hot air theory. But I think regulatory capture will drastically reduce the number of VC backed tokens that make it to large exchanges (like Binance or Coinbase). You can see versions of this if you look at the number of VC backed tokens making it to exchanges and compare to frequency in past cycles.
One theory is that retail capital is not flowing in like it once used to and exchanges have no reason to. The other, is that price discovery in exchanges have been down only - and they are being more picky. Whatever be the case, not being able to mark-up books and raise new funds will have trickle down effects on venture valuations.
This is why most funds have a preference of lower valuations (risk premia for illiquidity) or SAFTS (assurance that liquidity will come). I think as listings on exchanges get harder, we will see capital flow through to equity.
6. On token management.
A lot of founders seem to be issuing tokens as that is what VCs are backing today. But the same guys will vanish once your FDV is around your series A valuations. If you are a founder - consider hard and strong about issuing tokens.
If you do issue a liquid token, IR (or educating markets) about what you do is as important as running the product. There's space emerging for new forms of media that highlights key metrics, and earnings for protocols. This subsection of the market is small today - but as nature of investors focused on liquid markets trend to sophistication and number of tokens that are at low valuations increase, I see more capital flowing towards this segment.
7. The Early adopter-gatekeeper
See all these packed events? Talk to most folks attending them, and you'll realise everyone has a clear agenda. Most of the time, its money. Loads of it. And that's fine, its a capitalist economy after all.
The problem, is when a subsection has made tremendous wealth by being early and packages the same old thing in new words and continues to do the same things. We somehow presume everything needs a token. Everything needs to be overly complicated. Everything needs millions in burn.
The early adopters are rich and can afford to be stupid for years on length. New guys (post 2022 entrants) that haven't made bank, have to lean on efficiency. But in pursuit of efficiency, they seek advice from early adopters, and get lessons on a constant grift. I think this is why our industry struggles to evolve.
It rhymes with MLM schemes, because they work the same way. An early adopter wins by virtue of being early. As new entrants arrive, the early adopter continues to win. With each new participant, the amount of return declines. Sooner or later, you will have a desperate large bottom pyramid. If you are in the industry, it helps to wonder - are you desperate, or leading. Are you being efficient, or consuming junk. Just lots of room for introspection there.
The way these systems break is when a new entrant ignores the rules and builds a business to scale ignoring the incumbents. My thoughts, prayers and dollars can be behind you if that's you.
8. DePin Data
This is specific to data points (like audio, spacial data, map data etc). I think a lot of these will rhyme with P2E as it gives retail a chance to enter the industry and can be packaged like a dream. Spend $50 to make $100 is an easy sell.
My concern here is how valuable is this data? My running assumption is valuation fr such data will be at 1000x what they are actually worth. They will be great trades (and worth playing on liquid side) - but the long-tail of data accumulators will be in for a rude awakening. Much of that sector rhymes with gaming guilds at this point.
I know this is a sceptical take, but I'm putting it out there for healthy discourse on the value of the data. Some of it will be tremendously valuable, and much of it will be useless. Kind of like the long-tail of BS.
Which leads me to my final point.
9. The Long-tail of BS.
Every category initially has few players that are pioneers. They attract high valuations. Which in turn accrues talent building in the same category. If you are imitating a business, you are likely in the long-tail of BS category. It works if you have niche or geo-specific moats, but odds are quite low you have those moats.
This applies to service providers (like lawyers) as much as it applies to product categories (like GambleFi or Web3 social). The long-tail of BS happens because there's more VCs than thoughtful builders in the room. The long-tail of BS cannot be avoided. It is a thing. It is a beast to be acknowledged. As the industry grows, the long-tail of BS will grow even longer.
You can see it in the booths with no product. In the events with no conversations. In the KOL rounds with financial shenanigans. In the gigantic face of a founder with no product slapped on an event entrance. The long tail of BS is everywhere. I think it can't be tamed. It can't be cut. It only has to be acknowledged and waded through.
The reason why the long-tail of BS exists (currently) is because founders (and talent) that can meaningfully produce impact are likely in other sectors (like AI). Even funds that deploy at scale, see this tday. There is an evident decline in the quality of individuals.
But this is what retail adoption looks like. As the sector scales - it brings with it everything that society is. The good, the bad, the ugly - and well, even FTX. You just need to grow smarter as the long-tail of BS takes over.
A lot of the systemic challenges (and opportunities) that exist in crypto are dependent on price. As the fed cuts rates, much of what I said will change. We are quite probably at the early stages of a new cycle. I am not as bearish - but there's a healthy amount of skeptical cynicism in me.
We have work to do.
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