VC, short for Venture Capital, is also known as risk investment in Chinese. It refers to investing on the basis of assuming a certain degree of risk.

The VCs in the market are mainly divided into two categories: those that perform well are called top investment institutions, while those that do not perform well are called large retail investors.

At the same time, the main work of VCs is divided into four areas: fundraising, investment, management, and exit, where fundraising and investment are pre-investment work, and management and exit are post-investment work.

The former primarily focuses on raising the funds required by the institution and diversifying the investment across different projects within a certain period (with KPIs); the latter mainly provides a series of services for the projects invested in by the institution, offering appropriate help and guidance, so that profits can be earned when exiting after the subsequent project TGE.

So what is the situation and return rate of the VC market?

It is still the classic 28 law, where 20% of top institutions earn 80% of the profits in the primary market.

The reason for this phenomenon is that top institutions have strong competitiveness in the four aspects mentioned earlier, whereas most VCs usually only excel in one or two areas.

VCs that only know how to raise funds and invest may obtain sufficient capital for investment, but they have significant flaws in tracking subsequent projects and handling various issues. This often leads to institutions having plenty of money, but it becomes very difficult to recover the investments made.

VCs that only know how to manage and exit are generally hard to find; in most cases, their capital size is relatively small, so even if they excel in management and exit, their returns are still capped.

Adding to this cycle, there is no significant technological innovation; instead, it mainly revolves around asset issuance and distribution channels. This makes it difficult for the primary market to maintain a relatively normal investment environment, prompting a large number of VCs to frantically band together to place themselves in the inner circle.

Ultimately, the VCs in the core inner circle are making money, at worst breaking even; whereas the VCs not in the inner circle are disappearing in the continuous updates and iterations of the market.

Doesn't this seem very similar to the current on-chain market?

Therefore, when researching projects, do not overly trust VC endorsements unless you can distinguish which VCs are genuinely capable and which are simply large retail investors.

Otherwise, treat it as a low-priority reference; what matters more is whether the project itself has PMF, the prospects of the ecological track it is in, the team’s resources and background, etc.

You should believe that the content you have researched is better than most VCs; the market will reward those with true insights.

Let us demystify VCs together.