Influential Encryption Venture Capital: Differentiated Strategies and Market Trends

In the field of cryptocurrency investment, venture capital institutions from different backgrounds are showing markedly different development trajectories. Some well-known VC firms with Chinese backgrounds are facing challenges, while Western institutions represented by A16Z continue to expand. This contrast reflects the profound changes that the cryptocurrency industry is undergoing.

The Predicament of Chinese VC

Recently, several Chinese-background crypto VCs have chosen to scale back their operations. A well-known institution, after investing $40 million in the BTC Layer 2 space, was forced into post-investment management due to not achieving the expected returns. Similar situations began to emerge in 2023, with some VCs turning to the secondary market or halting fundraising, focusing on helping their invested projects go public to minimize losses as much as possible.

This phenomenon reflects that some Chinese VCs are overly focused on short-term profits, neglecting long-term development. As a certain business tycoon said, "Never try to make the last penny," otherwise it may trigger negative public opinion. However, the allure of money often exceeds personal will.

A16Z's Continuous Expansion

In stark contrast is A16Z. Although this Silicon Valley giant may not match some Chinese VCs in absolute return rates, its business scale and influence are continuously expanding. A16Z's AI fund has raised as much as $20 billion, and its cryptocurrency fund exceeds $7.6 billion. Even the minimum investment amount for its startup accelerator reaches $500,000.

The success of A16Z is not only reflected in the scale of its funds but, more importantly, in its position within the industry. For many entrepreneurs, obtaining investment from A16Z means a completely different development opportunity.

Differentiation of Roles Between East and West

Looking globally, the encryption industry shows a clear division of labor: the West dominates concept innovation and capital concentration, while the East is responsible for project development and providing liquidity. Although some trading platforms with Chinese backgrounds still hold an advantage in terms of liquidity, the entire industry is pursuing "internationalization", viewing the Chinese-speaking market as secondary.

This trend is reflected in multiple areas such as exchanges, stablecoins, and compliance. Undeniably, we are at a historic turning point. In the Web3 era, this imbalance between the East and West may further intensify.

Challenges Faced by Chinese VC

There are multiple reasons for the challenges faced by cryptocurrency VCs with Chinese backgrounds:

1. Market positioning is limited: Western institutions such as A16Z can focus on the U.S. market while naturally possessing a global perspective. In contrast, Chinese VCs find it difficult to directly serve the local market and can only rely on their Western background to participate in competition by selling liquidity in the Chinese-speaking market.

2. Insufficient local support: As the tide of Chinese concept stocks recedes, the traditional "USD + BVI + VC + Chinese market" model is gradually disappearing. Domestic internet giants have reduced their interest in Web3, while the government and state-owned capital are more focused on hard technology and localized projects.

3. Funding Scale Gap: Institutions like A16Z have large capital pools that can withstand more failures until they find the next blockbuster project. In contrast, Chinese VCs have a smaller margin for error.

Future Outlook

In the face of these challenges, investors of Chinese descent need to rethink their strategies:

1. Focus on long-term value: Avoid excessive pursuit of short-term returns and cultivate a long-term thinking mindset.

2. Leverage local advantages: Utilize in-depth understanding of the Chinese market to uncover unique investment opportunities.

3. Promote cross-border cooperation: Strengthen connections with global partners and enhance the level of internationalization.

4. Focus on technological innovation: Invest in truly groundbreaking technologies rather than just following trends.

5. Building the ecosystem: not only providing funding, but also offering comprehensive support for the project to create a positive ecosystem.

The encryption industry is still in its early stages, and the future is full of possibilities. Only by adhering to innovation and maintaining an open mindset can we seize opportunities and achieve long-term development in this rapidly changing field.