After posting the 'De-Mystification Theory IV: VCs Are Not Above Everyone Else', Clara @ClaraChengGo raised two soul-searching questions in the group. This sparked a series of discussions, and I felt this content was quite useful, so I整理发布一下.

1️⃣ Where are VCs truly taking action now? When asked, everyone says they are looking at everything and still investing.

To be frank, based on my understanding, those who are genuinely taking action now are indeed not many, which depends on the following three points.

1. Generally, the exit cycle for VCs averages around six months to a year and a half (because of lock-up periods, dollar VCs take longer).

Once everyone has an approximate timeline for the bull market, they will start taking action early to lay the groundwork.

Therefore, the second half of 2023 and 2024 is the period when VCs are most active.

Moreover, the average cycle for many Crypto VCs' first funds is 4-5 years.

After a large number of actions before, there shouldn't be too much money left. Currently, the main focus should be on management and exits, as well as fundraising for the next fund.

2. The overall market is still in the early stages of a bull market.

The cost-performance ratio of taking action is very low: first, the valuations of bull market projects are generally high; second, once locked up after investment, it can easily reach the end of the bull market or the bear market.

So I think those who are taking action now are either pure large-scale retail investors or are laying out projects for the next cycle and bear market cash flow.

3. However, I have also asked some people and found that many VCs actually cannot raise funds for the next round.

The reason for not being able to raise funds is simple: the ROI for this round of investments is very poor; even breaking even would already outperform most peers.

The main reason is that VCs raising funds have investment KPIs, and in the current market conditions, the projects they invest in have basically all failed.

When the invested projects fail, it means no returns and potentially losses; the ROI data looks very bad, which in turn leads to poor performance in raising funds for the next round.

The market situation is quite awkward; this round will likely see many VCs die off. Those that survive may still be self-funded or dollar VCs because they are not in a hurry to take action and can wait for the right hitting zone.

Then, in order to preserve capital or pursue returns, most have shifted to the secondary market or incubation route, the latter being for themselves to use early-stage chips.

Binance's frequent launch of Alpha is also consuming a large number of previous projects. Once these projects are nearly consumed, it will be coordinated with monetary easing. Sufficient funds with fewer projects might just be the spring of the primary market.

2️⃣ Besides the hot topic of 'Does Crypto need VCs?', there are more cyclical factors.

I still think it's necessary, even though most VCs are large-scale retail investors.

However, VCs still hold a low position in everyone's minds; this can essentially also be considered a form of attention/mind share acquisition.

Because people still can't avoid looking at the financing background when researching projects.

So there is actually room for maneuvering in this area; for example, market makers can work with VCs to create a high-control project.

As long as everyone truly has the strength, the yield should not be low.

However, the role of VC in this round has started to be replaced by some leading KOLs and buying communities.