New Trends in the Encryption Investment Field: The Rise of Family Office Models

The traditional venture capital model is gradually declining in the cryptocurrency field. Web2 venture capitalists are no longer enthusiastic about taking risks and are more inclined to follow the funding allocation of government guidance funds. The difficulty of early-stage financing in Web3 has increased, and the boundaries between investment institutions and financial advisory roles are becoming increasingly blurred. Starting businesses targeting certain mainstream trading platforms has become a consensus in the industry, with various analytical reports and memos being converted into chips for information exchange.

From an overall perspective, more and more large investment institutions are beginning to participate in project token issuance through the secondary market in order to achieve their primary market investment goals. This is different from early equity investments, initial token offerings (IXO), and the dual mode of stocks and tokens. The market is rapidly entering a mature phase, but during this process, smaller investment institutions may be further eliminated.

After the founder of a well-known trading platform made a comeback, with an investment-oriented approach, education as the slogan, and social media as the main tool, he fully supports the meme token projects of the public chain ecosystem to which he belongs. The investment department of the platform was renamed on January 23, increasingly showing the characteristics of a family office.

The avoidance of risk and preference for investment stability is reflected not only in post-investment management and investment in mature projects but also in the weakening enthusiasm for innovative exploration of projects. Taking a newly established investment institution as an example, its investment style demonstrates the trend of emerging capital transitioning to traditional capital, providing valuable learning examples for investors.

From the data of the past six months, seed round financing has not shown an overwhelming advantage in quantity, and its financing amount is not much different from subsequent rounds such as A/B/C rounds. This indicates that the concept of financing rounds in the field of cryptocurrency is disappearing, and projects that can obtain small-scale financing may continue to receive funding support, while projects that cannot secure financing may remain in a state of long-term funding shortage.

The Intersection of Artificial Intelligence and Encryption

Although the artificial intelligence field seems somewhat quiet at the moment, some investors believe this is a good opportunity to position themselves, as they hope to wait for more real builders to emerge.

The investment direction of emerging investment institutions indeed involves AI; in fact, most projects can establish some connection with AI. These projects can be roughly divided into two categories: "developing AI using encryption technology" and "developing encryption projects using AI technology." However, this classification is not of much practical significance. In the current era where AI technology is widely applied, we do not need to overly entangle ourselves with the necessity of AI.

Investment Case Analysis

1. Opinion Labs: This is a prediction market platform based on human opinions. In the future, it may conduct predictions and trading activities around social media opinion leaders, utilizing both the information finance (InfoFi) concept and trading attributes, offering strong flexibility.

2. Plume Network: This project focuses on the tokenization of physical assets (RWA). Its financing journey is quite unique, having secured $30 million in funding from top institutions, followed by an initial exchange offering (IEO) on a trading platform, and then further new investments. This flexible financing strategy reflects the unique opportunities in the encryption market.

3. Tensorplex Labs: This project attempts to apply the liquidity staking derivatives (LSDfi) technology to ensure the decentralization of large language model (LLM) training and datasets. Although the practical significance of decentralized AI is limited, it is not uncommon to secure investment against the backdrop of the cryptocurrency industry eager to integrate with AI.

4. Vana: This is an AI conceptual project that spans multiple market cycles. Since 2021, the project has received support from several well-known investment institutions and has ultimately landed in the project incubation section of a mainstream trading platform. This financing trajectory is difficult to replicate in the current market environment.

5. Blum: This is one of the few seed round projects, mainly focusing on transaction-oriented decentralized finance ( DeFi ) products. Notably, the project received joint investment from the investment departments of two competing trading platforms, showcasing the unique collaborative ecosystem of the encryption industry.

The Rise of Family Office Model

As the wealth creation wave from 2017 to 2021 recedes, the emerging capital in the encryption currency sector is gradually transforming into allocation-type institutions similar to family offices. These institutions no longer pursue extremely high returns, but pay more attention to the stability of projects.

Long before the founder of a well-known trading platform, another founder of a contract trading platform had already established his own family office. These institutions are usually funded personally by the founder, with daily operations managed by former executives.

These emerging family offices also have distinct characteristics in their investment styles. For example, some institutions may not directly invest in meme token projects, but they will invest in related tools and infrastructure. This strategy emphasizes a stability-first investment philosophy.

However, not all newly established investment institutions have developed stable investment styles. Some institutions are still exploring, and their portfolios may include various fields such as trading products, AI-related projects, and more. In the post-DeFi high-profit era, projects that can truly generate sustainable value may be relatively scarce.

Conclusion

Risk investment in encryption currency embarked on its journey with the first token issuance (IXO), reaching its peak before the collapse of a major trading platform. Currently, many institutions are wrapping up their established investment projects, striving to complete token issuance.

Venture capital in the cryptocurrency sector is undergoing profound changes. Investment institutions need to find a balance between stability and innovation, adapting to the new normal of the market. In the future, those institutions that can accurately grasp the market pulse and flexibly adjust their strategies are more likely to stand out in this challenging field.