Dialogue with the Founder of Avant Blockchain Capital: After investing in several TMT giants like Bilibili, why did I decide to start a crypto fund?

Guest: Jin Wenji, Founder of Avant Blockchain Capital

Interviewed by: flowie, ChainCatcher

What is the next big opportunity after the internet? This has been a question that Jin Wenji, the founder of Avant Blockchain Capital, has needed to consider.

Since entering the Silicon Valley startup scene in the U.S. in 1997, participating in project operations, and then joining Junlian Capital in 2007 to transition into an investor, and becoming a Managing Director at Sequoia Capital China in 2019, Jin Wenji has almost experienced the rise and fall of Web1, Web2, and Web3. Over more than a decade in TMT investment, he has deeply participated in the growth of several well-known internet companies, investing in publicly listed companies or unicorns like Bilibili, Ucloud, Mobile Legend, and Musical.ly.

However, after more than 20 years of internet development, growth bottlenecks have emerged, and the monopolies of Web2 giants have led to many structural issues. Jin Wenji began to contemplate the next steps for internet development. In 2017, by chance, he became acquainted with crypto through Bitcoin. His over ten years of TMT (Technology, Media, and Telecom) investment experience made him realize that, with the internet already widely adopted globally, the idea promoted by crypto of allowing users to truly own their data or rights is an important evolution after the internet.

Thus, in 2018, Jin Wenji founded his first crypto fund to initially explore crypto investments, and recently established the second crypto fund, Avant Blockchain Capital. Currently, Avant Blockchain Capital has disclosed investments in projects such as Taiko, EthStorage, Beachglass Labs, D3NS, and CREDARB.

From traditional Web2 investments to crypto investments, how did Jin Wenji build Avant Blockchain Capital, and what are the investment strategies? How does he view the current investment cycle narrative? Regarding these questions, Jin Wenji, founder of Avant Blockchain Capital, recently accepted an interview with ChainCatcher.

1. ChainCatcher: What was the initial opportunity that led you into the Crypto world, and how did you understand Crypto at that time?

Jin Wenji: I entered the Crypto world in November 2017. At that time, the cryptocurrency market was still quite niche, and Bitcoin was around $1,000, yet it accounted for about 80% of the entire crypto market. I felt that Bitcoin seemed to have a magical power, so I started researching its white paper and gradually became interested in Crypto.

2. ChainCatcher: Why did you decide to leave Sequoia China and establish a Web3 fund? What is the background of Avant Blockchain Capital's creation?

Jin Wenji: The creation of Avant Blockchain Capital as a crypto fund was also a natural progression. Previously, while doing TMT investments in traditional Web2 funds, I always needed to pay attention to what the next big opportunity after the internet would be. At that time, my judgment was that user ownership of their data rights would be an evolution of Web2.

This judgment has a significant premise: the high penetration rate of the internet. Currently, there are about seven to eight billion people in the world, most of whom can access the internet. Many developing countries have directly skipped the PC era and moved to the mobile internet era, allowing people to own their data and rights through the network.

Secondly, there has been a significant improvement in computing power. Crypto builds trust through code, and many consensus mechanisms require substantial computation to achieve, which demands high computing power. In recent years, while computing power has increased, costs have also significantly decreased, providing great possibilities for the operation of Crypto.

Moreover, Web2 internet companies are gradually moving towards monopolies. After monopolies, various political and economic issues arise, and there is an urgent need for solutions. The decentralized philosophy of Crypto can provide some ideas for resolution.

Previously, we invested in many projects related to cloud technology architecture in traditional Web2 funds. In the Web2 era, these were open-source, attracting developers from all over the world. However, while it used to be centralized cloud infrastructure, it is now trending towards more decentralization, so we are also quite familiar with developers in the crypto space.

Our fund is a top-down research-oriented institution, focusing on areas like infrastructure. Our research investment team has a global presence, currently operating in the U.S., Europe, and Southeast Asia.

3. ChainCatcher: Speaking of Web2 internet, your career has almost spanned the entire cycle of internet development, participating in and investing in companies like Bilibili. How do you think the growth paths or market competition of giants in the crypto space differ from those in the traditional internet space?

Jin Wenji: Currently, it is still unclear. The concept of blockchain itself is decentralized, but you will find that the concentration of leading products in blockchain, such as public chains, may be even higher than in Web2.

The chain itself aims to be decentralized, but its consensus mechanisms, like POS, are centralized. Therefore, I believe it is more about the decentralization of ideas and values. This decentralization is a dynamic rather than a static process. For example, if a public chain becomes too centralized, or if its discourse power and economic benefits are overly concentrated in the hands of a few, people may choose to leave and form other public chains or ecosystems to break this centralization. Conversely, if it can maintain the community's values, it can continue to exist long-term.

The values in the crypto space are very important. Many leading products cannot be called giants; for instance, Ethereum is not a company or an economic entity but should be regarded as an ecosystem. This is a very nascent phenomenon that cannot be replicated with traditional Web2 thinking.

4. ChainCatcher: The Avant Blockchain Capital website has disclosed investments in projects like Taiko and EthStorage, which are primarily infrastructure-related. What is your current investment strategy?

Jin Wenji: First and foremost, we focus on investing in infrastructure that improves blockchain efficiency. We believe that for the entire blockchain to become a World Computer, efficiency must be improved; otherwise, it cannot support or enable the emergence of large-scale applications. Similar to the Web2 era, without the transition from 3G to 4G, short videos would not have been possible. If smartphones had not dropped to a price point around a thousand yuan, the mobile internet would not have risen.

Currently, we have invested in infrastructure projects like Layer2 Taiko and storage project EthStorage, which also won first place at the Ethereum Black Mountain Conference EDCON. Layer2 is more computation-oriented, ensuring improved computational efficiency and reduced costs in future large-scale applications. Additionally, for blockchain to become a World Computer, it also needs data storage capabilities, so we have invested in storage projects.

Secondly, we also invest in infrastructure that facilitates user entry into cryptocurrencies. Currently, the entry barrier to cryptocurrencies is very high and requires a certain level of expertise. For example, different chains have different wallets, which require mnemonic phrases and need to ensure theft protection and privacy. We are optimistic about mature user interface infrastructure in this area. In this field, we have invested in a DID track project, D3NS, whose founder previously had a background with the Ethereum Foundation.

The third area we will explore is the intersection of AI and Crypto. The emergence of ChatGPT will create significant interactions with Crypto, presenting us with a new topic.

5. ChainCatcher: Can you elaborate on your views regarding the potential for AI and Crypto integration?

Jin Wenji: Currently, AI's large models are very centralized, primarily held by a few major players like ChatGPT. Whether these large models can integrate with Crypto is not something we can decide; it depends on ChatGPT's plans.

However, we see another direction where many open-source models are emerging. Training these models is very computation-intensive, so in terms of model operation, we can actually provide decentralized computing power through Crypto, similar to how mining involves providing storage or bandwidth.

Additionally, data protection is a significant concern. As data is utilized by large models, is there a way to protect user data? Currently, zk is a very popular direction, and we are also exploring investment opportunities in these areas.

6. ChainCatcher: The competition in Layer2 is very intense. How do you view the short-term and long-term competitive landscape?

Jin Wenji: First of all, we still lean towards Ethereum, as we believe Ethereum will likely remain dominant in the long term. Then, based on Ethereum, we choose to focus on zk, as op has already matured, leaving limited space for innovation, while we need to invest in innovative enterprises.

7. ChainCatcher: Besides the directions mentioned above, what other narratives or vertical segments will you pay attention to?

Jin Wenji: We believe there are still significant opportunities on the financial side. Traditional finance, such as banks and fiat currencies, has many shortcomings in its mechanisms. For example, in cross-border payments involving multiple fiat currencies, the fragmented financial banking system leads to long retention times and low efficiency, which Crypto can provide some solutions for.

8. ChainCatcher: The hot narratives in Web3 change rapidly. Recently, new concepts like the Bitcoin ecosystem have emerged. Are there any market trends that are very hot but you are not optimistic about?

Jin Wenji: We view market trends with a calm mindset. We often reflect on some hot events and innovative attempts. However, it is essential to understand that not all innovations will generate strong attention. As an institution, we need to study the underlying reasons.

9. ChainCatcher: The investment stage in Web3 is mostly early-stage projects, and "investing in people" is crucial for early-stage projects. What is your judgment logic on whether Web3 entrepreneurs are worth investing in?

Jin Wenji: First of all, we prefer value-oriented founding teams. We need to assess whether they are long-term thinkers. Additionally, we favor entrepreneurs with good educational backgrounds and experience in large companies. Of course, we do not exclude some very innovative and energetic young teams.

10. ChainCatcher: What changes have occurred in investment methods from traditional Web2 investments to crypto investments? How do the operations of crypto VCs differ from traditional VCs?

Jin Wenji: Crypto investment is more globalized, allowing access to many foreign entrepreneurs. This presents both challenges and opportunities. Secondly, the exit strategies for crypto investments differ significantly from traditional Web2 investments. Additionally, trading cryptocurrencies on exchanges is different from listing on NASDAQ, which has given rise to many new investment methods, such as earning returns through providing liquidity and staking.

11. ChainCatcher: Many viewpoints suggest that the primary and secondary crypto markets have become severely decoupled in the past couple of years. What was once "value investing" in the primary market is not well-received in the secondary market. How do you view this phenomenon?

Jin Wenji: Ethereum has seen peaks of $4,700, and now it has dropped to over $1,000. Such fluctuations are common in the cryptocurrency market. As investors, the most crucial thing is to be clear about where your profits come from. The essence of finance is the same, whether in traditional fields or crypto; the most taboo is to want everything, which may ultimately lead to earning nothing.

12. ChainCatcher: The Hong Kong Securities and Futures Commission officially released policies related to virtual asset trading this week, sparking much discussion. What is your view on the impact of Hong Kong's policies on Chinese crypto entrepreneurs or investors?

Jin Wenji: This is a very positive signal, indicating that Hong Kong is becoming a new hub. It has relatively quickly entered a compliant phase, which is a good development for the promotion of cryptocurrencies. However, regulation and cryptocurrencies themselves still require a long period of adjustment.

13. ChainCatcher: You mentioned that you have been in the crypto field for six years and have experienced some cycles. Do you think this current cycle is a good time for investment?

Jin Wenji: I believe it is. We are currently in a phase between bull and bear markets, which may last longer than previous times due to uncertainties in the macro environment, such as interest rate hikes and global economic uncertainties. In this context, the challenges for projects are higher, which will foster a batch of higher-quality entrepreneurial projects at lower valuations. For investors, as long as they have patience and a long-term mindset, they can invest in projects with a very high cost-performance ratio.