Why the Crypto Industry Needs Venture Capital: Q&A with a Seasoned Investor

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Traditional funding in the crypto space was once considered unnecessary. After all, the industry itself offers different, controversial, but nonetheless, ways to finance a project – initial coin offering (ICO), initial exchange offering (IEO) and the current darlings of offerings – ramps. introductory and initial decentralized exchange (DEX) offerings.

But with the industry maturing and more and more startups wanting not only the capital but also the mentorship to build a functional and valuable product, venture capital has become one of the most attractive options. Cointelegraph spoke to Li Rongbin, founding partner of SevenX, about why venture capital funding is the next big thing for crypto startups and entrepreneurs.

Tell us about your fund.

Our company, SevenX Ventures, launched in early 2020, so we’re a relatively young brand. But our three founding partners all have about six years of crypto VC experience. We are one of the first VCs to invest in DeFi and NFT in China. We have supported DeFi projects such as Dodo, Zerion, Debank, Furucombo, Daomaker, Vega, etc., and NFT-related projects, including YGG, Alchemy NFT, Rangers, and Whale, etc.

Prior to SevenX, we separately had our own crypto VC funds, based in Beijing and Shanghai, which were early investors in some big projects, including Huobi, Tron, NEO and others. We decided to merge into one because we really want to bring together our experience and knowledge to better bring value to our portfolios.

Why do you think the crypto industry needs corporate investment, given that there are many options to fund a project like ICO and IDO, for example?

We believe in decentralization and really think a decentralized way of fundraising is cool and useful. This type of fundraising will bring users, publicity and the community. But VCs are experienced and have great industry connections and resources, which is good for getting started,

There is some debate about whether to take VC funds as an entrepreneur. Sometimes these companies do little help, and they are also the fastest to throw the project into the bear market. But I think the problem really lies in how you handle communicating and using what VCs have to offer in the most effective way.

What type of companies do you invest in? How do you do your research and due diligence?

We love innovation. We seek out anything innovative enough to change the current crypto paradigm, and we’re not afraid to take a risk.

Specifically, we invest in projects with logical thinking skills and founders who clearly know where it’s going. We love imagination, but those bold imaginings must be based on logical reasoning and analysis. We believe that currently the whole industry is in its infancy, as is the age of exploration.

We want to be the support of these ambitious “captains”, we want to support them on “sailing” with “gears like a compass, a toolbox and knowledge” because we have already seen many captains and that we were captains ourselves (we still are, from an investment point of view).

We will provide the necessary capital for travel, security and even sometimes as a crew member. But we must support entrepreneurs who know what they are doing. And we only invest in captains who really want to find the new continent, not those who just want to discover another island and send goods back.

For research, we always map a specific market to form an architect structure, for example, what is the foundation of the whole DeFi direction, or how many pillars should it really have? We then analyze the driving forces or impact factors behind it. We have a so-called “get-BTC” model to analyze a product from six different aspects, including governance, economy, team, business model, technology, and community.

What matters more when investing in a crypto business – the product or the team?

I would say that at an early stage, the team matters the most because products can evolve over time. But people are hard to change. We also want to invest in teams that have already experienced failures.

But at a later stage, it is the product that matters the most because many things can influence the outcome and lead to failure in this ever-changing market.

What is the hardest thing about investing in crypto companies and products? What kinds of risks are involved?

The hardest part is that too much is happening every day in space. I often only sleep six hours a day, trying to keep up to date with innovations happening all over the world. Sometimes we need to slow down a bit and think rather than act quickly.

The risk is that we have to realize that we are participating in a grand experiment in the whole new world. And it’s certainly not risk resistant. But how to change the world without experimenting?

What is the most promising direction in the industry right now? Why?

But we are looking at potentially interesting directions like the arweave ecosystem. We believe this is the backbone of Web 3.0, NFT infrastructure and the new NFT utility paradigm. Other potentially interesting developments include DID, credit, Community Decentralized Autonomous Organizations (DAOs), and any type of technology that could bring crypto to mass adoption.

What type of assistance do you provide to the companies in which you invest?

A compass, a toolbox, a refueling station. We provide support throughout the product development process – from building the tokennomics, designing the marketing strategy, setting up business development, recruiting and emotional support.

Have you ever had an unhappy experience with projects?

For two years, so far, everything is going well.

What does the future of crypto investing look like? Do you think he will see an influx of more institutional investment firms?

More competition from traditional Web 2.0 giant investors and more small two- or three-man teams rooted deep in the ecosystem will happen at the same time.

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