Author: Sharon, Lucy, Jaleel, Joyce, BlockBeats
Since the second quarter of this year, the crypto market has entered a deep bear market, and the investment strategies and scale of major VCs have been shrinking. According to incomplete statistics from BlockBeats, in the past few months, the number of financings in the crypto field has remained at around 10 per week, while last year, this number was around 30 per week, and at its peak, there could be 60 financings in a week.
However, at the end of the third quarter, some top-tier crypto VCs became active again. Taking a16z as an example, in just over a week, it has led investments in 4 crypto projects, with a total financing size of 76.6 million US dollars. It seems that the “a16z’s” bottom-fishing action in the crypto industry has begun.
What has the crypto market experienced in the past six months without the “a16z’s”?
The same is true for a16z as a leading player in the industry. According to incomplete statistics from BlockBeats, in 2022, a16z participated in a total of 58 investments in the crypto field, with the highest total financing amount in March 2022, exceeding 2.1 billion US dollars. At the same time, in 2022, a16z led the highest investment in Yuga Labs, with an amount of 450 million US dollars.
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But after entering 2023, its investment frequency and amount have shown a downward trend. In the first quarter of 2023, a16z completed 13 investments, and the total financing amount of the projects it participated in decreased by 86.7% compared to the same period last year. The highest amount it led was 150 million US dollars, given to the AI startup Character.AI. The highest lead investment amount decreased from 450 million in 2022 to 150 million in 2023. The degree of contraction can be imagined.
In the second quarter, a16z entered a relatively quiet period. From April to August, a16z only completed 4 lead financings, including 29.3 million US dollars in seed financing for the on-chain IP infrastructure Story Protocol, 43 million US dollars in Series A financing for the blockchain-based AI computing protocol Gensyn, 20 million US dollars in Series A financing for the open-source software security solution Socket, and 16.5 million US dollars in seed financing for the generative AI tool Ideogram AI.
In the past second quarter, the crypto VC market can be said to have experienced a “withdrawal wave”. In addition to a16z, LianGuairadigm also modified its official website information at the end of May, claiming to be a “research-driven technology investment company” rather than a company specializing in “disruptive crypto/Web3 companies and protocols”, seemingly indicating an exit from the crypto industry.
Institutions with the attribute of “spiritual leaders” in the industry have successively faded out of the market, and the industry, like a headless fly, has gradually entered a chaotic stage of memes and dog coins flying around.
In March, Arbitrum’s airdrop opened a brief but spectacular wealth creation movement in the cryptocurrency circle. Legendary stories of “creating thousands of accounts,” “receiving hundreds of thousands of tokens,” and “achieving freedom overnight” circulated widely. The community suddenly entered an era of mass airdrop participation, with zkSync and StarkNet experiencing a growth of over 10 times their daily active users.
After a brief period of mass airdrop participation, BRC20 tokens took over. In May, the price of the BRC20 token Ordi surpassed $10, with a market value exceeding $200 million, creating a sense of FOMO in various communities. Compared to airdrops, the wealth creation effect of BRC20 tokens seems easier. Users do not need to participate in on-chain operations or worry about meeting strict conditions. They only need to mint the tokens at the time of issuance, and even during the early stages on the less congested Bitcoin blockchain, they can obtain a large number of Ordi tokens by paying only a few U in gas fees.
In the era of BRC20, Meme tokens also made their mark. The Meme token named PEPE quietly went online and experienced a thousand-fold increase in just four days. The myth of sudden wealth made PEPE famous, and the successive skyrocketing of PEPE brought Meme coins and Dogecoin back into the spotlight of the cryptocurrency market. Within a few days, dozens of Meme coins emerged, with gains of tens of times, causing half of the market to celebrate in the wealth creation myth and the other half to continue in FOMO-induced anxiety.
Returning to the recent popular public chain, Base. Without relying on “Odyssey” or airdrop hype, Base, the Layer2 network launched by Coinbase, exploded the market with the meme myth of a thousand-fold increase, attracting countless attention and achieving a 2000-fold increase in about 14 hours.
However, after just over 3 hours, BALD revealed its fangs and destroyed everything. The project suddenly withdrew a total of 8,660 ETH and 179 million BALD tokens in liquidity within 7 minutes, achieving a rug pull. Interestingly, some on-chain detectives believe that SBF or the orchestrator behind BALD.
“Lead Sheep” coming in for bottom fishing?
On the other side of chaos, some people have quietly exited. Since the beginning of this year, several projects have announced dissolution and closure, and the rate of project shutdown has been increasing. From an average of 1 project shutdown per month, it has grown to an average of 5 per month. In September alone, 4 projects announced closure, including NFT platform Voice, DeFi project Gro Protocol, DeFi project Fuji Finance, and DeFi and NFT trading robot None Trading. Most of these projects came to an end due to “insufficient funds.”
One possible reason for “insufficient funds” may be seen from an article published last week by Jocy, the founder of IOSG, one of China’s largest cryptocurrency industry venture capital institutions. After the TOKEN 2049 conference, Jocy pointed out in the article that the cold brought by the bear market may make it difficult for many project parties to survive until this winter, and also pointed out that the current investment institutions in the cryptocurrency industry are more inclined to tighten their belts.
“For many teams, TOKEN 2049 basically became their last hope for financing. If the bear market does not end, this may be their team’s last brand exposure, because most early-stage teams have expanded in the past two years, depleting their runway, and some teams have very high burn rates.”
In contrast to the Asian market, the return of Western cryptocurrency investment institution “Lead Sheep” has created a lively scene in the market.
After changing its official website homepage description to “research-driven technology investment company” in May and removing any content related to cryptocurrency, LianGuairadigm revoked this change in just over a month and announced its return to the cryptocurrency field. Matt Huang, co-founder of LianGuairadigm, said that deleting all mentions of cryptocurrency on the website login page before was “a bit absurd and a mistake.” He emphasized that LianGuairadigm will not give up its investment in cryptocurrency.
After returning to the cryptocurrency industry, LianGuairadigm immediately entered the “most exciting” MEV market and participated in Flashbots’ $60 million Series B financing completed in July, increasing its valuation by over $1 billion. In addition to Flashbots, LianGuairadigm’s most impressive investment in the past few months is friend.tech, which it selected and invested in, facilitating the rise of the Web3 social newcomer with a market value of over $100 million in just two months.
In addition to investments, LianGuairadigm’s official website blog has also become unusually active. In July, LianGuairadigm released an announcement titled “Collaborate with LianGuairadigm,” stating that it hopes to collaborate with more outstanding talents in the cryptocurrency field and calling on entrepreneurs or projects in the seed stage or Series A financing stage to fill out a form to introduce their projects to LianGuairadigm.
Yesterday, Matt Huang published another long article, not only refuting the pessimistic view that the current crypto market is too speculative and slow to develop from another perspective but also expressing confidence in the future of crypto.
Along with LianGuairadigm’s high-profile return, a16z has also regained vitality.
As can be seen from the chart below, from April to July this year, the entire second quarter of a16z seemed to have quieted down, with an average of only 1 investment per month. However, starting from August, a16z seemed to have become active again, increasing from 2 investments in August to 5 investments in September, which is equivalent to the total of the past few months. And in the latter half of September alone, a16z made 4 investments in 10 consecutive days.
On September 12th, a16z led a $15 million Series A funding round for LianGuaihdo Labs, a metaverse platform development studio. On the 18th, a16z led a $25 million seed funding round for Bastion, a startup providing services such as cryptocurrency custody. On the 20th, a16z led a $3.6 million seed funding round for Freatic, a decentralized information marketplace protocol. The next day, a16z led a $33 million seed funding round for Proof of Play, a blockchain gaming startup.
In a market situation where multiple projects have been shut down and Eastern capital is in short supply, are the “a16z’s” making high-profile appearances and frequent moves to bottom fish in the cryptocurrency industry?
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