In the Web3 field, how can retail investors avoid the risks of secondary market takeovers and find truly promising opportunities among a vast number of primary market projects? This article suggests leveraging the investment insights of top VCs by analyzing the investment data of 27 VC institutions, revealing the excellent performance of T0 and T1 level VCs (such as YZi Labs, Multicoin, etc.), and providing methods for evaluating investment returns (ROI) and success rates to help retail investors participate accurately in the primary market.
The Dilemma and Solutions for Retail Investors in Web3
In the Web3 field, retail investors face two major challenges: first, the high risks of the secondary market, where a moment's inattention can turn them into "bag holders"; second, the lack of ability to sift through the vast number of projects in the primary market to find truly valuable targets. So, how can they break through? The answer lies in leveraging professional institutions—venture capital (VC). VCs conduct in-depth research on projects daily and invest real money, their research and investment capabilities far exceed those of ordinary retail investors. The following will teach you how to follow top VCs to discover potential projects through data and experience.
Controversies and Value of VC Projects
Regarding VC investments in Web3 projects (referred to as VC projects), there are two voices in the market:
Positive View: Web3 is still in its early stages, and projects are generally not profitable; VC funding support is a guarantee for the long-term development of projects. Many stable top projects, such as Ethereum and Polkadot, have VCs behind them.
Negative View: Some VC projects are overly packaged, relying on short-term hype to drive up token prices, and VCs often cash out after token generation events (TGE), holding low-priced chips that allow them to control the market, undermining decentralization principles. In 2024, VC projects like zkSync, StarkNet, and Zero performed poorly, leading to market dissatisfaction with VCs and fueling the Memecoin craze. However, while Memecoins are fair and transparent, they are mostly speculative and contribute little substantively.
Objectively speaking, the role of VCs in promoting the Web3 industry is undeniable. Retail investors participating in the primary market, leveraging the insights of VCs, is an efficient path, with the key being the selection of reliable VC institutions.
How to Evaluate VC Investment Capability
To evaluate a VC's insight, one can start from the following dimensions:
Total Number of Investments: Reflects the VC's activity level and resource investment in the Web3 field.
Number of Tokens Launched: Measures the success rate of VC-invested projects going live.
Number of Listings on Major Exchanges: The number of project tokens listed on major exchanges like Binance, OKX, and Coinbase reflects project quality and market recognition.
Through these indicators, one can filter out truly insightful VCs. Based on a comprehensive analysis of 65 VCs, combining overall scores and ROI, VCs are categorized into five levels from T0 to T4, with higher rankings indicating better investment cost-effectiveness.
VC Level and ROI Analysis
VC Level Classification
T0 Level: YZi Labs (formerly Binance Labs), Continue Capital, IOSG Ventures, Bain Capital
T1 Level: Multicoin, Pantera, 1Confirmation, Smrti Lab, Zonff Partners
T2 Level: Polychain, ParaFi Capital, Dragonfly, Sequoia China, Delphi Digital, Electric Capital, Mint Ventures, CoinFund
T3 Level: Framework Ventures, NGC Ventures, SNZ Holding, Coinbase Ventures, OKX Ventures, etc.
T4 Level: Animoca Brands, GSR, Hashkey Capital, Waterdrip, LD Capital, etc.
ROI Analysis
T0 Level: Overall score > 1, average ROI is 8-12 times. Early participation (such as airdrops or new listings) yields high returns, with a high project success rate.
T1 Level: Overall score 0.7-1, average ROI is 6-7.5 times, with stable returns, suitable for focused attention.
T2 Level: Overall score 0.5-0.7, average ROI is 4-6 times, with significant return fluctuations but still potential.
T3/T4 Level: Overall scores are lower, with average ROI between 0-4.5 times, limited returns, and cautious participation is recommended.
Data Source: Through platforms like RootData, one can query specific investment details of T0 and T1 level VCs to understand their investment portfolios and project progress.
Why Are Some Well-Known VCs Ranked Lower?
You may have noticed that well-known VCs like a16z do not appear in T0/T1, and even rank in T2/T3. This is due to:
Excessive Number of Investments: For example, a16z's broad investment scope dilutes their listing rates and ROI.
Reputation Investments: Some VCs only endorse projects with limited actual investment, where influence outweighs substantive returns.
In contrast, T0/T1 level VCs focus more on high-quality projects, resulting in more substantial investment returns.
Practical Advice for Retail Investors Participating in the Primary Market
Prioritize T0 and T1 Level VCs: Projects invested in by VCs like YZi Labs and Multicoin have higher success and return rates, making them the top choice for retail investors. Use RootData to search for these VCs' investment portfolios, focusing on their early projects.
Emphasize Foreign VCs: Data shows that foreign VCs generally have higher ROIs than domestic VCs, with exchange-affiliated VCs (like OKX Ventures) in between. Prioritize projects from top foreign VCs.
Combine Project Fundamentals: When evaluating projects, check the level of participating VCs, and make comprehensive judgments based on the project's white paper, team background, market demand, etc.
Beware of Over-Packaging: Avoid blindly chasing trends, pay attention to VC exit mechanisms and token unlocking plans to reduce takeover risks.
Conclusion
In the Web3 primary market, retail investors do not need to go it alone. By leveraging the research and investment capabilities of T0 and T1 level VCs, combined with data-driven filtering methods, we can more efficiently uncover potential projects. Prioritizing top VCs like YZi Labs and Multicoin, along with fundamental project assessments, is essential to seize opportunities in the Web3 wave. Wishing everyone successful investments, avoiding traps, and seizing opportunities!
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