The Transformation and Future of the VC Industry

After participating in the Hong Kong Consensus Conference, my deepest impression is that the venture capital industry is facing tremendous challenges. In sharp contrast to project parties, many VCs are facing difficulties in fundraising, staff turnover, and other issues. Some are even considering issuing Meme coins to raise funds. Many people in the industry are choosing to transform, joining project parties or becoming opinion leaders. This change prompts me to reflect on the problems facing the VC industry and its way out.

Whether in China or the United States, the golden era of VC as an investment category has passed. Take Lightspeed as an example; its 2012 investment fund achieved a return of 3.7 times, but funds after 2014 have struggled to break even. Chinese VC has also experienced a similar trajectory, relying on demographic dividends to foster several Internet giants, but after 2015, it faced challenges such as increased regulation and tightening liquidity, leading to a significant decline in return rates. Cryptocurrency VC has also not escaped this fate.

The core issue facing the current market is extreme liquidity scarcity, intensifying market speculation, and the traditional VC model is difficult to sustain. This round of the bull market is mainly driven by the US Bitcoin spot ETF and institutional investors, but funds are primarily flowing into BTC and index products, with very little entering other cryptocurrencies. Due to a lack of genuine technology and product innovation, other coins struggle to maintain high valuations.

This has led to doubts about the VC model. Retail investors believe that VCs have an unfair advantage, being able to acquire chips at a lower cost and grasp key information. This information asymmetry has led to a collapse of market trust and further depletion of liquidity. In contrast, secondary fund strategies do not have a strong opposition to market sentiment, as retail investors also have the same opportunity to enter the market.

The rise of the Meme funding model is a response to this trend. It provides a fairer participation mechanism and a lower entry threshold. Retail investors can track information through on-chain data and obtain early tokens under a relatively fair pricing mechanism. Developers can "have assets first, then have products." This model reflects the impact of populist capitalism on the financial ecosystem, satisfying the public's desire for quick wealth and breaking the monopoly of traditional financial institutions.

However, the Meme financing model also has obvious problems. The signal-to-noise ratio is extremely low, with a large number of low-quality projects flooding in. There is insufficient information transparency, and high liquidity makes long-term project development less important. More seriously, high liquidity means high speculation, and there is a lack of long-term interest binding among participants, making this trust structure difficult to sustain.

Nevertheless, VC still has its value. The world is full of information and asymmetric trust, and certain collaborative resources are difficult for ordinary developers to access. However, VCs can no longer simply profit from information asymmetry as they did in the past. In the face of the reconstruction of market paradigms, VCs must adjust their strategies to find a balance between the high liquidity of the Meme model and the long-term support of traditional VC.

Regardless of how the market changes, what truly determines long-term value are those outstanding founders who possess vision, strong execution, and a willingness to continuously build. VCs need to reposition their roles to provide valuable support to these founders in the new market environment.