Challenges Facing the VC Industry and Emerging Financing Models

After attending the Hong Kong Consensus Conference, I deeply felt that the venture capital (VC) industry is facing severe challenges. Many VC institutions are encountering difficulties in fundraising, personnel loss, and other issues, with some practitioners even transitioning to become project parties or opinion leaders. This situation stands in stark contrast to the project parties, prompting me to reflect on the issues and breakthrough directions in the VC industry.

Whether in the Chinese or American market, the golden age of VC as an investment category has passed. Taking Lightspeed as an example, its star projects invested in 2012 such as Snap and Affirm achieved a 3.7 times distributed return, but funds after 2014 have struggled to break even. Chinese VC has also experienced a similar trajectory, from relying on demographic dividends to foster giants like Alibaba and Meituan, to facing multiple challenges such as stricter regulations and tightening liquidity. VC in the cryptocurrency space has similarly not been spared and is facing a survival crisis.

In the current market environment, the core contradiction faced by the VC model is the extreme lack of liquidity and the intensification of market speculation. This round of the bull market is mainly driven by the US Bitcoin spot ETF and institutional investors, but the flow of funds has undergone significant changes: institutional funds are primarily directed towards Bitcoin and related ETFs, with little diffusion to other cryptocurrencies; the lack of genuine technological innovation support has made it difficult for other tokens to maintain high valuations.

This change has raised questions 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, leading to a collapse in market trust and further depletion of liquidity. In contrast, secondary fund strategies have less opposition to market sentiment, as retail investors also have the opportunity to enter the market under the same conditions.

Against this backdrop, the Meme financing model has emerged. It offers a fairer participation mechanism and a lower entry threshold. Retail investors can track information through on-chain data and acquire early tokens under a relatively fair pricing mechanism. This model allows developers to "have assets first, then have products," similar to some public chains conducting token generation events when the ecosystem is not yet mature.

However, the Meme financing model also has problems, such as a very low signal-to-noise ratio, insufficient information transparency, and skyrocketing trust costs. It is essentially a more complex on-chain world than the VC model, lacking product and technical support, and "absolute fairness" may just be an illusion.

Nevertheless, VC is unlikely to disappear completely. The world is still full of information and trust asymmetries, and certain collaborative resources are difficult for ordinary developers to access. However, VCs must adapt to changes and cannot simply rely on information asymmetry to profit.

In the face of the high liquidity and short-term speculative mentality of Meme financing, VCs need to find a balance between long-term support and value empowerment. Although changing investment strategies is not easy, it is crucial to respond flexibly to market changes.

Regardless of how the market changes, what truly determines long-term value is always those exceptional founders who possess vision, strong execution capabilities, and continue to build.