Original interview: Jack, BlockBeats.
Original editor: Zhouzhou, BlockBeats.
In this cycle, the top-tier investment institution in the crypto field is undoubtedly AllianceDAO. At least among retail investors, it is still the dark horse VC that "incubates applications with a billion-dollar revenue." Currently, the primary market for crypto is bleak, and fund managers are comparing their IRR and DPI on social media, lamenting their performance. In the face of the future, some funds are "running dry" and switching to secondary markets, while others have stopped operations and are no longer raising funds. At this moment, Qiao Wang, the founding partner of AllianceDAO, said: We need to increase investment and become more aggressive.
Of course, Alliance is not blindly optimistic, nor is it blindly "greedy when others are fearful." What lies ahead is a narrative collapse in the Web3 world and a talent drain in the crypto industry. At the crossroads of Crypto and AI, how can a vertical VC make choices? How to position itself? This is not a simple issue and is something Qiao Wang truly needs to think about and solve. Fortunately, he understands: "Most VCs in this industry do not know how to invest in the application layer."
"The most knowledgeable about China" dollar crypto VCs can decide whether to "pull the trigger" after five minutes.
From "Trump's hype" to "Trump's criticism," the group that has seen the most significant change in attitude towards American politics over the past few months may well be those in the crypto circle. Ever since Trump issued the meme coin $TRUMP, industry liquidity has started to dry up. The bullish sentiment that had been steadily rising since Trump was elected in November has gradually dissipated, and the "tariff black swan" of Liberation Day became the catalyst for a 180-degree shift in attitude within the crypto circle.
Now, many people in the crypto circle have become avid enthusiasts of macroeconomics, and no one cares about high-quality undervalued targets in the market or the "future crypto narrative." According to industry media reports, primary market investment activities have also reached historical lows in recent years. However, AllianceDAO has decided to invest in more projects. To achieve this, they now make judgments on entrepreneurial teams after just five minutes of conversation.
BlockBeats: As a founding partner of a prominent crypto investment institution, do you often consider the impact of macroeconomic changes on your company?
Qiao Wang: As a lean startup, the external environment does not significantly affect us. We don't spend much money anyway, and when resources are limited, those expenses remain the same. As long as we maintain a lean management philosophy, the impact is minimal.
However, I believe the biggest issue between China and the U.S. is mutual misunderstanding. This misunderstanding is fundamental. For instance, the U.S. believes its tax policy toward China will force concessions, but this is a complete misjudgment of the situation. Such strategies may have been effective in 2018, but now China has significantly reduced its dependence on U.S. exports, and the economy is transitioning, actively decreasing its reliance on the U.S.
Moreover, the trade war has actually united the domestic front. The economy may face pressure, but external threats have brought everyone together. The U.S. has completely messed this up. Of course, I am not an expert; I am just sharing my observations and understanding, hoping everyone learns more.
BlockBeats: Is this misunderstanding reflected in the English crypto community? Is its impact on the crypto industry significant?
Qiao Wang: This misunderstanding is indeed deeply rooted. For the past decade or so, the U.S. has generally viewed China as an "enemy" rather than a competitor, from the government to the media to society. This zero-sum thinking—"China wins, we lose"—has dominated policy, culture, and social decisions, making it difficult to change in the short term. This exists from the top down and cannot be changed quickly.
The situation in the crypto industry is somewhat better. Most practitioners are smarter and have a more comprehensive understanding of the world compared to the average American. Among those I interact with, they typically view China as a respected competitor rather than an enemy. This contrasts sharply with the views of mainstream U.S. media and government, where ordinary Americans, influenced by the media, see China as a threat.
In the medium to long term, the macroeconomic impact on the crypto industry is minimal. There will be short-term fluctuations because the market will fluctuate with U.S. stocks. However, several executive orders signed by Trump have been very favorable for the crypto industry, overall remaining positive. For our business, the focus remains on finding good projects; macro fluctuations will not change our investment logic.
BlockBeats: Many believe that the U.S. stock market largely determines the fluctuations of BTC, and many consider global M2 to be the primary factor influencing BTC prices. What are your expectations for the performance of the crypto market this year?
Qiao Wang: I do not have strong judgments about the short-term trends of the crypto market because there are two opposing forces at play. On one hand, the U.S. stock market may decline in the short term (3-6 months) due to economic recession or inflation data, dragging the crypto market down. Especially since the current valuations in the U.S. stock market are very high, it may experience a downturn in the next 3-6 months. On the other hand, global liquidity is increasing, such as through money printing, which may push up crypto asset prices. I cannot predict which force is stronger, so I do not have a clear view on the crypto short-term outlook, but the U.S. stock market will likely decline.
The calculation method for M2 varies among people, such as whether to include data from China or other countries. However, overall, global M2 is on the rise, and the long-term trend of crypto assets is highly correlated with M2. In the short term, other factors like U.S. stock fluctuations may dominate the market.
BlockBeats: According to media reports, investment activity in the primary crypto market has dropped to its lowest point in recent months. Has AllianceDAO felt this "cooling change"?
Qiao Wang: In the past year or two, VC investments in the primary market of the crypto industry have basically remained flat. If the secondary market (like coin prices) rises while the primary market remains stagnant, it indicates that the primary market is underperforming compared to the secondary market. Once the secondary market declines, the primary market may suffer even more. It may continue to decline in the next one or two quarters. However, Alliance's incubation program is not affected by the number of investments from other VCs. If market investments decrease, we might invest more. The key is whether there are good projects; without them, we will not invest blindly.
BlockBeats: In terms of product entrepreneurship and incubation, AllianceDAO has always had a unique methodology, especially during the previous MEME craze. Now that the MEME cycle seems to have been deemed a "thing of the past," will you reflect on your previous investment and incubation strategies?
Qiao Wang: We review and reflect every day, but our overall investment approach will not change due to a downturn in a particular sector. We focus on excellent teams and promising directions. In the past year, we have optimized our decision-making process: previously, we would talk with teams for an hour, splitting into two in-depth discussions.
Now, we find that after carefully reviewing application materials, a 20-minute conversation is enough to make a decision within 24 hours. Because early information is limited, intuition and industry experience are more important. The core factors are the clarity of the team's logic, expression ability, and desire for success, which can often be sensed in just five minutes.
BlockBeats: What details do you primarily look at when assessing team potential in five minutes?
Qiao Wang: First, it’s about having clear logic, being able to explain complex issues simply. Second, it’s about passion; I can feel they genuinely want to make things happen. The remaining time is mainly spent understanding areas or project details we are not familiar with, but the overall impression of the team can usually be gauged in about five minutes. In the very early stages, the team's direction or track may not be clear, but these are not critical factors.
Crypto entrepreneurs are "escaping" to AI.
Not long ago, Jocy, the founding partner of IOSG, posted on social media expressing concerns about the future of the crypto industry as another project in his investment portfolio transitioned to AI.
"Crypto entrepreneurs are escaping to AI" is a sad statement, but it is indeed a fact. Qiao Wang does not deny this situation; in the latest AllianceDAO incubation program, one-third of the projects are pure AI entrepreneurial teams, whereas in the previous session, pure AI projects were only a small part. During this period, many projects have also transitioned to the AI field.
Crypto VCs "forced" into AI investments may be becoming an increasingly common phenomenon. When many AI entrepreneurs unexpectedly appear in their investment portfolios, fund managers seem to have to consider: What advantages do they have in the AI field? How should they position their funds?
Crypto VCs "forced" into AI investing.
BlockBeats: In this cycle, many fund managers have mentioned that many projects in their portfolios have transitioned to AI. Does AllianceDAO have a similar situation?
Qiao Wang: Our latest incubation program has 25 projects, about one-third of which are related to AI. Some teams started with pure AI projects, while others originally worked on crypto projects before transitioning. They chose us mainly because the team has a background in the crypto industry and understands our incubation model.
BlockBeats: Why would pure AI projects choose crypto institutions as incubation platforms?
Qiao Wang: These teams previously worked or started in the Crypto industry and now want to do AI. They happen to know us and apply for our program. The AI projects they are working on are mostly vertical applications, such as education, law, or advertising, where industry experience is more important than AI technical background.
BlockBeats: When did this phenomenon of transition start to appear frequently?
Qiao Wang: About the past six months, starting from the end of last year.
BlockBeats: Is this transition process initiated by the team making decisions on their own, or do they make decisions in discussion with you?
Qiao Wang: Some teams have very strong ideas, make a decision first, and then communicate with me. Others might think about how to discuss the next steps with me, and I provide them with some advice. If I feel they have a strong understanding of users and the market in a particular field, I will even share some AI ideas with them. Then we discuss what to do next together. So, both situations exist.
BlockBeats: When the Web3 craze first emerged, many internet teams chased trends. Now, Crypto entrepreneurs are also pursuing the AI craze. How do you determine whether a project is engaged in "trend arbitrage"? Are you concerned about the success rate of those teams seriously transitioning to AI?
Qiao Wang: We are very cautious about this issue. When Web2 transitioned to Web3 in 2021, we invested in some projects, only to find that some teams were merely chasing trends. Now, when communicating with AI teams, we delve into product details, target markets, user pain points, and why they are pursuing this project. The core is to judge whether they truly understand the industry and are solving real problems. Ideally, the team should be solving their own pain points, as this motivation is the most genuine.
The biggest reason for entrepreneurial failure is that the problem being solved does not exist. Teams transitioning from Web2 to Web3 often assume there is market demand, but that may not be the case. When communicating with AI teams now, we focus on: Who are the target users? What is the pain point? How to validate the pain point? Ideally, the team should solve their own problems because they best understand the authenticity of the pain points.
For example, one team we invested in has a background as a product manager at Uniswap. They discovered that TikTok advertising costs are high and used AI to significantly reduce costs. This is a pain point-driven entrepreneurial endeavor. Moreover, some individuals feel that if they don't solve this problem, it will be very uncomfortable because they are experiencing the same issue themselves, so they must address it.
BlockBeats: Some entrepreneurs are worried that the iteration of large models may render vertical applications less valuable. How do you view the investment logic for AI projects? How is it different from crypto investments?
Qiao Wang: The key is whether the project can provide value that large models cannot replace, such as a unique user experience or exclusive data. For example, Cursor uses AI to assist in writing code. Although it relies on large models, its value increases with the iteration of large models through developer data and optimized user experience.
When we invest in AI applications, we focus on the team's deep understanding of the industry and their ability to solve genuine pain points, rather than solely on their technical background. The main focus is on product and market: Who are the target users? What pain points are being solved? Why choose this market? What unresolved issues exist in the market? Each project is different, and the problems are very specific, aiming to confirm whether they have thought deeply and truly understand user needs.
BlockBeats: What do you think is the main driving force behind most entrepreneurial teams transitioning to AI?
Qiao Wang: Yes, it mainly revolves around seizing opportunities and trends. Moreover, they find the endeavor itself very interesting, which is crucial.
BlockBeats: What do you mean by "interesting"?
Qiao Wang: Interesting refers to their belief that the technology itself is fascinating and that it can address user pain points. For example, one of the biggest problems in Crypto over the past decade is that many teams have not solved a real problem.
However, in the AI field, they may identify some real pain points and feel that AI can help solve these issues, which is what they find interesting. Understand? As you mentioned earlier, many large companies, such as Tencent, have strong products and quick market promotion, but ultimately, they still rely on token issuance. It is quite evident that this does not solve real problems but is merely a means to make money.
BlockBeats: Will the "defection" of entrepreneurial teammates or allies to AI affect the momentum and confidence of other crypto entrepreneurs in your investment portfolio?
Qiao Wang: Yes, this will definitely have an impact. Every entrepreneur in the Crypto field will be affected in this regard. It could be influenced by friends around them or by public opinion. At such times, everyone will wonder: Why am I still doing Crypto? Why haven't I switched to AI? This kind of thinking is quite normal.
BlockBeats: Crypto entrepreneurs seem to be showing a similar enthusiasm for AI as internet entrepreneurs did for "Web3" and the "metaverse."
Qiao Wang: Yes, in the previous cycle, there were two mainstream narratives: one was the metaverse, and the other was the Web3 metaverse. I have always thought that was a "false narrative"; there was nothing genuinely interesting to me. However, I found Web3 to be very interesting at that time, and I still think it is very interesting now.
Web3 has done one of the most fundamental things, which is decentralized social media. This is inherently very interesting because it cannot grant such immense power to companies like Twitter or Facebook. However, perhaps at that time, users did not genuinely feel a significant demand for this, or the technology had not yet developed to a level that could address user pain points.
From Crypto verticals to general technology, Alliance is rethinking branding issues.
BlockBeats: After the projects you invested in transition to AI, do they need to adjust their financing models and amounts?
Qiao Wang: In terms of the application layer, the financing models are not significantly different. However, I believe that AI's first true killer app in the past few years has significantly enhanced developers' work efficiency.
You might have seen some articles I posted recently. Since around November 2021, when ChatGPT first came out, I have been continuously asking the teams we invest in one question: How much has AI improved your engineering efficiency?
In the initial months, their responses indicated that efficiency improvements were approximately between 20% and 50%. However, I track this question every year. The most recent responses, from one or two months ago, showed an improvement to 2 to 4 times. This is a remarkable change from the initial 20%-50% to now 2-4 times.
Therefore, if this trend continues, in the next 5 to 10 years, the funding required by entrepreneurs will likely decrease. Because one engineer can potentially accomplish the work that previously required four engineers. Based on this judgment, our current investment philosophy has also become very simple: We give you $500,000, and with two or three people, you should be able to persist for about two years, which should be enough time for you to find product-market fit.
Once you find product-market fit, either you have started making money and can begin hiring more people, or it becomes easier to fundraise, whether for a Series A round or a later-stage seed round, and then you can hire and scale. In this regard, whether it's an AI project or a Crypto project, as long as it's in the application layer, there is fundamentally no difference. Of course, if you are working on lower-level or more infrastructural items, you may indeed need more capital, right?
BlockBeats: Does AllianceDAO currently have cases of transitioning to AI and successfully finding PMF?
Qiao Wang: My definition of product-market fit is quite strict. To me, true product-market fit means that your product's growth rate can stabilize at 10% to 30% weekly or monthly, or even higher. At the same time, you have started to achieve an annual revenue in the seven figures or more.
Moreover, the key point is that user demand is continuously flowing in, even to the extent that your team finds it hard to cope. I believe this state indicates that product-market fit (PMF) has been achieved. According to this standard, I have yet to see any projects that have truly transitioned from Crypto to AI and reached this level.
BlockBeats: Is it because these teams are just starting out? Or have they encountered some issues?
Qiao Wang: I think it's mainly because they are just starting out. The trend of transitioning from Crypto to AI has only started in the past six months or so, so they may still need more time to truly find product-market fit.
Moreover, the competition in AI is extremely fierce; it can be said that the competition is intense. Almost every vertical field has dozens or even hundreds of teams doing similar things, making the competition very intense.
BlockBeats: Returning to AllianceDAO itself, which is an investment institution focused on the crypto field, now that there is a group of pure AI entrepreneurial teams in its portfolio, do you consider any branding positioning issues?
Qiao Wang: We will think about some branding issues, and we are gradually improving our branding. Ultimately, we want to create an accelerator to continue doing Crypto, but also to work outside Crypto.
Technology always feels like a wave coming in succession, and each wave may last 5 to 10 years, or even longer. However, once this wave passes, the investment opportunity may not be as abundant as it was in the early stages. Hence, you need to look at what the next wave is, and ultimately, we will create accelerators across various fields.
BlockBeats: When crypto VCs venture into AI, do you feel the risk factor has increased for you? Additionally, does this phenomenon of entrepreneurs "escaping" also affect your personal confidence in the industry?
Qiao Wang: I don't feel that the risk factor is higher. Although AI is indeed highly competitive, it is ultimately a significant trend. I believe this trend may be an order of magnitude larger than cryptocurrency.
So, overall, I don't feel that the risk factor is higher. Regarding AI's impact on cryptocurrency, it certainly exists because I have witnessed many cryptocurrency entrepreneurs transitioning to AI. From my personal feeling and data, there has indeed been a significant loss of talent to the AI field.
"We have invested in every entrepreneur transitioning from AI to Crypto."
BlockBeats: Are you concerned that an increasing number of projects transitioning to AI and fewer Crypto entrepreneurs may lead people to think that the industry has little hope?
Qiao Wang: I am indeed worried about this issue. But what I worry about most is whether the entrepreneurs we invest in will ultimately succeed.
If they want to transition to AI, I will focus on confirming two things. First, do they have no enthusiasm for what they are currently doing? Do they feel that their current direction will not yield good results in the long run? I need to clarify this.
Second, regarding the new direction he wants to pursue, such as AI, is he prepared for it? Does he have the capabilities and resources needed to succeed in this endeavor? More importantly, can this new project genuinely address user pain points? If the answers to these two questions are positive, I wouldn't stop them from pursuing a new direction; I might even encourage them to try.
BlockBeats: You mentioned that the crypto industry has lost many talented individuals to AI. Are these talents primarily developers or visionaries?
Qiao Wang: There are two main reasons for the talent drain in the Crypto sector: one is AI, which I have witnessed firsthand. The other is the U.S. government’s crackdown on Crypto over the past four years. Together, these two factors have indeed led to a significant loss of talent, be it visionary entrepreneurs or developers.
BlockBeats: Can I make a judgment that most of the entrepreneurs who have left are those who entered Crypto during the last cycle?
Qiao Wang: Yes, exactly. In fact, in the past six months, there have been some individuals from Web2 who want to come in to do Crypto. They know they could work on AR, but they choose to do Crypto because they find it very interesting. There are likely still such individuals; perhaps around four or five. We have also invested in almost every person who transitioned from Web2 to Crypto in the past six months to a year because we find such individuals very interesting.
They could easily transition to AI, but they choose to do Crypto instead. If they have good ideas, we will invest in them. Such individuals are often very interesting. Thus, there are still people like this, but there are more who are shifting to AI; perhaps there are one or two orders of magnitude more in that direction.
BlockBeats: That is to say, the emergence of 4-5 Crypto vertical projects is accompanied by 10-20 projects transitioning to AI.
Qiao Wang: Yes, it might be one or two orders of magnitude higher, not just 10 to 20. There may be dozens or even hundreds of such projects in the entire industry, or even more.
BlockBeats: What directions are the few entrepreneurs who are determined to pursue Crypto currently focusing on?
Qiao Wang: They will work on projects that combine social aspects and speculation. For example, they see projects like Palm Fantasy, Moonchat, and some socialized projects. Although these products may have failed, they believe that the execution may not have been done well, but the underlying principles are very sound. Therefore, they want to pursue these ideas.
At the same time, they feel that the AI field is too competitive and are uncertain whether they can succeed in it, so they prefer to work on projects that are both interesting and less competitive.
BlockBeats: Conversely, which vertical fields are the AI projects in Alliance's investment portfolio currently concentrated on?
Qiao Wang: Currently, we do not have many AI projects in our portfolio; approximately one-third of the projects in this latest batch are AI-related, amounting to about seven or eight projects. They are working on various directions, such as some aimed at developers, similar to the previous Y Coding, where code is generated directly from language, which is very interesting.
Additionally, I mentioned earlier about the team working on AI video advertising, as well as teams focusing on educational projects for children, middle school students, and even younger age groups. There are also some working on games using AI, essentially transforming language generation directly into a game. There are various projects, but we haven't invested in many.
Moreover, all seven or eight teams we invested in have come from the Crypto sector. You see, they all previously worked on startups in Crypto or came from reputable companies like Uniswap, Coinbase, and others.
BlockBeats: In other words, the Crypto industry has a strong background.
Qiao Wang: While these teams have strong Crypto backgrounds, as I mentioned earlier, I believe that experience in AI may not significantly help when it comes to developing AI applications.
BlockBeats: That sounds quite sad; the industry's best talents are not planning to stay in this field anymore.
Qiao Wang: In fact, there are still some strong teams that are purely focused on Crypto. However, the AI content in the last session was far lower than in this one. The previous session was basically zero, but later, there might be one or two teams transitioning to AI. They initially came in doing Crypto, worked for a while, possibly around six months, and then transitioned to AI.
Does Crypto+AI have a future?
BlockBeats: Currently, the Crypto+AI concept is still hot. Do you think this is a "pseudo-narrative"?
Qiao Wang: I think 90% of it is a pseudo-narrative, but perhaps 10% will create something interesting. You can imagine Crypto and AI as two large circles; their intersection is quite small. Although both circles are large, the overlap in the middle may be very small. However, in that tiny overlap, there may be interesting things, such as decentralized training, which could be quite intriguing.
We have seen some similar projects, but most of them are infrastructure-based, and many VCs are chasing these projects, offering them very high valuations, making it difficult for us to participate. Although the teams behind these projects are strong and I like them, such projects are challenging and may take several years to mature. Currently, decentralized training has not made significant progress.
The biggest challenge is how to aggregate the small models trained in each data center. The data transmission between different data centers is very expensive, and the cost of transmitting this information over the network is high. Therefore, whether decentralized training can be cheaper than centralized methods remains an unknown.
BlockBeats: In your view, has the valuation and popularity of Crypto AI projects in the primary market significantly declined under the current market conditions?
Qiao Wang: In fact, there are still some very large funds that have no other choice but to concentrate their investments in this type of project. Therefore, there will ultimately be multiple VCs investing together in the same large project.
I think many VCs do not genuinely understand the application layer of Crypto, so they can only invest in technical infrastructure. However, these infrastructure projects do not have that many interesting aspects. For instance, Layer 2; there are already hundreds of them on the market, and you can only find a few slightly interesting tracks to focus your efforts on.
