Original interview: Jack, BlockBeats;
Original editor: Zhouzhou, BlockBeats
In this cycle, the best performing primary investment institution in the crypto field is AllianceDAO. At least among retail investors, it is still the dark horse VC that hatched out a $1 billion revenue application. The current primary crypto market is bleak, and fund managers are competing with each other on social media to compare IRR and DPI. Facing the future, some funds have silently turned to secondary investment, and some funds have stopped operating and no longer raising funds. At this point in time, Qiao Wang, the founding partner of AllianceDAO, said: We want to increase investment and become more aggressive.
Of course, Alliance is not blindly optimistic, nor is it blindly others are fearful, I am greedy. What lies before them is a Web3 world with collapsed narratives and a crypto industry with a constant loss of talent. At the crossroads of Crypto and AI, how does a vertical VC make a choice? How to position itself? This is not a simple question, and it is also what Qiao Wang really needs to think about and solve, but fortunately he understands: Most VCs in this industry dont know how to invest in the application layer.
The US dollar crypto VC who understands China best decides whether to pull the trigger after just 5 minutes of chatting
From Trump praise to Trump hater, the group whose attitude towards American politics has changed the most in the past few months may be the people in the cryptocurrency circle. Since Trump issued the meme coin $TRUMP, the industry liquidity has begun to dry up, and the bullish sentiment that has been heating up since Trumps election in November has gradually disappeared. The tariff black swan on Liberation Day has become the fuse for the 180-degree reversal of the cryptocurrency circle.
Now, many people in the cryptocurrency circle have become loyal fans of macroeconomics. No one cares about the undervalued high-quality targets in the market or the future crypto narrative. According to statistics from industry media, the investment and financing activities in the primary market will also reach a historical low in the past few years. But AllianceDAO decided to invest in more projects. To do this, he can now make his own judgment after chatting with the entrepreneurial team for 5 minutes.
BlockBeats: As a founding partner of a leading crypto firm, do you often consider the impact of changes in the macro environment on your company recently?
Qiao Wang: As a lean startup, the external environment has little impact on us. We don’t spend much money, and we only spend when we have limited energy. As long as the management philosophy remains lean, the impact will be small.
But I think the biggest problem between China and the United States is mutual misunderstanding. This misunderstanding is fundamental. For example, the United States’ policy of increasing tariffs on China was thought to force China to make concessions, but this completely misjudged the situation. This strategy may have worked in 2018, but now China’s dependence on US exports has been greatly reduced, and its economy is also undergoing transformation, and it has taken the initiative to reduce its dependence on the United States.
In addition, the trade war has actually brought the country closer together. The economy may be under pressure, but external threats have brought everyone together. The United States has completely messed this up. Of course, I am not an expert, but only based on my observations. I hope everyone can learn more.
BlockBeats: Is this lack of understanding reflected in the English crypto community? Does it have a big impact on the crypto industry?
Qiao Wang: This misunderstanding is indeed deeply rooted. Over the past decade or so, the United States, from the government to the media to society, has generally viewed China as an enemy rather than a competitor. This zero-sum mentality - If China wins, we lose - dominates policy, cultural and social decision-making, and it is difficult to change in the short term. This exists from top to bottom and cannot be changed in a short period of time.
The situation in the crypto industry is better. Most practitioners are smarter and have a more comprehensive understanding of the world than the average American. The people I have contacted usually see China as a respectable competitor rather than an enemy. This is different from the views of the mainstream media and government in the United States. The average American is influenced by the media and sees China as a threat.
In the medium and long term, the macro economy has little direct impact on the crypto industry. There will be fluctuations in the short term because the market will fluctuate with the US stock market. However, several executive orders signed by Trump before are very favorable to the crypto industry and are generally positive. For our business, the focus is still on finding good projects, and macro fluctuations will not change our investment logic.
BlockBeats: Many people believe that the trend of the US stock market largely determines the trend of BTC, and many people also believe that global M2 is the dominant factor in BTC prices. What are your expectations for the performance of the crypto market this year?
Qiao Wang: I don’t have a strong judgment on the short-term trend of the crypto market because there are two opposing forces. On the one hand, the U.S. stock market may fall in the short term (3-6 months) due to economic recession or inflation data, dragging down the crypto market. In particular, the current valuation of U.S. stocks is very high and may fall in 3-6 months. On the other hand, global liquidity is increasing, such as printing money, which may push up the price of crypto assets. I can’t predict which of these two forces is stronger. Therefore, I don’t have a clear view on crypto in the short term, but the U.S. stock market is likely to fall.
The calculation method of M2 varies from person to person, such as whether to include data from China or other countries. But overall, global M2 is rising, and the long-term trend of crypto assets is highly correlated with M2. In the short term, other factors such as volatility in US stocks may dominate the market.
BlockBeats: Judging from the data reported by the media, the primary investment activities in the crypto market have dropped to freezing point in recent months. Can AllianceDAO itself feel this cooling change?
Qiao Wang: In the past one or two years, VC investment in the primary market of the crypto industry has remained basically flat. If the secondary market (such as the price of coins) rises while the primary market does not move, it means that the primary market is not performing as well as the secondary market. Once the secondary market falls, the primary market may fall even more, and may continue to fall in the next one or two quarters. However, Alliances incubator is not affected by the number of other VC investments. If market investment decreases, we may invest more. The key is whether there are good projects. If there are no good projects, we will not invest blindly.
BlockBeats: AllianceDAO has always had a unique methodology in product entrepreneurship and incubation, especially during the previous MEME boom. Now that the MEME cycle seems to have been judged as past tense, will you reflect on your previous investment and incubation strategies?
Qiao Wang: We review and reflect every day, but the overall investment approach will not change due to the decline of a certain track. We focus on excellent teams and potential directions. In the past year, we optimized the decision-making process: we used to chat with the team for an hour and have in-depth discussions twice.
Now I find that after carefully reviewing the application materials, 20 minutes of communication is enough, and a decision is made within 24 hours. Because early information is limited, intuition and industry experience are more important. The core is the teams logical clarity, expression ability, and desire for success, which can often be perceived in 5 minutes.
BlockBeats: When judging a team’s potential in 5 minutes, what details do you mainly look at?
Qiao Wang: First of all, they have clear logic and can explain complex problems in a simple way. Secondly, they are passionate and can really make us feel that they want to get things done. The rest of the time is mainly to understand the details of the fields or projects that we are not familiar with, but the overall feeling of the team can be determined in 5 minutes. In the earliest stage, the direction or track of the team may not be clear, but these are not key factors.
Crypto entrepreneurs escape to AI
Some time ago, IOSG founding partner Jocy posted on social media that another project in his investment portfolio was transforming into AI, and expressed concerns about the prospects of the crypto industry.
Crypto entrepreneurs are fleeing to AI, this is a sad statement, but it is indeed true. Qiao Wang does not deny the existence of this situation. In the latest AllianceDAO incubator, one-third of the projects are pure AI startup teams, while in the previous incubator, pure AI projects were only a small part. During this period, many projects have turned to the AI field.
Crypto VCs are forced to invest in the AI field, which may be becoming an increasingly common phenomenon in the industry. When there are many AI entrepreneurs in their investment portfolios, fund managers seem to have to think about: What are their advantages in the AI field? How should they position their funds?
Crypto VCs are “forced” to invest in AI
BlockBeats: In this cycle, many fund managers mentioned that many projects in their portfolios have transformed into AI. Is there a similar situation with AllianceDAO?
Qiao Wang: Our latest incubator has 25 projects, about 1/3 of which are related to AI. Some teams started out working on pure AI projects, while others were originally working on crypto projects and later switched. They chose us mainly because the teams have a background in the crypto industry and understand our incubation model.
BlockBeats: Why do pure AI projects choose institutions in the crypto field as incubation platforms?
Qiao Wang: These teams previously worked in the crypto industry or started a business, and now want to do AI. They happened to know us and applied for our project. Most of the AI projects they do are vertical field applications, such as education, law or advertising. Industry experience is more important than AI technical background.
BlockBeats: When did this transformation phenomenon begin to occur frequently?
Qiao Wang: In the past six months or so, starting from the end of last year.
BlockBeats: During this transformation process, does the team make the decision themselves and then notify you, or do they make the decision together with you through communication?
Qiao Wang: Some teams have very strong ideas and make decisions first, then communicate with me. Some teams will first discuss with me what to do next, and I will give them some advice. If I think they have a good understanding of users and the market in a certain field, I will give them some AI ideas. Then we will discuss what to do next. So, basically, both situations exist.
BlockBeats: When the Web3 craze first emerged, many Internet teams chased the trend. Now Crypto entrepreneurs are chasing the AI craze. How do you judge whether a project is trend arbitrage? For those entrepreneurial teams that are seriously transforming to AI, do you have concerns about their success rate?
Qiao Wang: We are very alert to this problem. When Web2 turned to Web3 in 2021, we invested in some projects, and later found that some teams were just following the trend. Now when communicating with AI teams, we will discuss in depth the product details, target market, user pain points, and why they are doing this project. The core is to judge whether they really understand the industry and whether they solve real problems. It is best for the team to solve their own pain points, as this motivation is the most real.
The biggest reason for startup failure is that the problem they are trying to solve does not exist. Teams that switch from Web2 to Web3 often assume that there is market demand, but that may not be the case. When communicating with AI teams now, we are most concerned about: Who are the target users? What are the pain points? How to verify the pain points? The ideal situation is that the team solves its own problems because they know the authenticity of the pain points best.
For example, one of the teams we invested in had a product manager from Uniswap. He found that TikTok advertising costs were high, so he used AI to significantly reduce costs. This is a pain-point-driven startup. Some people think that if I don’t solve this problem, it will be very uncomfortable, because I have this problem myself, so I have to solve this problem.
BlockBeats: Some entrepreneurs are worried that large model iterations may make vertical applications lose value. What do you think of the investment logic of AI projects, and how is it different from crypto investment?
Qiao Wang: The key is whether the project can provide value that cannot be replaced by large models, such as unique user experience or exclusive data. Take Cursor as an example. It 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 teams in-depth understanding of the industry and ability to solve real pain points, rather than just technical background. It mainly revolves around products and markets: Who are the target users? What pain points are being solved? Why choose this market? What unsolved problems are there in the market? Each project is different, and the questions are very specific. The purpose is to confirm whether they have thought deeply and truly understood user needs.
BlockBeats: In your opinion, what is the main driving force for most startup teams that transform into AI?
Qiao Wang: Yes, it’s mainly about grasping opportunities and trends. And they also find it very interesting to do this, which is very important.
BlockBeats: What does “interesting” mean exactly?
Qiao Wang: Interesting means that they think the technology itself is interesting and can solve users’ pain points. For example, one of the biggest problems of Crypto in the past decade is that many teams have not solved a real problem.
But in the field of AI, they may see some real pain points and think that AI can help solve these problems, which is what they find interesting. Do you understand? You see, as you mentioned just now, many big companies have emerged, such as Tencent, and their products are very strong and the market promotion is also very fast, but in the end they still have to rely on issuing coins. In fact, it is obvious that this is not solving real problems, but just for making 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, it will definitely have an impact. Everyone who starts a business in the Crypto field will be affected by this. It may be the influence of friends around them, or it may be the influence of public opinion. At this time, everyone will think: Why am I still doing Crypto? Why don’t I do AI? This mentality is actually very normal.
BlockBeats: Crypto entrepreneurs seem to be showing similar enthusiasm for AI as Internet entrepreneurs did for Web3 and Metaverse.
Qiao Wang: Yes, there were two mainstream narratives in the last cycle, one was the metaverse and the other was the Web3 metaverse. I always felt that it was a false narrative and there was nothing really interesting about it for me. However, I thought Web3 was very interesting at the time, and I still find it very interesting now.
Web3 has done what I think is the most core thing, which is decentralized social media. This is inherently very interesting because it cannot give such a large amount of power to companies like Twitter or Facebook. However, perhaps users did not really feel that there was a particularly large demand for this thing at the time, or the technology had not yet developed to the level that could solve user pain points.
From Crypto to Pan-Tech, Alliance Rethinks Branding Issues
BlockBeats: After the invested projects transform into AI, do they need to adjust their financing model and amount?
Qiao Wang: At the application level, the financing model is not that different. But I think the first killer app of AI in the past few years is that it significantly improved the work efficiency of developers.
You may have seen some of my recent articles. Since ChatGPT first came out - around November 2021, I have been asking the teams we invested in a question: How much has AI improved your engineering efficiency?
In the first few months, their answer was that the efficiency increased by about 20% to 50%. But I track this question every year. The last time I asked them was a month or two ago, and their answer was: it increased by 2 to 4 times. From the initial 20% -50% to the current 2-4 times, this is a very amazing change.
Therefore, if this trend continues, in the next 5 to 10 years, the funds needed by entrepreneurs will actually be less and less. This is because one engineer may be able to complete the work that four engineers could do in the past. Based on this judgment, our current investment philosophy has become very simple: we give you $500,000, and you bring two or three people to do it. If two or three people can persist for about two years, it should be enough for you to find product-market fit.
Then when you find product-market fit, you can either start making money and start hiring more people. Or it will be easier for you to raise funds, raise a Series A or a later seed round, and then hire people and scale up. In this regard, whether it is an AI project or a Crypto project, as long as it is at the application layer, there is essentially no difference. Of course, if you are doing something more basic and infrastructure-oriented, you may indeed need more money, right?
BlockBeats: Does AllianceDAO have any cases of transforming to AI and successfully finding PMF?
Qiao Wang: My definition of product-market fit is actually quite strict. In my opinion, true product-market fit means that your product can grow steadily at 10% to 30% per week or month, or even higher. At the same time, you have begun to achieve annual revenue of seven figures or more.
And the most important thing is that user demands are pouring in continuously, even to the point where your team can hardly cope with them. Only in this state can I consider PMF to be achieved. If we use this standard, I have not seen any project that has really reached this level of transformation from Crypto to AI.
BlockBeats: Is it because these teams are just starting out, or are they encountering some problems?
Qiao Wang: I think it’s mainly because they are just getting started. In fact, the trend of transitioning from Crypto to AI has only started in the past six months or so, so they may need more time to truly find product-market fit.
In addition, the competition in AI is very fierce. In almost every vertical field, there are dozens or even hundreds of teams doing similar things, and the competition is very fierce.
BlockBeats: Back to AllianceDAO itself, it is an investment institution focusing on the encryption field. But now that there are a group of pure AI startup teams in its investment portfolio, do you think about some issues about brand positioning?
Qiao Wang: We will think about some branding issues, and we are gradually improving our branding. Ultimately, we want to build an accelerator to continue working on Crypto, but we will also do things other than Crypto.
Because in fact, technology always feels like one wave after another, and each wave may last for 5 to 10 years, or even longer. But after this wave is over, the investment opportunities may not be as many as in the earliest stage, so you have to see what the next wave is. Ultimately, we will become accelerators in various fields.
BlockBeats: When crypto VCs get involved in the AI field, do you feel that the risk factor you face has increased? In addition, will this phenomenon of entrepreneurs fleeing also affect your personal confidence in the industry?
Qiao Wang: I don’t think the risk factor is higher. Although AI is indeed highly competitive, it is a big trend after all. I think this trend may be an order of magnitude larger than cryptocurrency.
So, overall, I dont think the risk factor is higher. As for the impact of AI on cryptocurrency, it is definitely there, because I have personally seen many cryptocurrency entrepreneurs turn to AI. From my personal feeling and the data, there is indeed a lot of talent loss to the AI field.
We invest in every entrepreneur who switches from AI to Crypto
BlockBeats: Are you worried about the following situation: more and more projects are switching to AI, and there are fewer and fewer Crypto entrepreneurs, which will make people feel that the industry seems to have no hope.
Qiao Wang: I do worry about this issue, but what I worry about most is whether the entrepreneurs we invest in can succeed in the end.
If they want to transform and do AI, I will focus on confirming two things. First, are they no longer passionate about what they are doing now? Do they feel that the current direction will not produce good results in the long run? I need to find this out.
Second, is he ready for the new direction he wants to take, such as AI? Does he have the ability and resources to accomplish this? More importantly, can this new project he is doing really solve the users pain points? If the answer to these two questions is yes, then I will not stop them from taking the new direction, I will even encourage them to try.
BlockBeats: You mentioned earlier that the crypto industry has lost a lot of talented people because of AI. Are these talents mainly developers or visionaries?
Qiao Wang: Both. I think there are two main reasons for the loss of talent in the Crypto field. One is AI, which I have seen with my own eyes. The other is the crackdown on Crypto by the US government in the past four years. These two combined have indeed led to the loss of a lot of talent, whether it is entrepreneurs with vision or developers.
BlockBeats: Can I make a judgment that most of these entrepreneurs who have left are those who entered Crypto in the last cycle?
Qiao Wang: Yes, thats right. In fact, in the past six months, there are still some people from Web2 who want to do Crypto. They know they can do AR, but they dont want to do AR, but choose to do Crypto because they think Crypto is very interesting. In fact, there are still such people, maybe four or five. We also invested in almost everyone who switched from Web2 to Crypto in the past six months to a year, because we think such people are very interesting.
They could have done AI, but they chose to do Crypto, and they have good ideas, so we will invest in them. Such people are often very interesting. So, there are still such people, but there are more people turning to AI, and the number of people in this direction may be one or two orders of magnitude higher.
BlockBeats: That is to say, the emergence of 4-5 Crypto vertical projects will be accompanied by 10-20 projects transforming into AI.
Qiao Wang: Yes, it may be one or two orders of magnitude higher. There are not just 10 to 20 companies. There may be dozens to hundreds of them in the entire industry, or even more.
BlockBeats: What direction are these few entrepreneurs who are determined to do Crypto heading in now?
Qiao Wang: They will do some projects that combine social and speculation. For example, they see projects like Palm Fantasy, Moonchat, and some social projects. Although these products may fail, they think that the execution may not be done well, but the essential principle is very good. So they want to do this.
At the same time, they also feel that the AI field is too competitive and are unsure whether they can succeed in the AI field. Therefore, they would like to do a project that is both interesting and less competitive.
BlockBeats: Conversely, in which vertical fields are the AI projects in the Alliance portfolio currently focused?
Qiao Wang: We don’t invest in many AI projects now. In the most recent round, AI projects account for about 1/3, which is about 7 or 8 projects. They are working in various directions. For example, some are for developers, similar to the previous Y Coding, which directly generates code using language, which is very interesting.
There is also the team that I just mentioned that does AI video advertising, and there are teams that do educational projects for children, primary and secondary school students, and even younger age groups. There are also some that use AI to make games, basically directly converting language generation into a game. I know all kinds of them, but we don’t invest in many.
And the seven or eight teams we invested in all came from the Crypto field. You see, they all worked as startups in Crypto before, or came from some relatively good companies, such as Uniswap, Coinbase, etc.
BlockBeats: That means you have a strong background in the Crypto industry.
Qiao Wang: Although these teams have strong Crypto backgrounds, as I just said, when it comes to AI applications, I don’t think their experience in AI will necessarily be of much help.
BlockBeats: This is quite sad. The best people in the industry are not planning to stay in this industry now.
Qiao Wang: Actually, there are still some teams with strong backgrounds that are purely engaged in Crypto. However, the AI content of the previous period is much lower than this period. The previous period was basically zero, but later there may be one or two teams that switch to AI. They did work in Crypto when they came in, and worked for a period of time, maybe about half a year, and then switched to AI.
Does Crypto+AI have a future?
BlockBeats: The concept of Crypto+AI is still hot. Do you think this is a false narrative?
Qiao Wang: I think 90% is a pseudo-narrative, but maybe 10% will do something interesting. You can imagine Crypto and AI as two large circles, and the intersection between them is actually very small. Although both circles are large in themselves, the intersection in the middle may be very small. However, in that small intersection, there may be some interesting things, such as decentralized training, which may be quite interesting.
We have seen some similar projects, but most of them are infrastructure projects. Many VCs are also chasing these projects and giving them very high valuations, which makes it difficult for us to participate. Although the teams of these projects are very strong and I like them very much, these projects are difficult to do and may take several years to do well. At present, decentralized training has not made much progress.
The biggest challenge is how to aggregate the small models trained in each data center. Data transmission between different data centers is very expensive, and the cost of transmitting this information over the network is very high. Therefore, whether decentralized training can be cheaper than centralized methods remains unknown.
BlockBeats: In the current market context, has the primary market valuation and popularity of Crypto AI projects declined significantly?
Qiao Wang: In fact, there are still some very large funds that do not have many choices and can only focus on investing in this type of project. Therefore, in the end, there will be multiple VCs investing in the same large project.
I think many VCs don’t really understand the application layer of Crypto, so they can only invest in technical infrastructure, but these infrastructure projects don’t have that many interesting things. For example, Layer 2, there are already hundreds of them on the market, and you can only find some slightly interesting tracks and then focus on investing.
