Dialogue with LongHash Ventures CEO Emma: Why is this bull market characterized by only minor innovations?

Interviewer: flowie, ChainCatcher

Guest: Emma Cui, Managing Partner and CEO of LongHash Ventures

Editor: Marco, ChainCatcher

In 2016, by chance, LongHash Ventures CEO Emma Cui attended a meeting with Vitalik at Singapore Management University, which led her to decide to transition from traditional finance to crypto finance.

At the end of 2017, after receiving early funding support from Hashkey and Distributed Capital, Emma Cui officially founded LongHash Ventures with her former McKinsey colleague Shi Khai.

In the early days, when funding was scarce, LongHash Ventures quickly faced challenges in fundraising during the bear market. "At that time, we tried to establish our first fund and were rejected countless times." It wasn't until the arrival of DeFi Summer that LongHash Ventures emerged from the crisis and entered a growth phase.

Currently, LongHash Ventures manages hundreds of millions of dollars, with internal rates of return (IRR) for both funds reaching 40%-70%, and has invested in hundreds of Web3 projects such as Polkadot, Astar, io.net, Manta, Safe, Avail, and Puffer Finance.

Emma Cui believes that this bull market is still in its early stages. In addition to the market effects brought by expectations of a BTC spot ETF, more catalysts are needed to kickstart a true bull market.

From Traditional Finance to Crypto Finance

1. ChainCatcher: Can you introduce your significant career background? How did you first get into the crypto field?

Emma Cui: I was introduced to Ethereum in early 2016 while I was still in the banking industry. Perhaps due to the sensitivity of the financial industry, I became interested in Ethereum as a decentralized world computer and its potential disruptive impact on finance.

In early 2016, I happened to attend a meeting with Vitalik at Singapore Management University, which only had about 50 attendees. That meeting had a direct impact on me. I went home and started reading everything related to Ethereum. At that time, understanding cold storage and cryptocurrency wallets was a very challenging process for me.

It was then that I decided to look for a job related to cryptocurrency. I began talking to cryptocurrency startups to see if I could find a suitable position. At that time, there were very few non-technical people working in the crypto field, and even fewer women, so I couldn't find the right opportunity.

Meanwhile, McKinsey offered me a position as a management consultant to help financial institutions launch digital initiatives, which provided foundational knowledge for my next role.

2. ChainCatcher: LongHash Ventures was founded at the end of 2017. Why did you choose to establish a Web3 fund at that time? Can you take us through the process from the idea to its formal establishment?

Emma Cui: In 2017, I had the opportunity to connect with industry pioneers, such as Xiao Feng from Hashkey, Shen from Distributed Capital, and Prince Gong from Baowang, and received funding support from Hashkey and Distributed Capital. My former McKinsey colleague Shi Khai also joined and co-founded LongHash Ventures with me.

When LongHash Ventures was initially established, the funds were not abundant, and during the bear market from 2018 to 2019, we faced significant challenges in fundraising. We were trying to establish our first fund, and I was rejected countless times. At that time, there were only four of us, yet we needed to accelerate 20 projects each year.

For a period, we had only enough cash in the bank to last two months. Fortunately, DeFi Summer finally arrived in mid-2020, and since then, our business began to take off.

3. ChainCatcher: Transitioning from banker and McKinsey consultant to investing in the Web3 space, what real changes do you think crypto finance has brought compared to traditional finance? What shortcomings still need to be learned from traditional finance?

Emma Cui: Crypto finance has brought several changes compared to traditional finance:

For instance, in terms of decentralization and transparency, blockchain technology has enabled public, tamper-proof transaction records, enhancing transparency and trust.

Crypto finance has also broken geographical and political boundaries, making cross-border payments more convenient and cost-effective, providing financial services to those who cannot access traditional banking services. Additionally, new concepts and technologies such as smart contracts and decentralized finance (DeFi) have introduced new financial services and products.

However, crypto finance also has shortcomings and needs to learn from traditional finance in areas such as regulatory compliance, risk management, and user protection.

4. ChainCatcher: LongHash Ventures has been developing for 7 years now. What areas have you expanded into? What is the current scale of your funds? How large is your team, and what is the composition of your team members?

Emma Cui: We have two business lines: fund investment and accelerator programs.

In fund investment, we focus on early-stage blockchain and cryptocurrency projects, helping them grow and succeed. Our professional accelerator program helps startups gain resources and guidance.

Currently, LongHash Ventures manages funds totaling hundreds of millions of dollars, although specific figures may fluctuate. Our team is also continuously expanding, with about 10 members now.

Team members come from diverse backgrounds, including consulting, finance, technology, and marketing, with alumni from MIT, Stanford, and Imperial College. Currently, team members are distributed across multiple regions globally, primarily concentrated in Singapore and the United States.

5. ChainCatcher: From public information, it seems you have launched at least two funds. Can you share some information about the fund's performance?

Emma Cui: Indeed, we have launched two funds. Both funds focus on early-stage blockchain projects and have achieved good returns, with internal rates of return (IRR) reaching 40%-70%. Although we have not yet reached the final exit stage, preliminary data shows strong performance.

Eight Directions for AI and Crypto Integration

6. ChainCatcher: According to the crypto data platform Rootdata, LongHash Ventures has invested in over 100 projects. Do you have any consistent investment strategies or principles? Which areas do you prioritize for investment, and which are you less likely to invest in? What is the typical investment amount?

Emma Cui: In the investment field, we primarily focus on early-stage projects in blockchain infrastructure, decentralized finance (DeFi), and Web3 applications. We assess the market potential and growth space of projects, selecting those that are likely to achieve rapid growth in the coming years.

Additionally, we pay special attention to the background and technical strength of the project team. A strong team and innovative technology are important considerations for our investments.

In terms of single investment amounts, they typically range from $500,000 to $5 million, depending on the project's stage and needs.

Projects we are less likely to invest in include those lacking innovation or suffering from severe market homogenization, as well as those with compliance and legal risk issues.

7. ChainCatcher: From your investment perspective, LongHash Ventures has invested significantly in infrastructure, followed by DeFi. Can you share your investment preferences in these two areas?

Emma Cui: In infrastructure, we tend to invest in projects that aim to enhance blockchain performance, scalability, and security. For example, new consensus algorithms, cross-chain solutions, and Layer 2 scaling technologies. The theme of our second fund will focus on multi-chain infrastructure, particularly around innovative L1, L2 aggregation or cross-chain solutions, interoperability frameworks, and key modular layers such as identity, privacy, and data availability.

We believe that the current level of Web3 infrastructure cannot support mainstream, retail-friendly applications, so building and investing in robust Web3 infrastructure has tremendous benefits.

In DeFi, we focus on projects that can provide efficient liquidity management and optimization, such as decentralized exchanges (DEX), liquidity mining platforms, and automated market makers (AMM).

Additionally, CeFi insurance and risk management tools play a crucial role in protecting user assets, and we tend to support projects dedicated to enhancing DeFi security and reliability.

8. ChainCatcher: So far this year, you have invested in over 10 projects, covering hot areas in this bull market such as AI + Crypto, Bitcoin ecosystem, LSD, and modular blockchains. Especially in the AI + Crypto field, it seems your investment weight is the largest. What aspects of AI + Crypto cases do you prefer to invest in?

Emma Cui: We believe that AI + Crypto can make an impact in these eight sub-directions:

In smart contract automation, AI can optimize trade matching and pricing algorithms, improving the efficiency of decentralized exchanges (DEX). AI can also automatically generate and audit smart contracts, reducing human errors and enhancing security.

In data analysis and forecasting, AI can analyze blockchain data and market trends, providing more accurate investment predictions and decision support, as well as real-time monitoring and analysis of transaction data on the blockchain for deep insights.

In digital identity and authentication, combining AI's biometric technologies (such as facial recognition and fingerprint scanning) with blockchain's tamper-proof characteristics can build secure digital identity systems. AI can also automate KYC (Know Your Customer) and AML (Anti-Money Laundering) processes, ensuring efficiency and accuracy in user identity verification.

In supply chain management, AI combined with blockchain technology can monitor product flows in real-time, ensuring product authenticity and traceability. By analyzing supply chain data, AI can optimize inventory management and logistics, enhancing overall supply chain efficiency.

In NFTs and digital art, AI can generate unique digital artworks and manage copyright sales and transactions through blockchain platforms: using blockchain and AI technologies for copyright protection and management of digital works, ensuring creators' rights.

In privacy protection and data security, AI can implement privacy-preserving computations (such as secure multi-party computation and federated learning) in conjunction with blockchain technology, enabling data analysis while ensuring data privacy. AI can also monitor the security status of blockchain networks in real-time, detecting and preventing potential attacks and threats.

In gaming and virtual worlds, AI-driven virtual assistants can provide personalized services in blockchain games and virtual worlds. By managing and trading in-game assets through blockchain technology, AI helps optimize the use and distribution of assets.

In decentralized autonomous organizations (DAOs), AI can optimize the governance structure and decision-making processes of DAOs, improving organizational efficiency and transparency. AI can also automate the operational management of DAOs, enhancing the operational efficiency of autonomous organizations.

9. ChainCatcher: LongHash Ventures mostly participates as a co-investor, with only a few projects as lead investors. Under what circumstances do you typically lead investments?

Emma Cui: When we first started, we indeed participated more often, partly because our fund size was small and partly because we began with an accelerator, often participating in pre-seed rounds and allowing the market to determine the pricing for fairness, such as Astar Network, which came from our 2019 accelerator.

However, starting from our second fund, we began leading investments in promising projects during the bear market phase of 2022-2023 and making significant bets. For example, in Particle Network, we led the pre-seed round, which recently completed a strategic round at a $150 million valuation. In Arcium Network, we led the pre-seed round, which ultimately completed a strategic round at a $50 million valuation. For Saga Network, which recently launched on Binance, we were also one of the largest tick sizes in the seed round. Other projects we led include Kakarot, which received angel investment from Vitalik, and Primev, which graduated from a16z Crypto School.

Our logic for leading investments ultimately returns to our confidence in the founding team itself.

Why Is This Bull Market Only About Minor Innovations?

10. ChainCatcher: At what stage do you think this bull market is? Early, mid, or late?

Emma Cui: Personally, I believe it is in the early stage. The current market trend, which started in the last quarter of last year, is more about the market effects brought by expectations of a BTC spot ETF. Institutional liquidity has all entered the BTC spot ETF.

To kickstart a true bull market, we need more catalysts, such as interest rate cuts, more capital inflows into the crypto market, and truly refreshing innovative applications, etc.

11. ChainCatcher: There are many opinions that this bull market is a minor innovation bull market, and the industry has not seen significant innovations like DeFi in the previous two cycles. Do you agree? What could be the reasons behind this?

Emma Cui: I agree with some of the viewpoints. The current bull market is more about optimizing and improving existing technologies and applications rather than introducing completely disruptive innovations. These minor innovations include the expansion of DeFi, diversification of NFT applications, and improvements in blockchain performance.

Why is this happening? The blockchain and crypto technologies have reached a high level of maturity after several cycles of development, making disruptive innovation more challenging. Current resources are more focused on optimizing and expanding existing applications rather than exploring entirely new fields.

At the same time, the market's demand for stability and sustainable development has increased, with investors and users paying more attention to the practical applications and commercialization of technology rather than purely conceptual innovations.

Regulatory measures from various countries regarding the crypto market have also posed some obstacles to innovation.

Although the current focus is on minor innovations, this does not mean that large-scale innovations will not occur again. We believe that interdisciplinary integrated applications may become future innovation hotspots, such as the combination of AI and blockchain, and the integration of IoT and blockchain.

12. ChainCatcher: What are your investment goals in this bull market? What advice do you have for investors or entrepreneurs?

Emma Cui: Of course, the primary goal is to provide our investors with returns that exceed expectations. At the same time, we hope to support creative and promising blockchain and crypto projects to drive industry development, focusing on practical applications and supporting areas such as infrastructure, DeFi, NFT, and Web3. We also hope to build a win-win ecosystem through investment and incubation.

We encourage fellow investors to adopt a long-term perspective in their investments while appropriately diversifying risks.

We also hope that entrepreneurs can maintain their original intentions, create valuable products, focus on user needs, and be flexible in responding to the market, while maintaining transparent communication with investors and the community to build trust.