Dialogue with Qiming Venture Partners' Tang Yi: Innovating Amidst Disruption

Source: Moonshot Commons

"Moonshot Commons" is a "sandbox" for Gen Z entrepreneurship " The distrust of old systems… brings an inherently destructive force of innovation," Tang Yi describes the maker spirit of the Web3 era.

In 2016, while still studying at Columbia University, Tang Yi was filled with curiosity about the crypto world and often visited various early crypto companies in New York. Among countless startups, a company called ConsenSys caught his attention. At that time, ConsenSys had only about 50 people and was located in a graffiti-covered factory on Bogart Street in Brooklyn. After communicating with founder Joe Lubin, Tang Yi was immediately captivated by the vision Joe portrayed and chose to dive into the wave of the crypto field as a developer, soon becoming the head of ConsenSys in China. A few years later, after noticing the disconnect between the application layer and underlying infrastructure, Tang Yi transitioned from entrepreneur to investor, beginning to build the Web3 world as an investor.

Now, as an Executive Director at Qiming Venture Partners, he has become a supporter behind Web3 companies like InfStones and imToken. Through the immense noise and bubbles in the industry, Tang Yi has been contemplating the possibilities of Web3's future. At the same time, he is spreading this rebellious spirit and longing for new paradigms through investments in the digital world of humanity. In the first issue of Moonshot Insight, we invited Tang Yi from Qiming Venture Partners to discuss his perspective on investment, insights into the Web3 ecosystem, and his thoughts on communicating with entrepreneurs.

" Web3 is a natural extension of a long-term vision in the crypto world. Moonshot Partner:

As history progresses and markets iterate, the Web3 field is constantly changing. What was your initial exposure to Web3 like, and what was your understanding at that time? Why did you choose to stay? Yi:

In the early days of the crypto world, the asset attributes were stronger, and then, starting from the use cases of Bitcoin and Ethereum, it gradually extended to the so-called ownership economy, and then to many concepts discussed in today's Web3. This is a relatively natural process.

My first exposure to the crypto world was in 2016 while studying at Columbia. At that time, there were quite a few Web3 companies in New York, and I often visited them. One particularly interesting encounter was with ConsenSys in Brooklyn.

Ethereum launched in 2015, and ConsenSys, as one of the largest early builders in the Ethereum ecosystem, was still relatively small in 2016, with about fifty people. In a rundown little factory in Brooklyn, I met founder Joseph "Joe" Lubin and learned that there was a group of developers working on developer tools related to the Ethereum ecosystem.

To be honest, I didn't have a deep understanding of this field at first; I just found it interesting. The products I saw at that time were quite primitive, including Metamask, which didn't have many application scenarios. However, one project focused on identity and access management, uPort, attracted me. So, with a curious mindset, I chose to join the team part-time to participate in product development, which became my first opportunity to enter the crypto world.

ConsenSys Founder: Joseph Lubin Moonshot Partner:

You originally have a computer science background and entered Web3 as a developer. What was the thought process behind your transition from developer to investor?

Yi:

Because of my technical background, I was initially not very interested in cryptocurrencies themselves; I was more focused on the changes in identity authentication systems from a technical perspective.

For example, people used to register an email and password for internet websites, possibly adding a second verification. If we don't consider commercial single sign-on solutions provided by Facebook or similar sites, the identity systems between websites were not interconnected.

But the crypto world accepted a new identity system early on. It meant that your identity system could be used across different applications with the same set of standards. This was something I found very interesting at the time. Because I had previously worked in information security, a significant part of my work focused on identity systems and identity access management.

You could see the entire technical framework of the identity system changing.

When I joined Qiming Venture Partners in 2019, the industry was experiencing a winter.

One major issue during the winter was the lack of good applications. At that time, there were many Layer-1 infrastructures, but DeFi and NFTs had not yet emerged, leaving only pure speculation about the application layer.

I believed in the long-term development of the entire industry, but to be honest, I was also quite confused, constantly searching for direction and thinking about how to play a better role in the industry's development. On the other hand, after moving back to China from New York, I wanted to establish a closer connection with the entire Chinese entrepreneurial community, so I ultimately chose to invest.

Perhaps due to growing up in China, even though I had spent a long time in the U.S., I still felt a stronger empathy for the entire Chinese community or Asian entrepreneurs, so I hoped to support entrepreneurs with Chinese backgrounds in the role of an investor.

" The development of the crypto field is actually part of the entire digitalization process of humanity. Moonshot Partner:

You mentioned that your first exposure to the crypto field was in Brooklyn, New York. Do you think there is a formation of a Web3 culture in these cities? With more traditional internet companies getting involved, what are the unchanging legacies between tradition and innovation? Yi:

The U.S. is still leading many cutting-edge developments in Web3 and the crypto field, especially in terms of protocols and infrastructure, given its deep accumulation in foundational research, including cryptography.

Specifically regarding cities, I feel that New York and the Bay Area are the two places with the best talent density and atmosphere.

I believe there are some historical reasons for New York's prominence, as the crypto field, whether it be Bitcoin or Ethereum use cases, has a very strong financial attribute. New York, as the financial center of the so-called old world, has a lot of understanding and experience with the old financial system, but at the same time, there are also a group of people who want to break away and innovate.

Thus, it's natural for people like Joe to emerge from New York.

Joe has experience working on Wall Street and in traditional finance. He once mentioned in an interview that many innovations in the crypto field and Web3 stem from distrust of old systems or disruptive innovation.

In my view, New York, as a crypto hub, has a strong foundation due to its connections with finance, technology, and art, which is consistent with the so-called Silicon Valley spirit.

Whether in the crypto field or the previous mobile internet era, the core is the innovators challenging the old systems and then using technological means and products to disrupt an entire paradigm.

In fact, the early leaders of change were all very "rebellious." Tech geeks could earn a good salary working for big companies, but they were willing to take higher risks to build a new world outside the system.

This kind of story has been repeated in every era.

As an investor, this spirit is also essential, and one must genuinely recognize the attitude of innovation.

Moonshot Partner:

Could you elaborate on your current understanding of Web3?

Yi:

My understanding of Web3 mainly comes from a user perspective, imagining what it will develop into in the long term. To some extent, Web3 is about building a so-called digital world.

From a higher perspective, human society has been advancing digitalization for many years.

The internet era initially allowed people to digitally obtain and distribute information. These things were unimaginable for ordinary people 20 years ago. The impact of this change is that everything has become faster, more flexible, and more convenient. You can access information today a thousand times easier than 20 years ago.

Previously, it was just simple information, but the future, or what is already happening, is that digitalization is penetrating into the forms of organizations, as well as the transfer and acquisition of value, and it may even affect legal or social issues.

Similarly, due to digitalization, team collaboration has also become more globalized. It used to be hard to imagine an organization being able to flexibly hire people from various regions around the world and pay them. Transactions have also taken on new forms; for example, a piece of artwork created by a South American artist can easily be resold to a collector in Europe.

Thus, the development of the crypto field is actually part of the entire digitalization process of humanity.

With this development as a foundation, a significant portion of people's economic and social activities in the future will occur in this digital world: your identity, assets, and most of your value will be embedded within it.

Of course, there isn't just one digital world; you can live in multiple digital worlds in parallel. This represents a disruptive change for our existing world.

Moonshot Partner:

It is often said that everyone in Web3 is a builder. I want to ask why you chose to participate in the construction of Web3 as an investor? What role do investors play in Web3?

Yi:

Overall, I believe that investors are part of the Web3 ecosystem and play their own roles within the community.

In a large ecosystem, everyone has their own division of labor. Investors may have less responsibility in building products, but we focus on capital allocation and influence the long-term trends of the entire industry through investments.

Secondly, if you believe that what a team is doing can have a significant and positive impact on the industry, you will support it with funding. This is my basic understanding of an investor's responsibility.

Each investor's decision-making process is different and focuses on specific areas. In this industry, for example, there are overlaps between infrastructure and applications, while sometimes they are completely unrelated.

Thus, investors attempt to view issues from a more comprehensive, high-level perspective.

This is a relatively unique role for investors.

Moonshot Partner:

How has your understanding as an investor been established? How has this understanding changed over the years?

Yi:

Understanding is a gradually iterative process.

It's quite similar to product development; entrepreneurs initially need to have a general sense of direction and understand what they want to create, but during the process, they may find that the results do not align with their expectations, leading to continuous iteration and learning.

Similarly, for investors, we need to build our understanding of the entire industry, but the source still lies in our interactions with entrepreneurs.

We talk to many project teams every day, focusing on the different directions they are pursuing, and even within a single direction, there may be numerous teams working on it. Through these communications, I have personally learned a lot, forming my own observations. Additionally, because we communicate extensively, our conclusions tend to be more comprehensive, effectively integrating everyone's viewpoints, ideas, and feedback.

This is the most important source for us to form an industry perspective.

We also engage in deep thinking, forming a so-called narrative or vision for the future. For example, what interesting use cases exist in industry development, or what level of maturity should be achieved in the infrastructure layer, we will develop our own viewpoints in these areas.

Combining our viewpoints and what we've learned constitutes our general understanding of the industry.

Another important aspect is the judgment of timing. How is the current stage of development in this industry? What is needed? If we attempt something, is it too early? We make judgments from a relatively objective perspective.

Moonshot Partner:

In the current crypto world, what areas do you think are being overly emphasized? Conversely, which areas are still relatively vacant and need more people to build?

Yi:

I think one area that is overly focused on, though this is controversial, is Web3 social.

In the long term, it has potential and imagination, but based on my personal observations, the use cases in this area are still very limited. From an ordinary user's perspective, what value does Web3 social bring them? Or will they actively initiate many activities? Although people are now emphasizing Web3 more than cryptocurrencies, the main activities in this world are still centered around finance and transactions.

On the other hand, security issues may be underestimated by many.

If you are going to build a digital world, security is still very important because no one wants to live in an unsafe digital world. From a long-term perspective, if all your assets and activities in real life are stored here, you certainly wouldn't want this world to disappear tomorrow, right?

Whether at the infrastructure or application layer, security issues need to be taken seriously by the entire industry. In a sense, many of the security incidents we see now are passively testing these systems. I think the Ethereum ecosystem is doing relatively well in this regard. For example, Ethereum emphasizes decentralization and hopes to use cryptographic methods for scaling or privacy, creating a more secure foundation.

In this context, decentralization is not just a slogan; it is more of a necessary means to achieve security.

" The relationship between the infrastructure layer and the application layer is a spiral ascent. Moonshot Partner:

Currently, the Web3 field is beginning to develop some blockbuster applications, but among them, why do you choose to focus primarily on infrastructure? Is it due to long-term considerations or timing factors?

Yi:

Qiming focuses on both the underlying infrastructure and the upper-layer applications in this field — both sides have opportunities and their own value for industry development.

As for how to define it, I personally believe that the two are in a spiral ascent relationship.

At different stages of the industry, you sometimes observe that infrastructure is somewhat overdeveloped without many applications; later, applications catch up, generating more demand for infrastructure, which then needs to catch up again.

Specific examples include around 2018 and 2019 when everyone was working on Layer-1. A major issue in the industry at that time was that if there were no applications, what do we need so many chains for? But later, as DeFi and NFTs developed and attracted more users, people realized that multi-chain was quite useful due to the spillover demand from Ethereum.

At the current stage, aside from DeFi being one application, NFTs being half an application, it seems that the application layer is starting to lack again, while the infrastructure layer is somewhat excessive. Thus, everyone is beginning to think about what the next application scenario will be, continuing a spiral ascent process.

This is what I have observed. Since I have a computer background, I feel more connected to infrastructure projects. The infrastructure companies we previously invested in have been particularly beneficial to the ecosystem, lowering the barriers for developers and making many underlying tasks easier.

Moonshot Partner:

What are the differences in strategy and predictability between investing in infrastructure and applications?

Yi:

From an investment perspective, the predictability of the infrastructure layer is relatively strong, as understanding the trends in technological development will generally lead to a vision for the future. For example, at what stage the barriers need to be lowered, or from a technical perspective, what building blocks are likely needed are all very clear.

The infrastructure layer can be subdivided into many directions.

I also consider user onboarding as part of infrastructure. This process can be divided into two parts: one is aimed at individuals, like ordinary C-end users, and the other is organizations, leaning towards B-end.

If we want more users to come in, there is a lot of work to be done here, such as providing better self-custody wallets. Additionally, many projects are exploring cryptographic methods to create hardware wallets, which is a To-C aspect.

As for developer tools, it gets even more detailed, such as indexing across various chains to make it easier for developers to access on-chain data. For example, there are still many projects where the underlying nodes need to be run and maintained by themselves, and these can be solved by professional infrastructure companies.

Conversely, the predictability of the application layer is relatively weak. There are many directions, and there will be some blockbuster applications, including STEPN and NFT avatars. However, when blockbuster applications will emerge and in what form, it is difficult for anyone to provide a definitive answer.

I personally think that investing in the application layer is actually more challenging, with greater unpredictability, but that does not mean investors should not invest in this direction, as explosive opportunities do exist. Moreover, investment teams also have different divisions of labor, requiring different investors to have a deeper understanding of various directions and to make more investments.

I am particularly optimistic about directions like gaming. Not GameFi, but hoping to see more digital native creations that possess characteristics of the crypto world, such as value transfer or integrating identity systems and payment systems.

Moonshot Partner:

Aside from the user onboarding and developer tools mentioned above, what other specific directions are you focusing on?

Yi:

Looking further ahead, I am quite optimistic about the application of cryptographic methods (such as zero-knowledge proofs) in this field. For example, are there libraries that provide simple methods for everyone to easily use the latest cryptographic techniques?

The demand for this on-chain aspect is more direct; everyone is talking about scaling, which we are also optimistic about. But on the other hand, privacy has many pain points. From a user's perspective, if you live in a digital world where your every move is 100% exposed to public view, and anyone can peek into your life or whereabouts, that is certainly unreasonable. So I also hope for better privacy solutions that allow users to selectively display content.

" Web3 allows participants to engage in the construction of every node in the entire system. Moonshot Partner:

Could you share some details about your investment work? For example, what teams or projects have impressed you?

Yi:

First, a big conclusion is: We hope to support entrepreneurs who have grand ideals and beliefs, who are very dedicated to their chosen direction and are long-term builders.

A specific example is InfStones, a Web3 infrastructure provider we invested in earlier.

When I first met the CEO at the end of 2019, we discussed node services. This might sound uninteresting at first, but he mentioned a point: Web3 has highly specialized the software system.

For instance, if you look at traditional AWS cloud services, it is both the designer of the entire system and the operator of the entire system.

But Web3 is quite different; it allows participants to have further specialization.

In addition to developers and protocol designers, there is also a role for operators. They may not build the system themselves but can operate the entire network through their capabilities, making it more stable. The roles of the three are separated.

In the crypto world, software is not only specialized but also deepened, requiring professional companies or participants for each segment.

InfStones is more of the third type of role, focusing on the large-scale operation of software, which left a deep impression on me. People often think that node software is just a money-making business, but I believe that truly remarkable entrepreneurs can have a long-term vision and deeply believe in their mission, steadily moving toward their goals.

InfStones is the most widely used Staking and PaaS provider Moonshot Partner:

In your view, what qualities do successful teams you have invested in possess?

Yi:

For successful early-stage startup teams, the most important aspect is team building.

I believe this industry changes very quickly, with many unknowns and unpredictability. In this context, the most crucial thing in the early stages is to establish a solid team structure. If you are an entrepreneur, consider finding a co-founder who complements you in skills and personality.

The second point is the choice of direction.

You might choose a long-term direction that is very certain. For example, many people currently do not believe in NFTs because there have indeed been many bubbles and garbage projects over the past year. But as long as you believe in its long-term value, build a good team, and persistently cultivate it, no matter what stage you are in, there will come a day when you will succeed.

Moonshot Partner:

How do Web3 teams differ from traditional companies in terms of philosophy or building methods?

Yi:

First, like traditional companies, the early core team members need to trust each other, have complementary skills, communicate well, and share a common belief. This is similar, but Web3 also brings new characteristics.

Firstly, the world of Web3 is globalized.

You will find that, geographically, early teams can be relatively dispersed, and even some core employees may be located in different countries or regions, effectively collaborating remotely.

Secondly, this industry tends to have more cohesion in its early stages.

One major channel for projects to find talent is the community, which has very enthusiastic members who may help you achieve many things on a part-time or even volunteer basis.

The third characteristic is that, overall, entrepreneurs in this industry tend to be younger.

Young people may not have many mental constraints and can sometimes create more disruptive projects. Moreover, young people have energy, allowing them to continuously learn and do many things in a rapidly evolving industry.

Moonshot Partner:

You mentioned earlier that young people have a natural advantage in the Web3 field. What impressions do you have of the young entrepreneurs you encounter? What criteria do you use to evaluate people when investing?

Yi:

Aside from the advantages mentioned earlier, young people also break certain mental constraints. Because they are naturally more adapted to the crypto world, they tend to be more accepting of concepts like the metaverse.

An interesting phenomenon is that you will find many builders are professors at American universities with extensive experience, yet they still consult young college dropouts for their opinions, understanding what directions the industry needs and inviting them to participate in projects.

In many directions, young people are actually guiding the way.

But age is just one factor; investors will still objectively assess whether a team is suitable for what they are doing and whether they have the necessary foundational skills.

For example, in infrastructure-related projects, traditional internet and cloud operation capabilities are very important, which may not necessarily be possessed by a college dropout and may not be suitable.

On the other hand, if it is a more To-C, application-layer project, then these are new for everyone, and young people may have an advantage because they naturally adapt to and accept this environment. Or for recent graduates, if a certain topic in the industry aligns with their research direction, even without years of work experience, the knowledge they possess can be irreplaceable.

Investors will comprehensively evaluate whether a person has long-term beliefs and whether what they are doing aligns with the team's development direction.