It appears that “you are just a VC project” might become this cycle’s “no token, no ICO” both of these statements are just counterproductive virtue signalling imo. The no token mantra alone probably set us all back 18 months due to overcorrecting for ICO scams.
I said many times through 2018 and 2019 you actually want scams and other fuckery, not having them is a sign of underinvestment, which is far worse than the alternative.
The market can solve these problems and it clearly has already to a large extent, deal structures are now much clearer and incentive aligned than they were in 2017. Does that mean we won’t see vaporware raise tons of money this cycle? Of course not! But again that’s a good sign.
Now let’s talk about “VC investors” firstly not all institutional capital is the same. A16Z is not Multicoin is not Polychain is not Paradigm is not Framework. They are all very different entities with different approaches to the market.
Hedge funds with no lockup’s are a pretty unmitigated disaster typically. The number of “funds” that’s dumped HAV into the ground in 2018 because they had zero conviction or understanding is amazing. Thankfully their punishment is to be eternally haunted by those sell orders.
Venture style funds like @hiFramework and @paraficapital stepped in in 2019 and picked up the pieces alongside mega chads like @Arthur_0x and @DegenSpartan. Safe to say without these high conviction bets DeFi would be in a very different place!
The lesson is don’t overcorrect and get blinded by simple heuristics and narratives. Most likely whoever is peddling them has an angle. Put the effort in to assess each situation on its merits, it will pay off...
Market structures are maturing in crypto, things have changed from 2017 ICO style discount rounds being dumped on retail. High conviction, long biased pools of capital, regardless of what they call themselves are a net benefit to the space.
As long as they are strongly incentive aligned with long lockup’s they provide initial capital at high risk stages and ensure we are over-investing in DeFi not under-investing.
All of that said I believe we should try to avoid creating privileged positions and need to find ways to have more open funding mechanisms, that’s why projects allocating large pools to yield farming is so effective IMO. It allows price discovery to be market driven.
Lots of projects are still finding price floors at multiples of their most recent private raises though. Much like the IPO pops in TradFi we probably need to examine this from a market efficiency perspective.
Open auctions for locked tokens initiated by project DAO’s could potentially replace these closed private rounds but there are regulatory headwinds to say the least...
Ultimately the market will decide and while it may take longer than we would like for market structures to mature and efficiencies to kick in, it will happen eventually. In the meantime it’s up to everyone to collectively push things forward through investment in experimentation.
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