Who is Cypher Capital?
Cypher Capital is a multi-strategy cryptocurrency investment company located in the United Arab Emirates. Their business covers areas such as venture capital, public markets, node operation, and mining. The company collaborates with globally renowned Web3 providers, offering not only financial capital support but also utilizing their international connections and industry knowledge to ensure the long-term success of projects.
《Tech Flow》invited Bill Qian, the President of Cypher Capital, for an in-depth interview regarding Cypher Capital’s investment situation and the current bull market.
Full Q&A can be found here:
Q: Hi Bill, can you talk about your recent investments?
Bill: Hello. We’ve been quite fortunate with our fund this cycle. We heavily invested in Solana, Ton, and Sui during the bear market. At the application layer, we also invested in star projects such as Peaq, Uxlink, and Bouncebit. Overall, we currently have more than 6x returns and good overall liquidity.
Q: We heard that many VCs are struggling in this cycle. What is your perspective?
Bill: In the previous cycle, everyone was rushing after the listing (VCs included). In this cycle, it’s the “let the bosses run first” cycle. Who are the “bosses”? Exchanges and founding teams. VCs are now bound by an average lock-up period of 3-4 years, as required by exchanges and founding teams, which promotes a long-term approach. VCs can only watch the candlestick charts and see exchanges and founding teams cash out, feeling helpless and anxious. I often joke that VCs are not profitable in this cycle but rather become “inferior” financial consumers, making donations (grants) to the industry to promote its growth, which can be considered a good deed.
Q: But aren’t founding teams also subject to lock-ups and focused on long-termism?
Bill: Are you referring to the lock-ups in the Team Allocation mentioned in their financing pitch deck? This is just a formal Team Allocation in appearance. You can understand it as the entire token pie belonging to the founding team, so all the continuously unlocking tokens in the pie can be sold by the founding team under various pretexts. Some teams sell tokens to continue developing their business, while others sell tokens to buy Ferraris.
Q: It’s rare for a fund like yours to capture Solana/Ton and Sui simultaneously in this cycle. Can you talk about the stories behind these investments?
Bill: In this cycle, I directly positioned our platform as the largest investor in Solana in the Middle East and possibly one of the top three globally. When you believe in an opportunity, courage and position are the remaining decision factors. As an investor who has experienced the entire journey from Web1 to Web3, the training I received made me deeply understand the concept of “concentrate to get rich.” Whether it’s Tencent, JD.com for Hillhouse Capital, ByteDance for SIG, or Tesla for Baillie Gifford in Scotland, or Apple for Warren Buffett in his later years, heavy positions in core assets have always been the source of significant returns.
Q: You supported Ton early on. Can you talk about that?
Bill: We were the first institutional investor for Ton globally, and I was the first external director of the Ton Foundation. Our cost was less than a quarter of many funds in Silicon Valley that later invested. The logic behind my decision to join the Ton Foundation as a director and advisor was that among the top five social communication software companies in the world, one is in China, three are in the United States, and none of them can do Web3. The only one left was Telegram, so we invested. To be honest, Western investors had doubts about Ton at that time, thinking it was best to stay away from projects led by Russians and fearing the impact of the previous Telegram gram incident. But because I lived in Dubai and frequently met their team, I understood their passion and vision, so I became determined. And if we step back and think, isn’t Crypto anti-establishment? In this industry, those who make big money are all anti-establishment, aren’t they? For example, USDT, Binance, etc.
Q: I remember the primary market fundraising for Sui was highly competitive, with participants such as a16z, Sequoia Capital, and others. At that time, Cypher was just a young investment institution. How did you secure an allocation?
Bill: We are the first team globally to help a sovereign country establish a Bitcoin strategic reserve. We are the only crypto-listed company in the Middle East and the only listed national enterprise in the global crypto industry (our group, Phoenix, has the Abu Dhabi government as a major shareholder). When we communicated with the founders, instead of positioning ourselves as “a young investment institution,” we preferred to introduce ourselves as “industry investors” from the Middle East. As a result, the founders were very willing to cooperate and allocated us a separate quota of $5 million. This made us the only investor in Sui in the Middle East and likely the largest among Chinese investors globally.
Q: Why did you heavily invest in Solana and become their largest investor in the Middle East?
Bill: Because even after FTX, developers continued to build on the Solana ecosystem. At the same time, it gained popularity (MEME). So when the market was still uncertain about Solana, we decisively took a heavy position. In 2023, we made ourselves the largest investor in Solana in the Middle East. We also brought Solana to the Middle East, and next year, Solana will host the Breakpoint Conference in Abu Dhabi.
Q: In this cycle, many people are pessimistic about VCs, feeling that VCs are both unlikable and unprofitable. What is your perspective?
Bill: Temporary setbacks are part of the journey. I am not pessimistic about the VC industry at all, although we must admit that VCs in this cycle are facing challenges. For the next cycle, it is likely that due to the exit of VCs in this cycle and the emergence of numerous new innovations in a technological progress + regulatory relaxation environment, the days of VCs will improve. It’s like in 1999, when VCs established in Silicon Valley had a very poor vintage, and most of their investments ended in bankruptcy. However, VCs established after the bursting of the Silicon Valley tech bubble experienced a turnaround in performance. I am optimistic about the VC industry as a whole because the industry needs us to: screen good teams and development directions for the industry, provide vision and resources to founders, improve project success rates, and ultimately provide good assets to the secondary market.
Q: Web2 VCs are still operating various billion-dollar AI industry projects. What do you think is the difference between Web2 and Web3 VCs?
Bill: They are quite different. The Web2 industry requires “building high walls, accumulating resources, and slowly becoming king,” so the typical approach is to raise enough money in the primary market, such as $1 billion, $10 billion, or even more, which is “accumulating resources.” They continuously expand market share, delay profitability, and build their own moat, which is “building high walls.” They delay listing, so they don’t have to worry about quarterly reports and public investors, and delay dividends. The core support behind this strategy is private market capital, which is VC. That’s why we see that Web2 VCs are getting bigger and can raise funds of $100 billion for one vintage, as they need to provide enough ammunition for the “nuclear war” between founders. However, the logic of Web3 is different. It emphasizes “getting famous early.” The cycle from the primary market to the secondary market has become too short, making it difficult for good teams to solidly build their products. This fast enriching industry will push founders to chase trends, focus on market-making, and quickly list on exchanges. Therefore, I believe that Web3 needs more “patient capital” and should move closer to the style of Web2, so that it can accompany founders to accumulate more in the primary market.
Q: Thank you. One last question, how do you view the top of this bull market? Will there be a top or a Super Cycle?
Bill: When people start talking about a Super Cycle, they must be careful. It’s like someone telling you, “This time it’s different, the tree will definitely grow to the sky.” The big logic of the crypto industry is still growth, but the specific form is definitely a spiral upward within a cycle. Market timing is difficult, so we usually construct our portfolio based on the current market sentiment, making it more aggressive or defensive. Thank you!
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