How was the controversial "bull market winner," LD CAPITAL, formed?

Author: 0x5willows, Deep Tide TechFlow

"Look at how beautiful the graphics of 'BIG TIME' are!"

The investor sitting across from me was showcasing a test video while introducing it in a particularly joyful tone with a Hunan accent. His institution could achieve hundreds of times equity returns from just the 'BIG TIME' chain game project.

This investor is Yi Lihua, the founder of LD CAPITAL.

As LD CAPITAL captured numerous Alpha projects during this bull market cycle, Yi Lihua has once again become known as "Boss Yi."

"Incredible," commented a traditional investor from Shanghai who had interacted with Yi Lihua, "A few years ago, Yi Lihua was still 'pimping,' back then he was just a little brother on the basketball court, never thought he would transform into a 'big shot' in the crypto circle. Later, I heard they were struggling during the bear market, but I never expected they could make a comeback."

From a poor boy in a rural area of Hunan to today's "VC big shot," Yi Lihua's life trajectory vividly illustrates the blockchain revolution under the opportunities of the times, along with his self-founded LD CAPITAL.

Starting with five hundred thousand dollars, without external financing, LD CAPITAL invested in hundreds of projects within four years, rapidly increasing its asset scale to over one billion dollars, yet it has faced much skepticism and controversy.

Deep Tide TechFlow communicated with the founder of LD CAPITAL and several investment managers to try to restore the growth trajectory of LD CAPITAL and the secrets behind its wild growth.

Sprouting and Setbacks

"My life has been completely without embellishment; you have no idea how difficult it was before. I played a bad hand to get to where I am today, and I have a huge sense of defiance."

In September 2018, when Yi Lihua returned to Loudi, Hunan, to donate and establish the "Teaching Assistance Scholarship" at his alma mater, Xinhua No. 1 High School, he said this.

"I am a rural child with nothing. I longed to escape that world, came to Shanghai to attend university, started my entrepreneurial journey in college, went through failures and scams, earned my first pot of gold, and then ventured into classical investments. None of those were the world I wanted until blockchain gave me a weapon; this desire sustained me."

This is a glimpse into Yi Lihua's first half of life.

Three opportunities changed his life.

In 2013, a local government was seeking investment, and after hearing the news, Yi Lihua contacted all the business owners he knew in Shanghai, filtering 60 out of 400 people, and helped them fill out a lengthy application covering various aspects from technology and team to business model. Ultimately, 20 of them were successful, and Yi Lihua earned his first 5 million.

In 2015, he was introduced to Bitcoin. Yi Lihua invested one-third of his assets into BitSE for mining, at that time, a Bitcoin was only 1,000 yuan.

By the end of 2016, during the "ICO" craze, Yi Lihua invested 100,000 yuan in the angel round of financing for Quantum Chain, acquiring 100,000 Qtum. In May, Qtum went live for trading, and the price quickly soared to 100 yuan, peaking at 600 yuan, earning Yi Lihua a hundredfold return. After that, he continuously participated in financing for numerous projects like Vechain and EOS, reaping substantial rewards.

Through "ICO," Yi Lihua obtained his true "first pot of gold." In January 2018, as a continuation of personal investment, Yi Lihua officially established Crypto Fund LD CAPITAL.

From day one, LD CAPITAL has been highly controversial and talked about.

On one hand, Yi Lihua's online disputes with crypto OGs attracted countless eyes; on the other hand, LD CAPITAL's investments were deemed overly aggressive and high-profile.

In the first ten months after its establishment, LD CAPITAL invested in over 80 projects.

GRE, Bitget, Bitgogo, Citex, Lbank, MEXC, BHEX, GGBTC, Coinsuper, BiLaxy… LD's investment portfolio included a large number of exchanges.

It is reported that Yi Lihua even had the opportunity to participate in the earliest investment in Binance but missed it because he did not conduct due diligence due to a few words of advice from friends.

Whether it was regret over missing Binance or a long-term optimistic view of the sector, Yi Lihua has always had a fixation on exchanges.

Additionally, LD CAPITAL continued Yi Lihua's investment style from the "ICO" craze period, quickly investing in a large number of "domestic projects."

In an interview with Chain Catcher in 2018, Yi Lihua discussed his investment logic ------"I don't define any project; I only look at the speed of evolution." He also introduced LD CAPITAL's investment decision-making process, stating, "The investment decision time is very short. If everyone thinks a project is good, and the discussion is fine, we invest immediately; decisions can be made in a day."

At that time, both LD CAPITAL and Yi Lihua himself were exceptionally high-profile in the industry.

A typical scene was one day in 2018 when Yi Lihua announced "LD CAPITAL strategically invests in Haichain" in a media group of big shots. After the WeChat red envelope exploded in the group, blockchain media reporters and related practitioners who had been silent for a long time rushed to "send their blessings."

Quick decision-making, massive investments, combined with a high-profile style, made LD CAPITAL very noticeable.

However, the brief false prosperity was soon crushed by the bear market. When the "ICO" bubble burst, many projects went live only to fall below their issuance price, and there were frequent instances of project teams running away.

Angry investors began to investigate the backgrounds of various "dog projects," frequently discovering familiar faces among investment institutions, "Why is LD CAPITAL everywhere? They have taken all the money."

Regarding external doubts, Yi Lihua expressed that he could understand but felt very innocent.

On one hand, LD CAPITAL was seen as the "sickle" harvesting the market; on the other hand, Yi Lihua stated in his circle of friends that LD CAPITAL lost 600 million yuan in 2018.

"I completely understand the market's view. First, most of them do not know the project parties but are very familiar with a few investment institutions. When projects fail, some people will certainly blame the investment institutions; second, there was a lack of understanding and insufficient internationalization at that time. Our investment capability was average but extremely high-profile, which inevitably attracted dislike."

With both fame and fortune lost, coupled with a bleak market environment, LD CAPITAL was once on the brink of bankruptcy. After deep reflection, Yi Lihua and his team made four adjustments:

1. Focus on investment, cutting off all businesses unrelated to investment.
2. Strive to be low-key and enhance understanding of the industry and sector.
3. Improve post-investment service capabilities comprehensively, gaining recognition and support from quality projects.
4. Despite experiencing the brutal investment failures of the bear market, still firmly believe in the future of blockchain.

After that, LD CAPITAL gradually faded from the public eye, awaiting rebirth.

Winners of the Bull Market

Entering 2021, "LD CAPITAL" disappeared, replaced by LD CAPITAL frequently appearing in various project financing news.

The investment style remained aggressive, but this time it was slightly different.

No longer just investing in exchanges and "domestic dog projects," Flow, Mina, Assembly, Flare, Immutable X, CoinList… numerous top international projects appeared in LD CAPITAL's portfolio.

In the NFT and GameFi sectors, LD's investment portfolio is particularly rich in Alpha: the blockchain 3A game masterpieces Illuvium and Bigtime, the distributed rendering network Render Network, the star chain game Star Atlas from the Solana ecosystem, and Alien Worlds (TLM), which launched on BINANCE IEO…

Benefiting from the GameFi craze, LD achieved an extremely exaggerated investment return ratio.

Illuvium had a maximum paper return of 63609%; Star Atlas had a maximum paper return of 62200%; Alien Worlds had a maximum paper return of 238567%…

LD's high-return investments in the GameFi sector

How did LD CAPITAL transform and gain high Alpha project investment opportunities in the fiercely competitive primary market?

Insights from several LD CAPITAL investment managers may provide a glimpse of the answer.

1. Dare to Invest

LD CAPITAL has consistently adhered to a daring betting style, and fortunately, this time it was at the eve of a bull market.

On March 12, 2020, after experiencing a historic crash, both primary and secondary markets plummeted to freezing points, with most entrepreneurs and investors choosing to exit or wait and see. However, LD CAPITAL, driven by faith in blockchain and a surge of energy, chose to "ALL IN" and accelerated its layout in the primary market.

According to an investment manager, the brief gap after March 12 was actually a golden vacuum period for the primary market: less competition, relatively easier to invest; low valuations, many quality projects were valued at only around ten million dollars; entrepreneurs who chose to continue moving forward in the industry's low valley were more trustworthy and worthy of investment…

More importantly, LD dared to be the first investor in projects, regardless of whether other VCs had already participated.

"We are the first investors in many projects, not just providing money but also giving founders confidence. This is certainly a risk, but we believe it is worth it," Yi Lihua stated.

2. Comprehensive Post-Investment Support

LD CAPITAL treats post-investment services as an important bargaining chip to "secure" projects, claiming that all members are involved in providing post-investment services, including but not limited to strategic consulting, economic model design, capital and platform relationships, market brand growth, ecological cooperation, technical development, and talent recruitment.

For example, after investing in a trading aggregation protocol, LD not only assisted the project team in obtaining investments from top overseas VCs but also helped them connect with IDO platforms and major exchanges, find well-known overseas KOLs and communities for cooperation, and connect with other DeFi projects for collaboration, continuously participating in the project's development without exiting a single token.

3. Talent and Incentives

People are the core of all investments. How to attract better investment managers? How to stimulate the enthusiasm of investment managers?

Since it is self-funded, LD CAPITAL has a more flexible incentive mechanism: sharing investment quotas with investment managers, with a maximum participation of 30%, and this ratio will continue to increase, ultimately allowing the investment leader's participation to exceed 50%.

As a result, some have jokingly said that at LD, it's like investing for oneself while casually bringing the boss along.

Moreover, partners can play an important role in investing in top projects. Each partner has their own resource network and core competency circle. The pitches and investments in top projects like Illuvium and Bigtime largely rely on the personal abilities of the partners.

Compared to many other VCs that have started to take a laid-back approach, LD can be considered one of the hardest-working in the industry. Partner Lee XI stated, "I haven't had a good night's sleep in two years."

Currently, LD has nearly 40 people and is still actively expanding.

4. Starting Anew

Why did LD CAPITAL seize the investment opportunities in NFT and GameFi?

Fortune out of misfortune.

In 2020, after experiencing DeFi Summer, the DeFi sector became exceptionally hot. However, quality projects were mainly concentrated in Europe and America, making it difficult for Asian institutions to participate in top project investments. To put it bluntly, LD wanted to invest in top DeFi projects but couldn't get in.

Thus, LD had to turn to research new sectors and opportunities. Two years ago, one of LD's partners began studying NFT and GameFi, and after discussions, LD decided to place its bets. The judgment logic was that this was a breakout sector; while DeFi could capture a large amount of TVL, it was concentrated among a few people, whereas NFT and GameFi could bring in a massive user base. Any opportunity exists in a huge incremental market. The past Web 2.0 era has already proven this, having users means having a future.

5. Going Global & Offline

LD CAPITAL recognized early on that "in the crypto world, the West rises while the East falls," with many quality projects located in the US or Europe, making "going global" a necessary option.

Therefore, LD began recruiting in the US and Singapore, actively participating in various offline meetings and events to expand projects.

The pandemic has isolated the world, leading to a lot of communication happening online, but offline interactions are more conducive to building trust and connections between people, making pitching projects simpler and more direct.

Through active offline efforts, LD CAPITAL has invested in a large number of early-stage projects in the US, many of which have yet to be disclosed.

LD's team in the US

6. FOF and Resource Network

In September 2021, LD Capital announced the establishment of a $50 million blockchain mother fund to invest in outstanding blockchain funds globally.

According to its official website, LD has currently invested in 1kx Capital, Kraken Ventures, Republic Fund, Shima Capital, BigTime Eco Fund, DHVC, and others.

Yi Lihua stated that the main purposes of FOF investment are to make friends globally, meet more partners, and discover more good project investment opportunities; and to reserve more resources for projects, providing good post-investment services. Many institutions have different advantages, and we hope to combine them to help the invested projects, with post-investment services being the core.

On one hand, Shima, Republic, and other VCs have become LD's deal sourcing partners; on the other hand, LD is also building a connection network between top projects.

For example, after LD invested in DAOMaker, it gained access to numerous deals.

A top AAA GameFi project that LD invested in referred LD to other top projects, such as the P2E gaming guild Polemos, which recently announced completing a $14 million seed round of financing, led by Framework Ventures and Delphi Digital, with LD Capital participating.

If there is one last point to mention, it is persistence and dedication. To invest in a project, LD is willing to "lower its stance and visit the humble abode."

One project party stated that LD Capital communicated multiple times with promises, ultimately allowing LD Capital to participate in the investment through "soft persuasion" and "sincerity and persistence."

Competing for Bargaining Power

In terms of financial returns, LD Capital can be considered a big winner in this bull market cycle, but it still has a considerable gap compared to top-tier crypto funds.

Regarding the evaluation criteria for VCs, a crypto VC practitioner stated: "The standard for outsiders to evaluate VCs is how much profit they made, but within the industry, VCs are evaluated based on fund size, ecological positioning, and voice."

Compared to truly top-tier VCs, LD still lacks "bargaining power."

To this day, among the countless VCs in the crypto world, only a few investment institutions like a16z, Paradigm, Binance Labs, and Multicoin Capital truly possess bargaining power.

Bargaining power comes from brand and post-investment services (Value-added).

An objectively existing phenomenon is that on the brand side, LD Capital is still burdened by "historical memories," leading to some projects and funds rejecting LD Capital's investments. There have even been instances where deals were agreed upon, and just as payment was about to be made, the project party suddenly backed out, because among the other VCs participating in the investment, some believed LD Capital was a Pump & Dump Capital.

Generally speaking, there are two types of VCs in the industry. One is Pump & Dump, which only seeks greater financial returns without any value-added, even selling all tokens immediately upon listing, harming the project party.

The other is Diamond Hand, which not only holds onto investments but can also continuously provide value-added services. For example, in January this year, Coinbase Ventures stated that it had never sold any of its invested tokens.

Yi Lihua believes that LD is somewhere in between, as it is all self-funded, so the strategy is to exit part of the projects to support new ones. However, when choosing to exit, LD communicates fully with the project party to respect their demands, committing to long-term investments in projects that continuously strive to iterate and grow, believing in the compounding of value growth.

"LD strongly opposes unlocking and dumping, and firmly opposes such investors. Between extreme profit and market respect, LD chooses the latter."

Additionally, the previously circulated "LobsterDAO crypto VC blacklist" has caused serious trouble for LD's investments. LD Capital was listed on the blacklist, and although LobsterDAO later clarified that the list had nothing to do with them, it had already been widely circulated in various communities and social media.

Regarding various external opinions, Yi Lihua stated that he no longer cares, "Focusing on doing our own thing, the times have changed. Besides investing, LD will next focus on overseas branding and building better post-investment services. Most of the new talents being recruited are preparing for post-investment services."

According to LD investment managers, the situation of being rejected for investment has greatly decreased, "because there is a positive cycle in investment. Securing a good project makes it easier to secure other good projects. LD has already proven itself with its portfolio, especially in the GameFi sector. Moreover, LD provides comprehensive post-investment services to project parties."

So, will LD continue its previous style of broad investments?

"Perhaps our team strongly believes in the future of blockchain, and we can't help but support those teams that show innovation and ideals, daring to be the first investors in projects," Yi Lihua explained, but changes are also happening.

"We are also reviewing and continuously improving, to reserve bullets for the best teams and use services and resources to support top projects. Therefore, we have recently begun to take action and change. The investments made in the last two months have basically been heavy bets on top projects, and we believe the market will see a brand new LD Capital in the future."

Regarding future promising directions, LD investment managers are still looking for various WEB3 applications that can widely break out, with gaming still being an important sector. For example, blockchain games like Bigtime and Cradles.

Bigtime is an AAA-level chain game masterpiece launched by Decentraland co-founder Ari Meilich, with team members from top gaming companies like Epic Games, Blizzard, EA, and Riot.

Cradles is an RPG game set in a prehistoric civilization background, creatively introducing a time and entropy system, integrating the rules of time and space from the real world into the game for the first time.

The Cradles team has developed a new NFT standard, EIP-3664, adding operational modules to static NFTs, turning them into "flexible" and "living" NFTs, such as NFTs that exhibit property decay characteristics to simulate the aging of real-world items.

Modular public chains are another direction that LD is optimistic about.

A public chain can typically be decomposed into consensus layers, data availability layers, and execution layers, while most public chains at this stage belong to single-layer chains. As the number of on-chain nodes increases, blocks also grow larger, making transaction congestion inevitable. Therefore, modularization has become a trend. The Rollup we often hear about in Layer 2 is also a product of blockchain modularization, responsible for executing transactions.

In this sector, LD has bet on Assembly, a smart contract chain developed by the IOTA team. Assembly allows developers to freely create their own smart contract chains based on their needs, somewhat similar to multi-chain networks like Cosmos or Polkadot. The difference is that Cosmos is still loosely self-made chains without shared security, while Assembly chains rely on IOTA 2.0's L1 consensus security layer, solving the shared security issue.

Overall, LD's growth has gone through three stages.

In 2018, LD CAPITAL resembled a "speculative VC" with a nouveau riche mentality; by 2021, LD Capital began to internationalize and gradually formed its investment methodology; now, LD Capital is moving towards version 3.0:

(1) More focused, making heavy bets on top projects.

(2) Building a higher quality, comprehensive post-investment service system to deeply empower projects.

(3) Fully going global, enhancing global brand influence.

(4) Daring to be the first investment institution for project parties.

In summary, whether it is LD Capital or its founder, both are full of stories and controversies. It is difficult to define LD Capital; it benefits from faith and persistence in blockchain, and perhaps a bit of luck, riding the wave of the global WEB3 tide, becoming a typical example of a Chinese crypto VC.

In the future, WEB3 will inevitably be a global competition, and the primary market will become more brutal and "class-solidified." Can LD Capital completely step out of the "brand shadow," find its survival stronghold in a more Western crypto narrative context, and gain more bargaining power?

I don't know, but the rushing river can only flow towards the sea, never to return.