Investment and Trends in the Crypto Space - Panel

hi i'm joining now um what are we talking about okay perfect timing um hi guys good morning um my name is michelle guo and um i'm the u.s based representative for animal conventions so we're catching my breath right now we are catching our breath right now and we are investing in the future of web3.0 we do specialize in gaming blockchain gaming that is and and so we believe in the decentralized decentralization of um we're through gaming and we're really investing in the ecosystem and leveraging our network effect of our about 150 portfolio companies to date within web3 and so they work cohesively together in partnerships to leverage each other's networks and ability to add value to um one another so um yeah good to be here for anamogo adventures thanks okay awesome uh great to be here so you're running a little bit late but i'm very excited for this panel i'm alexis johnson i'm the president of lightning media we do marketing events and advisory for projects in the crypto space and this this panel is focused on investments and investment trends and themes within the world of crypto so we already kind of got started with the introduction so i'm just going to kind of dive right in for for our panelists here we have basically veterans on this panel and i have some friends on this panel but for panelists here what advice would you give you know a newcomer to the crypto space looking to invest and also navigate the current market starting with cecilia okay so i think as a newcomer i would take myself as an example so i'm i think one advice i can give is get rid of your bias because you know as we are you know private market and project investors so we always talk to founders and the teams and i don't have time to follow and chase other mts and i have some bias like yeah it's just a g-pack you know it's maybe it's a hype whatever and i just recently talked to a lot of friends who just ap and you know punk and abe in the very early stage and really just dive in the talk with them to learn what the men said was the you know the you know the points like behind the community so why is it so popular so i learned a lot as well and just yesterday i got my oh two days ago i just got my first mutated you know mutated apes and joined the mt communities so i think that's one example you know i can learn is like get rid of your bias and i think find your the area you are really interested in i think no matter what the area is i think you can make the your way to you know rise up and you can find that's the beauty of web 3 you can find the right group of people the right group of community to carry the conversation and also gain the financial i have the financial gain and also the you know personal interest uh your life gain as well together down the road that's my advice sure i can go next um so totally agree with what cecilia said um i think uh another piece of advice i always give is um you know web3 investor but overall still an investor so i would always encourage everybody whether they're you know an undergrad mba student um kind of existing full-time investor from web 2 or from traditional private equity to still keep a lot of the fundamentals or knowledge of fundamentals because we are in a potentially frothy market very very cyclical up and down to be able to do kind of the basic fundamentals of reading a p l understanding how to compare monthly active users across different protocols against each other you know basically being able to keep some of the fundamentals in addition to many of the both positive and sometimes negative hype that that surrounds certain projects and protocols i think is super important so that's that's another piece of advice i'd give a very good point just to add on to that um i think it's really important to understand the underlying asset that you're buying in last year was the first approval for for um for the etf and then people think that okay it's um less risky well actually it's not you're still buying crypto so be prepared for the volatility and be prepared for lost potentially everything that you may own um and then if you understand underlying assets and you understand why you're buying that asset and um and then you should you should you should then invest in it and also do your own research on the projects that you're investing in we do you know our own due diligence for investment also for listing exchanges and i encourage all of the retail users we will help educate about what's going on the projects why we're listing that projects but we always encourage retailers to learn about projects and understand the risk involved a piece of advice i would give is hedge your risk and diversify your portfolio i think that goes without saying and that's more on the tradify side for sure another piece of advice is go with your gut if a deal looks too good to be true it's probably too good to be true awesome awesome so next question because we just touched on in a little bit i know we have different firms represented here um i guess starting with michelle at animoka you know what is your investment thesis and how has that thesis evolved over time but really for all panelists what's your thesis thanks alexis um so investment thesis um you know we've sort of we've been built upon web 2 gaming and then transitioned over to web3 as we're seeing the space um right now that's sort of where the market is headed um but we're really the pioneers and the first to attribute towards this trend and then when you know nfts as it applies to gaming really took off that's why animoka came about and became the leaders in the blockchain gaming space that's what we were built upon fundamentally and then from there from blockchain gaming came nfts then you know investing in the wallets and d phi and obviously the guilds and metaverses we've invested in you know about 10 guilds sedate 30 metaverses to date and numerous and countless successful blockchain games including axe infinity which you've hopefully have heard of here so i guess to answer your question our investment thesis how it's changed over time is you know we're really contributing towards the web 3 economy by that network effect i already mentioned um and so it's the future of gaming and of nfts as it applies to gaming and then all the other you know value chains that apply and can contribute towards this greater economic growth and economy how has it changed over time as well it's really the future of web3 you know we're seeing a lot really i think we can all agree it's web 2.0 or 2.5 transitioning over to web 3.

0 but yeah that's what i would say for the future of gaming and nfts okay so i will take over so uh i think uh for uh i really you know talk briefly represent of mask and formless so for mask i think we are our ecosystem fund we are very very focused on the vap3 infrastructures so that's why we invest a lot of midwares to link to web to the web 3 and a lot of very fundamental like web 3 you know protocols such as index tool you know nft verification tool and the liquidity tool as well and for the formless we are more general invest in d5 c5 35 game a lot of games skills we could invest a lot with animoka and for if we are talking about the changes i think we are entering into the we i want to call it block chain 3.0 error because blockchain 1.0 is more like i think it's a lot of you know tag a lot of you know layer ones and then blockchain 2.0 we start to see like a lot of different focus the protocols focus on different use cases and now i think is blockchain 3.0 is i think it's really changes before you know in the you know ideal dream of web 3 communities it's always tag first and we think oh the user will grow organically or naturally well never will have a cool tag but it's not like that right so we have a lot of famous uh protocols even though their tokens are trading at a very high price best if you look at their users we look at their traffic it's really hard to see it's a little bit horrible there on the adoption level so i think uh for going forward for our focus we are very focused on invest in founders who want to build the option first who want to read let's say we we are looking into some like very solid social uh protocols were like such as a similar to mirror uh similar to medium as well so what they do is they are really emphasizing on operation as well they want to bring like all the good contents good uh publishers they are like content and user first but also figure out the tag part and then grow the community and then launch the token so i think going forward entertains it enter this enter into this blockchain 3.

0 i think uh just you just have a cool white paper to have a cool tag and you're very lame on operation i don't think that's going to last in the future cool so as i said earlier we take a chain gnostic approach not like a lot of talk we see already have a large position on some of the layer ones it's a new fund we're funded by some of the top ecosystems and will help you know fund their ecosystem projects and with um our teams are all like formal executives from like exchanges or vc will help with our portfolio company with our operational expertise to become section leaders um so for example we'll help them with token design go to market strategies community buildings introducing them to the right market maker and bridge the gap between the west market and his market and we're also very big on gaming uh we did a 100 million joint ventures with gala games and we'll be investing into like a broader um you know blockchain gaming industry and also variability on web3 and web 3 social as well awesome so first of all i think a lot of what's been said really resonates um one thing i think we actually find it pretty hard to keep an investment thesis for longer than three months or six months sometimes in this industry besides the inevitable you know crypto is certainly going to grow significantly the future is multi-chain um we as a fund are also um super multi-chain and invest across all layer ones and l2s um i think one thing that is quite evergreen is um and just even looking at the numbers there the the electric capital report on just the number of web 3 engineers i think right now is 300 000 as of the end of 2021 so if we look at that linearly as like the base case that number basically grows to six hundred thousand nine hundred thousand over the course next two years if we look at exponentially it could go up to three million to five million and a lot of what we focus on in terms of a quantitative way of understanding a project is well hey is this actually meaningfully going to change the number of developers that are building on chain and through that adding additional use cases growing the number of users across all blockchains and so that i think is one big thesis of us which is it's important to drive developer growth reduce the frictions for developers to move from web to web 3 and any products that are building in that whether it's an l2 middleware stack is incredibly interesting for us awesome so my next question is more so when it comes to the actual vetting and diligence process i guess starting with sierra like what are some of the red flags that you look for uh when when looking at these projects and what do you want to avoid um so first of all most important thing is the team and um we do like rounds of course with the team to make sure they're actually real and they're focusing on the project and there are some reflects like if they are involved with like political issues if they're doing like gambling um if the um after the call due diligence like if we look into the close and what they said they're building or they've built is like totally different than was showing with the code base um that's are all the red lights and also like security token of course um yeah it's pretty much the same procedures that we're taking for for listing tokens yeah yeah i would i would echo that um certainly everything comes down to people and oftentimes people are the the cause for great projects and and bad projects uh the one thing we do pay attention to a lot is uh vesting schedule um usually the more bullish the market the shorter we see vesting schedules um and one thing that's important to binance is you know we actually believe that the four-year vesting schedule is essentially an artifact from silicon valley when if you started a company or joined a company you really weren't really expecting liquidity for 10 years anyways but now with token liquidity people can get it in 18 months or two years so we're really interested in longer vesting schedules and we see it as a red flag whenever teams have very short 18-month 24-month vesting schedules yeah so have you echoed that i think first thing is the team and also blockchain areas are super small so if you have did anything you know bad in the past it's very easy for us to find out to do cross check with other vcs and founders and your previous team members uh and another thing i think uh i really think i think you can and crazy are already a lot of other teams i would say token economic is the the first thing i will look at if you see a cap you know their token economically designed it's like the team have much shorter investing period than the others so normally it's a huge huge red flag for us and also i think whenever uh if you see a token design like seed around you know 10 million 12 million and just right after two months later it's like a you know so-called private sale as a 60 million or 17 million valuation pumps so high and then like two months later public sale is 100 million not only would you think this is uh you know you know not we would not use the word ponzi but maybe palm dom projects were high property as we call so i think that's some very often is the huge red flag for us to do you know to even look at it into the product no matter how good it is i think i think the mindset behind this tokenomic designs is just not right so i think your community supported you right and why is that uh you know makes sense for your community pays such a higher price than the seed investor who is just you know some random vcs you know in the area who don't care about your product maybe so only care about the return so sometimes we we think this is a huge red flag at least for me to jump into the deal or to help them further grow in the future yeah um i think all these points are very valid um so back to the team um so sometimes you see founders that are not even full-time on a project but they're looking for investment you know if you were in our shoes would you invest in a company and you're asking for money from us if you're not even fully committed or show that you're fully committed while you still have a full-time job elsewhere probably not um yeah so yeah great points and i guess for panelists here what are some of the the big trends that you're you're following in 2022 and beyond uh starting with starting with michelle trends i'm seeing um so we can talk about the guild space um so guilds 1.0 was really a way to help game games gain user acquisition so it was a quick user acquisition funnel for them to benefit um in the form of scholars scholars play the games in the form of play to earn games and your their incentives was very clear right so um in guilds 2.0 i'm seeing um and i hope to see more of is um tools so find out finalize um finance that the financial side of guilds providing um these scholars with abilities to maybe easily um you know yield farm with some of the nfts or other tools like on the accounting side you know tools that are enabling users and gamers to help better with their incentives really so that's the trend that i'm seeing and i would like to see more of on that's specific to guilds so i think echo michelle's point uh you know i think in the 1.0 era so you will see a lot of interesting concepts right such as skills such as play to earn such as you know blockchain games you know you know there are certain games with super huge but it did launch the lft support their financing process i think we have seen a lot of experimental concept there and as this the 2.0 we're like 2.

5 like arrow we we start to think see more like more sophisticated tools to help polish those whatever concept is for gearside echo that we are seeing a lot of skills for guilds we're two for build guilds a lot of famous skills uh even though they have you know tens of users ten thousands of users but they're still managing other process manually inside so that's why we're talking to teams who have like 15 or 20 years working experience in the gaming and a source area to start to help other girls to actually facilitate their in-galls management process same as nft area right so before we see a lot of tools that's ft verification everything browsing tool i have t you know indicator tool that here and there are a lot of you know projects there so we start to think some like very very polished you know even like web 2 ux similar product who want to you know consolidated other like pieces with other puzzles together so they either build inside in a company where either they just partner with and put all the pieces together to make it is much more powerful and a strong product so i think i believe like a blockchain in this area we will see the real adoption in the in the in a couple years maybe not immediately but i believe that there are like more and more sophisticated to build to improve the area um trends going forward so back in 2017 and 2018 that's where we invested and listed like public trends like um all grand politics earlier um so you know solona all of those great infrastructures and um in this recent two to three years of development this family is ready and we see applications are booming but i think going forward it's going to be really easy for any builders in the blockchain space to build their own chain so the chains will be just gates for access into blockchain space and metaverse and i think crosstrend and and multichain is going to be the future and um so we are really bullish on zero knowledge and a lot of the other like multi-chain applications and wallets um so that's the first trend and then also like wipe three social because i think that's kind of like the bridge and the connection is more like horizontal that can connect all the communities together connects all the different layers together and you know real use case scenarios and with great communities also really bullish on gaming but we have been really conservative with investment into like single games because i think it's going to be really hard for them to survive where there was um not well designed platon model especially in the bear markets but still i like horizontal things like management tools skill management tools or like engines where i think that's going to be really easy for them to scale in the future so yeah those are the trends and i'll be seeing i think in the next few years um yeah uh very quickly i mean i think one thing that hasn't been mentioned so far i agree with everything that's been said um especially since we're at youth denver i think it's worth talking about dows um you're just reflecting on 2021 you know obviously was known as the year of institutional adoption the year of nfts the year of um also just kind of l1 and l2s um but i think just the proliferation and the number of dows was actually pretty extraordinary last year and this year we see that continuing to happen um so tens of thousands of new dows being created across the entire market and tbd on the hit rate of dow success in all honesty in terms of long term but to what was mentioned across across this group here infrastructure and tooling whether it's especially in that middleware stack i think is going to be incredibly important so dow is a service right to put it bluntly i think is going to be one thing that is going to be incredibly important for us to invest into this year i just wanted to add on interoperability um cross chain and sort of i guess tying in all the sub sectors that we spoke about i think that would be the future for sure and that's what we're looking into though very incredibly difficult problem to solve for something rough to look for and talk about