Interview | Frank, PANews
Author | Zen, PANews
Qiming Venture Partners manages a total of 18 funds under its umbrella, with total managed assets reaching $9.5 billion. Its main investments are in early and growth stage excellent projects in the technology, consumer, and healthcare sectors. It has invested in over 530 high-growth innovative enterprises, with over 200 of them going public or merging, and over 70 becoming industry-recognized unicorns and super unicorns.
In fact, Qiming Venture Partners has also been laying out in the Web3 industry in recent years. The projects it has invested in include Ethereum scaling project Scroll, Web3 infrastructure provider InfStones, decentralized wallet imToken, and crypto financial services company Matrixport. During the ETH Hong Kong event, PANews invited Tang Yi, the executive director responsible for Qiming Venture Partners' investments in the Web3 field, for an interview on the investment strategy, focus areas, and industry analysis of Qiming Venture Partners.
PANews: Please briefly introduce yourself and Qiming Venture Partners.
Tang Yi: Hello everyone, I am Tang Yi from Qiming Venture Partners. Qiming Venture Partners is a globally leading VC with 17 years of experience in the VC field. In the Crypto field, we started investing in 2019 and have invested in 16-17 projects. Our investment strategy focuses on supporting Chinese entrepreneurs to build a global market in Crypto.
Our investment scope is very broad, ranging from infrastructure to application layer, and some middleware, including wallets, and so on. Before joining Qiming Venture Partners, I worked at ConsenSys, a very large company in the Ethereum ecosystem.
PANews: As an investment institution that has achieved remarkable success in traditional and Web2 industries, how does Qiming Venture Partners view the encryption and Web3 industry?
Tang Yi: We officially started investing in this field in 2019, when the market was relatively low, it was a downturn in the Crypto industry, but we believe in the long-term potential of the Crypto/Web3 industry. We think from a technical and talent perspective, this market is very interesting, with many smart engineers and developers working on their own products and research in different fields.
We believe that the initial vision of Crypto is to build a value network, where users can have their digital assets, value, identity on this network, and can quickly exchange these values. So from the perspective of vision and goals, we also find it very interesting; from the current perspective, it has some similarities to the early days of the internet, it has already formed some de facto standards globally, such as the format of digital assets and interaction rules, which are recognized by everyone globally. From these perspectives, we all think that there are some early signals indicating that this direction has great potential. For this reason, we are optimistic about it in the long term. So from 2019 to now, whether it's in a period of high market or a relatively low period, we have been continuously looking at this field and making investments.
PANews: 70% of Qiming Venture Partners' investments occur in Series A or B rounds. In the Web3 industry, which has many early-stage projects, do you still maintain this habit and style?
Tang Yi: We feel that Crypto projects present some differences in fundraising and related matters. Also, because the industry is still in its early stages, the fundraising for many projects is at an earlier stage, and the investment amount is usually smaller, which may be relatively small for our fund size. We have made some adjustments internally for this situation, so we have also made some investments in earlier seed rounds and pre-seed rounds. In addition, there are some projects that have already reached the growth stage or have relatively high valuations, and require a large amount of capital to develop their ecosystem and future development, and we can also invest in such projects. Because our fund size is relatively large, we have the flexibility to make investments in a wider range of stages, so we can invest in early or mid-late stage projects. In terms of investment amount and approach for this industry, we will be relatively flexible.
PANews: In addition to Scroll, what other Web3 projects has Qiming Venture Partners invested in? What are the key areas that you think should be focused on?
Tang Yi: Our investment coverage in Web3 is quite broad. From the user's perspective, we think that Crypto users are more individual-oriented and more institutional-oriented, with the latter having a larger scale. In these two areas, we pay more attention to projects related to user entry or infrastructure, such as the self-custodial wallet project imToken, which we invested in earlier (Editor's note: completed a $30 million Series B financing in 2021, led by Qiming Venture Partners). From a more institutional or larger user perspective, we have also invested in some projects that lean towards traditional CeFi, or take a compliant route with CeFi+DeFi to attract more funds, such as the Asian crypto financial company Matrixport (Editor's note: completed a $100 million Series C financing in 2021, with Qiming Venture Partners participating).
In addition, we have made many investments in underlying infrastructure. A typical case is from 2019 to 2020, when we thought that Ethereum's transition from PoW to PoS was a very clear change. Before it transitioned to PoS, we invested in two staking service providers, which we believe did not exist in the PoW era, but have a great opportunity and market space after the transition.
Overall, we have invested in sixteen or seventeen companies, with more focus on underlying infrastructure (involving zero-knowledge proofs, middleware, security, etc.), and some early attempts in the application layer, such as DeFi, NFT, and Gaming.
PANews: In the long bear market, the primary market is becoming quieter. How long do you think this situation will continue?
Tang Yi: The pace of this market is actually quite difficult to judge. Most of the industry professionals I have met are relatively optimistic about the market turning around before the end of next year. But personally, I think this timing is very difficult to predict. I am relatively optimistic about the market turning around before the end of next year, but I am also prepared for the difficulty of predicting the market. For the companies we invest in, the key is to ensure that they have a sufficiently long-term reserve of funds, preferably sustainable income and value capture, so that even if there is no improvement next year, they still have a chance in the following years and will not be forced to exit the market in the cold winter.
PANews: What is Qiming Venture Partners' investment strategy, what are the important influencing factors, and will the investment pace remain the same in bull and bear markets?
Tang Yi: Directionally, I don't think it will change. We hope to invest at a relatively stable pace regardless of the market conditions. But it is true that in a bull market, because the competition is very fierce and there are many projects coming out, the result is that everyone's pace will be faster in a bull market. In a bear market, because the market is relatively cold, everyone will be more rational, and we can have more in-depth discussions with the main teams of the projects, and spend more time doing due diligence. The situation that emerges is that the pace of investment in a bear market will be slower, but I personally think that this state of investment and financing in a bear market is actually healthier for the entire ecosystem, including the projects.
PANews: Referring to the Web2 unicorns in Qiming Venture Partners' investment portfolio, what elements do you think Web3 truly needs to achieve large-scale adoption?
Tang Yi: From a numerical perspective, such as comparing the user scale of some equivalent Web3 and Web2 products, Web2 is probably at least two orders of magnitude higher than Web3, and this gap is still very large. In terms of user experience, the gap between them is even larger than people imagine.
The specific reasons are, first, for the vast majority of users, the acceptance and comfort of the experience of cryptocurrency payments are significantly different from Web2; second, there are still many imperfections in the underlying infrastructure. This includes some very detailed points, such as from the perspective of encrypted data, suppose you are a DeFi user, what is the real daily income from the money you lock in the protocol, including the money locked in Ethereum staking? Many details of data are not so perfect. Not to mention the work that needs to be done for the EOA (Externally-Owned Account) wallet and AA (Account Abstraction) wallet that everyone is discussing. So overall, from the perspective of infrastructure, there is still a considerable distance from the large-scale adoption that everyone imagines, and this is definitely not something that can be quickly resolved in the short term, such as within two or three years. I personally think it requires more patience.
PANews: Many Web2 entrepreneurs are entering the Web3 entrepreneurship. Are these serial entrepreneurs the ones you prefer?
Tang Yi: Yes. Based on my personal observation, many Web3 entrepreneurs I know or in our investment portfolio have had good entrepreneurial experiences in Web2. It's a great choice for these entrepreneurs to venture into Web3 because they have undergone professional training, possess strong technical and execution capabilities, and have a good understanding of product-market fit. As long as they spend time learning and understanding user needs and industry requirements in Web3, they will grow rapidly. Personally, I think this type of entrepreneur is quite good.
PANews: Many Web3 entrepreneurs switched to the AI track after AI became popular. How do you view this phenomenon?
We are a comprehensive VC, with team members investing in the AI direction and making many investments. I have had a lot of discussions with them and many industry friends on this topic. My feeling is that this phenomenon is quite understandable. First, the problem in the Crypto industry now is that some new use cases and scenarios have not emerged. This is indeed a dilemma, especially for entrepreneurs at the application layer, who may feel quite lost. Secondly, as I mentioned earlier, the development of large-scale adoption may not be as fast as people thought during the bull market, so there is a significant psychological gap.
On the other hand, there are indeed some major new changes in the underlying AI technology. After a long period of "unknown" development, the effects of large models have finally reached a turning point. Many exciting things are happening. However, Crypto has also gone through the same cycle. When new changes in underlying technology emerge, people may be overly optimistic and overestimate the short-term effects they can achieve at the application layer. So I think entrepreneurs, whether in AI or Crypto, will encounter many challenges at the application layer and will need a considerable amount of time to explore. I think entrepreneurs should explore more based on their interests and capabilities and realize that there is a lot of uncertainty on both sides.
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