Interpretation of Web3 VC Ranking: What are the competitive advantages of TO5 VC?

Published on 9/29/2022   283 views   0 Comments  

By: CODY

On September 27, the encryption research organization GCR and Clearlock jointly launched a ranking list of Web3 VCs. The top 20 Web3 VCs were Paradigm, a16z Crypto, Panetera Capital, Coinbase Ventures, Polychain Capital, Dragonfly Capital, Sequoia, Variant Fund, Electric Capital, Multicoin Capital, ParaFi Capital, Digital Currency Group, Blockchain Capital Union Square Ventures、Spartan Group、Alameda Research、Binance Labs、Animoca Brands、CoinFund。

This list has aroused controversy in the encryption community. Some people recognize it and some people criticize it. This article is an interpretation of the list by Global Coin Research. It discusses the specific scoring rules and conducts research and analysis on the top five VCs,Global Coin Research authorizes Shenzhen Tide TechFlow to compile and release the Chinese version.


summary


In the past cycle, Web3 venture capital has evolved into a complex and differentiated space - traditional idea driven funds, enterprise venture capital (CVC), DAO venture capital, world-class exchanges and trading companies, which have flourishing venture capital departments and funds and will invest in each life cycle of equity and token companies.

We see the list published one year ago, according to" Diamond Hand; To" Value added", Ranked some cryptocurrency venture investments. This list tells us that just like the dynamic development of the market in which these funds invest, the VC pattern and its leaders are also changing dynamically.

This report will conduct a comprehensive and up-to-date analysis of the top ten Web3 venture capital companies and broader industry activities - measuring funds in multiple areas, including: investment portfolio, competitive differentiation factors, platform strategy, community and reputation, 2022 transactions, etc.


method


In such a volatile and dynamic market, there is no precise science to rank - today's ranking of a fund may be completely changed due to their next investment, writing or strategic initiatives, which is the difference between this ranking and most rankings.

In a world where the amount of asset management dominates everything, an interesting dynamic has emerged in the past 24 months - economic policies have promoted the arrival of an investment era, capital has become a commodity, and top companies must make themselves unique in order to gain a place in the highly competitive capital table. Because of this, the knowledge moat established by the fund outside asset management accounts for the largest proportion in this method.

Extract the following categories of data from Crunchbase:

  • total investment: [Weight: 7/10] Number of investments since the launch of the first fund
  • Lead round: [Weight: 8/10] Number of rounds as the main investor
  • Transactions in 2022: [Weight: 7.5/10] Number of investment transactions completed in 2022
  • unicorn: [Weight: 9/10] The number of unicorns in the fund portfolio (with a valuation of more than US $1 billion)
  • Diversified investment: [Weight: 4/10] Number of investments in companies founded or led by women and ethnic minorities
  • Well known transactions: [Weight: 3/10] Investment in well-known Web3 and cryptocurrency companies
  • Unicorn hit rate: [Weight: 9.5/10] An indicator to evaluate the percentage of Unicorn in the total investment of the Fund. 
    • Unicorn/Total Investment=UHR
    • Note: The Fund may have made multiple rounds of investment in the same unicorn.
  • Platform score: [Weight: 9.5/10] Evaluate the actual post investment support provided by the fund to the portfolio company through a dedicated platform team or strategy. This includes technical support in protocol design, elaborate token economics or white papers, allocation of engineering resources for construction, and internal platform teams to assist GTM, talent, business development, activities and other formal operational cooperation beyond capital allocation.
  • Community score: [Weight: 7.5/10] This is a unique indicator to measure the importance of Web3 -- community -- and the Fund's ability to design, cultivate and expand communities. This includes writing, social media coverage, podcasts, meetings, Twitter Spaces, and general community engagement and thought leadership. We look at the number, quality and coverage of these community driven programs to determine scores through social and traditional media sources, as well as the Fund's website and/or media.
  • Reputation score: [Weight: 6.5/10] Measure the reputation of the fund in the media, builders and founders in this field, and the Web3 community, because they invest, interact, and provide infrastructure for consumer centered products, platforms, and agreements. This category is based on public sentiment from social and traditional media sources.
  • Non encrypted native fund: [Weight: 5/10] It is only evaluated based on its cryptocurrency investment, focusing on recent trading activities. This leads to a natural bias against crypto native funds around trading volume, leading rounds and unicorn number. More weight has been given to those funds that operate natively in the field of Web3/cryptocurrency.
  • Female Partner : [Weight: 5/10] Category data comes from the team page of each fund website.
  • Negative news: [Weight: 8/10] From open source web search and social media. This is related to the reputation score.
  • USD raised: [Weight: 4/10] From Crunchbase and Messari fundraising databases (formerly Dove Metrics).
  • Year of establishment: [Weight: 2/10] helps to highlight the persistence of the fund in multiple cycles.

The total score combines the above weighted indicators to provide a comprehensive score (100 out of 100).


TOP 5 :


#1 / Paradigm

summary

Launched in 2018 by Coinbase co-founder Fred Ehrsam and former Sequoia partner Matt Huang, Paradigm is the only Web3 fund in this list whose founders are alumni of the other two companies in the top 10. Both companies have achieved the best performance in this field.

Paradigm has a team composed of expert researchers, blockchain security experts and white hats, and uses capital deployment and technical support at each stage of the growth of the company it invests in.

investment portfolio

Paradigm has been focusing on collecting unicorns in the investment portfolio - concentrated bets through in-depth technical research and calculation. Their investment ranges from a seed round of $1 million to a growth round of more than $100 million. This non phased investment is unique compared to many other top crypto native funds that focus only on early stage investments.

Their investment portfolio includes 15 unicorn companies, including more than 10 top liquid and non liquid companies in the industry: Coinbase, Chainalysis, Uniswap, Compound, Cosmos, Fireblocks, FTX US, Opensea, Magic Eden, Amber, Gauntlet, MoonPay, Phantom, Optimism, Sky Mavis and Starkware, which have improved their diversified teams.

competitive edge

Paradigm is a fund composed of technical experts who have created one of the most unique moats in the industry. Although every venture capital company can provide their investment company with capital and committed post investment support, Paradigm has the technical capabilities that are truly built with the founders, which most companies in this field simply cannot provide:

  • A young engineering prodigy who publicly attacked his boss on Twitter;
  • An elite team of white hat and blockchain security researchers can design novel token mechanisms;
  • Developer competitions, such as the recent CTP 0xMonaco game, promote top engineers in this field to compete with each other;
  • Technical thinkers, built with their portfolio companies.

Transactions in 2022

Before the market downturn, Paradigm raised a fund of 2.5 billion US dollars in time at the end of 2021. Unlike other companies in the industry, Paradigm did not show much retrogression in capital deployment. As of the first week of September, Paradigm has announced 25 transactions, which is expected to exceed 29 transactions in 2021. They doubled their investment in Opensea, Magic Eden, Phantom, Optimism and Fractional, and made new seed investment in some projects that they thought would become household names in the next cycle.

#2 / a16z Crypto

summary

Andreessen Horowitz, or A16z, is not only a giant of Web3, but also a giant in the field of technology investment. Marc Andreessen, the founder of A16z, is the author of Mosaic, the world's first Internet browser. The company has shifted most of its focus to the cryptocurrency field -- Chris Dixon, the head of Web3, will become the first on the Forbes Midas list in 2022. They raised a cryptocurrency focused fund of up to $4.5 billion in May 2022. In addition, they launched a $5 billion growth fund, a $2.5 billion biotechnology fund and another $600 million game sector fund in January 2022.

It is worth noting that many competitors believe that the deployment of such a scale may have a negative impact on the Fund's income, but I will not play down Marc, Chris and a16z's world-class teams. Others, such as Chamath Palihapitiya, believe that the a16z business model will become a "black stone in the technology industry" - creating a publicly owned institutional security that is linked to technology by absorbing hundreds of billions of dollars of industry equity, rather than focusing on providing a large return for its LP as traditional funds do. They are playing a game different from other industries.

investment portfolio

The company has deployed the power of strategic capital to expand some of the most dynamic and defining companies in the industry. We can write a complete report for this portfolio (perhaps we will), but now we will discuss 14 Unicorn projects - cross protocol layer, centralized and decentralized infrastructure, consumer applications and mature NFT projects. These include Anchorage, Dapper Labs, Coinbase, Opensea, LayerZero, Yuga Labs, Phantom, etc.

competitive edge

In addition to the huge popularity and performance of A16z in the investment and technology fields, a key aspect that makes it different from the native cryptocurrency native fund is its post investment platform team of more than 200 people. They created an internal consultation composed of experts, involving marketing, operation, business development and partnership, marketing, talent and capital formation, bringing new significance to each company in their portfolio. This elite platform team is unmatched by cryptocurrency native funds and global venture capital.

Transactions in 2022

With $4.5 billion to be deployed in the next few years, it is not surprising that A16z will be active in 2022. According to Crunchbase data, the company's cryptocurrency department has invested in 14 transactions so far this year, which is in the leading position in almost every round of transactions they participate in. The scale of the company's deployment in Web3 is hard to ignore. Yuga Labs has obtained a huge seed round of 450 million dollars, VeeFriends has obtained 50 million dollars, FlowCarbon has obtained 70 million dollars, and the investment in NEAR and Morpho Labs in the protocol layer.

#3 / Pantera Capital

summary

Pantera Capital, founded in 2013, is known as one of the first institutional crypto asset management companies in the industry. Pantera has five unique funds, which can not only be used as a hedge fund to trade current assets, but also to trade private companies from seed to growth. Pantera's capital has supported the most defined projects in many industries. Few people have foresight on the cryptocurrency industry like Dan Morehead, the founder and CEO. In his famous investor letter in the summer of 2013, he said that Bitcoin hit the bottom of $65 and urged customers to start accumulating assets.

investment portfolio

Pantera has been in contact with this industry since the early Cyberpunk era, even before Vitalik's beloved World of Warcraft character was blocked by developers, leading to the birth of Ethereum. In 2013, they issued the first check of 1.4 million dollars for Ripple's seed round, providing seed funds for Polychain Capital - now they are an industry giant, and a series of consumer and infrastructure games, including the seed round of The Block, the A round of NEAR and Bakkt, and almost all the growth rounds of Circle since 2014.

In addition to these impressive portfolio of brand-name investments, the Fund has accumulated 22 diversified investments in companies founded by women and ethnic minorities (accounting for more than 10% of the investment since the establishment of the Fund). Pantera's portfolio, track record and enduring reputation make them among the top VCs.

competitive edge

It has been mentioned, but perhaps the most obvious difference between Pantera and most funds in this field is its long-term record of successful investment in each stage of the past decade. On this list, few funds (if any) can be said to have invested $1.4 million in the seed round in 2013.

Transactions in 2022

Pantera, like many other top companies, will continue to invest in 2022 with 43 investments, making it the fourth largest cryptocurrency native fund this year, and one of the few funds that have exceeded 200+investment since its establishment. This year, they have invested in 18 seed rounds, 9 A rounds and 16 growth stage rounds, which shows their commitment to the investment portfolio unrelated to the stage. The first quarter was the most active venture investment quarter in the company's history, with 24 investments.

#4 / Coinbase Ventures

summary

Coinbase Ventures was established in the bear market in 2018. At the beginning of its establishment, it was only 15 million dollars. Now Coinbase Ventures has covered the entire industry, perhaps more than any other investor in this field. So far, it has made more than 275 investments and has 30 unicorn enterprises, which will make Peter Thiel and Bill Gurley blush.

investment portfolio

There are many ways to build a strong venture portfolio. On the one hand, you have a centralized, research driven approach. For example, we will visit Variant. Then comes the method of Coinbase Ventures, whose portfolio has the maximum coverage in every field and stage. They demonstrated their mission of providing transparency for the industry and made early financing for almost all well-known cryptocurrency data providers: CoinMetrics, Messari, Flipside Crypto, Dune, Nansen, CoinTracker, and Moralis. They also provided their commitment to maximize the value of portfolio companies. After leading their A-round financing, they directly acquired Bison Trails with more than $450 million in cash and stock. At the same time, they continued to provide seed funds for investment companies, agreements, consumer applications and DeFi infrastructure from Silicon Valley and Miami to Paris and Chennai.

competitive edge

Coinbase has paved a way for CVC of the exchange to become a strong player in the risk field and compete with the most elite funds in the industry. With a world-famous brand, a team composed of hundreds of engineers, and experts in product, marketing, enterprise and business development, the founders felt that they had a unique machine to support the development of the company, and Coinbase Ventures was in a leading position.

Transactions in 2022

In terms of activities in 2022, Coinbase Ventures ranks second in the industry. So far this year, there are 85 transactions - 47 seed investments, 21 round A investments and 17 transactions at different growth stages. This focus on small transactions is meaningful because most of their marginal capital will be deployed in 2021. It is worth noting that Coinbase Ventures is said to have deployed 90% of its capital in 2021. Many of these investments may fall in price, and they may better take advantage of the bear market in 2022 to become builders. In other words, this does not seem to slow down the investment of Coinbase Ventures in 2022.

The influence of Coinbase Ventures is still very diversified. At the agreement level, it has invested in well-known capital distribution institutions such as Valkyrie and AllianceDAO, data providers CoinTracker and Moralis, as well as Aptos, Sei, Euler and LayerZero.

#5 / Polychain Capital

summary

The fund was founded in 2016 by Olaf Carlson Wee, the first employee of Coinbase, and a16z, Pantera and Union Square Ventures acted as seed fund L - the fund has experienced a fairly long second cycle since the bear market in 2018, The SEC file shows that its asset management scale has increased from US $591.5 million at the end of 2018 to more than US $6.6 billion in March 2022 (Note: the last file is before the market downturn, which may be significantly reduced at today's prices).

investment portfolio

Since its establishment, Polychain has been investing in the infrastructure and agreement level of DeFi, providing funds for some agreements and platforms at the earliest stage - it has made seed round investments in Polkadot, dYdX, Starkware, Compound, Avalanche, Gauntlet, Acala, Solana, Maple Finance, etc. since 2017. The company insists on taking root in Bitcoin and continues to be a leader in promoting the development of new technologies, investing in the next generation of mining and clean energy companies, investing in the growth stage of Crusoe Energy (Series C), and seed investing in Vesper Energy and Vespe Energy.

competitive edge

Polychain is another fund that emerged in the past encryption era - long before jpegs flooded our cryptocurrency Twitter. By encrypting the peaks and valleys of the currency fluctuation cycle, the asset management scale of the Fund has been expanded by 10 times. During its existence, the Fund will return investors' capital and reinvest in the winners, which is exactly the consistency and belief that the founders and LPs hope in other super turbulent areas.

Transactions in 2022

One trend we see in this report is that these top funds are committed to continuing to deploy capital under uncertain macro conditions. So far this year, Polychain has 26 investments, 15 of which are early seed round investments. Polychain also demonstrated its commitment to reinvest its winners. From the seed round in October 2018 to the latest round B in May 2022, Polychain has made four rounds of investment in Unicorn Gauntlet.

It can be seen from this report that the top venture capital companies in the cryptocurrency and Web3 fields are not only capital allocators with high returns, they are promoting the development of the industry with deep technical sensitivity, cycle endurance and novel design frameworks that define the industry. This is the difference between VC that defines the industry and other tier one companies. They open up their own way.


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