Web3 emphasizes "fame should be seized early."
Guest: Bill Qian, Chair of Cypher Capital
Q: Hi Bill, can you talk about your recent investment situation?
Bill: Hello. Our fund has been quite lucky; during this cycle, we heavily invested in Solana, Ton, and Sui in the bear market, and we also hit star projects like Peaq, Uxlink, and Bouncebit at the application layer. Overall, we currently have over 6x returns, and the overall liquidity is very good.
Q: We’ve heard that many VCs are having a tough time this cycle. What do you think?
Bill: In the last cycle, everyone rushed to exit after the IPO (VCs followed suit). This cycle is about "letting the bosses exit first." Who are the "bosses"? The exchanges and founding teams. VCs are being asked by exchanges and founding teams to practice the value of "long-termism," so they are now bound by an average lock-up period of 3 to 4 years, only able to watch the candlestick charts while exchanges and founding teams cash out, feeling helpless and anxious. I often joke that being a VC in this cycle is not a profitable business; rather, it’s about becoming a "subordinate" financial consumer, making donations (grants) to promote the industry's development, which can also be considered a merit.
Q: But don’t founding teams also have lock-ups? Aren’t they also "long-termists"?
Bill: Are you referring to the "Team Allocation" lock-up in the fundraising PPT? This is merely a formal "Team Allocation." You can understand that the entire supply of the coin belongs to the founding team, so all the continuously unlocked coins in the entire supply are pools that the founding team can sell under various pretenses. However, some coins are sold by the team to continue developing the business; others are sold to buy Ferraris.
Q: Few funds like yours have managed to capture both Solana/Ton and Sui in this cycle. Can you share the stories behind these investments?
Bill: In this cycle, I directly made our platform the largest investor in Solana in the Middle East, possibly ranking in the top three globally. When you believe an opportunity is right, the remaining decision factors are courage and position. I have experienced the entire investment journey from Web1 to Web2 to Web3, and the training I received has made me deeply understand the concept of "concentrate to get rich." Whether it’s Tencent or JD for Hillhouse Capital, ByteDance for SIG, or Tesla for Baillie Gifford in Scotland, or Apple for Buffett in his later years, heavy investment in core assets has always been a source of significant returns.
Q: You supported Ton very early on. Can you talk about that?
Bill: We were the first institutional investor in Ton globally, and I personally was the first global external director of the Ton Foundation. Our cost was less than a quarter of what many Silicon Valley funds later invested. My logic for joining the Ton Foundation as a director and advisor was: among the top five social communication software globally, one is in China, three are in the U.S., and they cannot do Web3, and the last one is Telegram, so we invested. Frankly speaking, at that time, Western investors had doubts about Ton, thinking it was a Russian project to avoid, fearing the impact of the previous gram incident from Telegram. But since I live in Dubai and frequently meet with their team, I understood their passion and vision, which made me more resolute. Moreover, if we think about it, isn’t Crypto about being anti-establishment? Who in this industry makes big money without being anti-establishment? For example, USDT, Binance, etc.
Q: I remember the primary market financing for Sui was very competitive, mainly involving a16z, Sequoia U.S., etc. At that time, Cypher was just a young investment institution. How did you secure your allocation?
Bill: We are the first team globally to help sovereign nations establish Bitcoin strategic reserves, the only Crypto listed company in the Middle East, and the only listed central state-owned enterprise in the global Crypto industry (our group Phoenix's major shareholder is an entity of the UAE government). When communicating with the founders, rather than positioning ourselves as "a young investment institution," we preferred to introduce ourselves as "industrial investors from the Middle East." Therefore, the founders were very willing to cooperate with us and specifically allocated $5 million to us. This also made us the only investor in Sui in the Middle East, likely holding the highest share among global Chinese investors.
Q: Why did you heavily invest in Solana and become their largest investor in the Middle East?
Bill: Because we saw that after FTX, developers were still active in the Solana ecosystem. At the same time, it became a meme, so when the market was still uncertain about Solana, we decisively increased our position and became the largest investor in Solana in the Middle East in 2023. We also brought Solana to the Middle East, and next year Solana will hold the Breakpoint annual conference in Abu Dhabi.
Q: In this cycle, many people are pessimistic about VCs, feeling that VCs are neither popular nor profitable. What do you think?
Bill: The cycle of prosperity and decline is transient. I am not pessimistic about the VC industry at all, even though we must acknowledge that VCs in this cycle (vintage) are facing a challenge. For the next cycle, it is very likely that due to the clearing of VCs in this cycle and the emergence of many new innovations under the environment of technological advancement and regulatory relaxation, VCs will have a better time. It’s like the Silicon Valley VCs established in 1999 were in a very poor vintage, and most investments ended up in bankruptcy, but VCs established in the years following the burst of the Silicon Valley tech bubble saw a reversal in return performance. I am optimistic about the VC industry as a whole because the development of the industry needs us, including: screening good teams and development directions for the industry, providing vision and resources for founders, increasing project success rates, and ultimately providing good assets for the secondary market.
Q: Web2 VCs are still actively working on various multi-billion dollar AI industry projects. Do you think there is a difference between VCs in the Web2 and Web3 industries?
Bill: There is still a significant difference. The Web2 industry requires "building high walls, accumulating grain, and delaying kingship," so the typical strategy is to raise enough money in the primary market, such as $1 billion, $10 billion, or even more, which is "accumulating grain"; continuously expanding market share, delaying profitability, and establishing their own moat, which is "building high walls"; delaying IPOs, so they don’t have to worry about quarterly reports and public investors, and delaying dividends, all of which are "delaying kingship." The core support behind this strategy is private market capital, which is VC. Therefore, we see that Web2 VCs are getting larger, to the point where a single fund can raise $100 billion because they need to provide enough ammunition for the "nuclear war" among founders.
However, the logic of Web3 is different; it emphasizes "fame should be seized early." The cycle from primary to secondary markets is a bit too short now, which does not support good teams to steadily develop products. This rapid wealth accumulation industry model encourages founders to chase trends, market aggressively, and quickly list on exchanges. Therefore, I feel that Web3 needs more "patient capital," leaning towards the style of the Web2 industry, which can accompany founders to accumulate more in the primary market.
Q: Thank you. One last question: what do you think about the peak of this bull market? Will there be a peak, or will there be a Super Cycle?
Bill: When people start talking about a Super Cycle, one must be cautious. It’s like someone starts telling you: this time it’s different; this time the tree will definitely grow to the sky. The overarching logic of the Crypto industry remains growth, but the specific form will certainly spiral upward within cycles. Market timing is very difficult; we usually build our portfolios based on current market sentiment, making them more aggressive or defensive. Thank you!
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