Low-key king or fallen noble? Uncovering the Crypto layout of Lightspeed Venture Partners
For investment institutions, investment returns are the absolute proof of strength. A good investment institution needs to be able to identify promising companies and sectors in advance and then present them to the world.Author: 0xclancularius, Rhythm
The name Lightspeed Venture Partners has recently appeared quite frequently in the crypto world.
At the beginning of 2022, FTX dropped a bombshell announcement, launching a $2 billion Web3 venture fund, FTX Ventures, and recruited Lightspeed partner Amy Wu to manage it. Once the news broke, the market's focus immediately shifted to Lightspeed, which has a 20-year history in VC.
The long bull market in the crypto market in 2021 spawned a large number of native crypto institutions and attracted more attention from traditional financial institutions, with Lightspeed Venture Partners being one of them. That year, Lightspeed not only made frequent moves in the crypto primary market but also partnered with FTX and Solana to launch a $100 million gaming fund, with investments in NFT, GameFi, DeFi, public chains, and infrastructure flourishing.
Lightspeed partner Mercedes Bent stated in a previous interview that by 2021, Lightspeed had invested nearly $500 million in 40 blockchain/Web3 investments. This year's investments include FTX, Solana, Terra, Alchemy, Parallel Finance, LedgerX, Blockchain.com, and more, with plans to continue increasing investments in Web3 and NFTs in 2022.
As a traditional internet VC fund established in 2000, Lightspeed may not be able to become a benchmark and leading capital in the crypto industry like a16z or Coinbase Ventures, but its years of accumulated investment strength should not be underestimated.
For investment institutions, investment returns are the absolute proof of strength. To understand how this veteran institution has performed in the new crypto world, we need to let the facts speak.
Crypto Investment Landscape
Here is an analysis and summary of Lightspeed Venture Partners' basic data:
- By sorting through Lightspeed Venture Partners' (U.S.) official website and public information, Rhythm has found that from 2013 to the present, Lightspeed has invested in 19 launched crypto projects, of which 14 projects were invested in after 2021, accounting for as much as 74%.
In comparison, a16z launched 63 projects in 2021, Three Arrows Capital 29, Alameda Research 25, DCG 24, and Multicoin Capital 24.
As an established internet VC, Lightspeed's obsession with projects issuing tokens is evidently not as deep. Among the 19 projects, only 5 projects' tokens have been launched, accounting for only 26%.
In terms of investment categories, Lightspeed Venture Partners' investment scope includes NFT, DeFi, GameFi, public chains, and infrastructure. Among them, there are 2 public chain projects, 10 infrastructure projects, 2 DeFi projects, 2 NFT-related projects, 2 Web3 decentralized applications, and 1 GameFi project. Infrastructure projects account for 53%.
Strictly speaking, Lightspeed Venture Partners is not a native crypto VC, but it has still taken the lead in 7 instances, accounting for 37%. This is commendable.
Looking deeper into Lightspeed's crypto investment history, we can see that there have been good opportunities in every cycle.
In 2013, it hit the established public chain Ripple, achieving an extraordinary increase of 354 times with XRP.
In 2018, it invested in the decentralized music application Audius during its Series A round, with the token reaching a maximum increase of 16 times.
In 2021, Lightspeed successively invested in one of the hottest public chains, Terra, and the most sought-after trading platform, FTX, and led the seed round of several NFT trading platforms favored by capital, demonstrating impressive investment performance.
Deeply Bound to FTX?
With FTX appointing a Lightspeed partner to manage the new fund, the relationship between the two institutions has also drawn attention. One is an established institution that has grown alongside the internet, while the other is a rapidly rising new force; the two seem to have established a connection.
A closer look at Lightspeed's investment history reveals that FTX has participated in 9 projects in various ways, including investing in FTX itself, accounting for 47%. Coupled with the joint launch of a crypto fund, it appears that Lightspeed has formed a deep bond with the new crypto force, FTX.
However, further analysis shows that among the 9 projects mentioned above, 6 projects were led by Amy Wu. Although Amy Wu claims to still hold the title of Lightspeed partner, her Twitter bio has changed to FTX Ventures. With Amy Wu's change in position, Lightspeed inevitably becomes a thing of the past, and how deep the bond between FTX and Lightspeed is remains to be seen.
Interestingly, Amy Wu is not the only crypto talent lost by Lightspeed.
In Lightspeed's investment history in 2021, aside from FTX, another standout name is Terra, led by former Lightspeed partner Natalie Luu. In December 2021, Luu announced her joining Terra as the head of ecosystem development.
The continuous departure of partners to native crypto companies may reflect Lightspeed's reserved attitude towards crypto. Currently, Lightspeed has not established an independent fund specifically targeting the crypto industry, and its investment pace appears slow compared to VCs like a16z that are making bold moves. In the rapidly changing crypto industry, this caution undoubtedly seems passive.
How to Evaluate a VC
In a crypto landscape filled with various factions and distinct styles, what constitutes a good VC?
From the perspective of serving entrepreneurs, Richard Malone, the operations director of Advanced Blockchain AG, categorizes funds into three basic types: Brand Funds, Specific Value Add Funds, and All-Purpose Service/Value Add Funds.
In simple terms, Brand Funds serve as endorsements; these funds are often well-known. When startups receive investments from these funds, it is akin to graduating from an Ivy League university or owning a Hermès Birkin bag. When a company's investment institution adds the name of these Brand Funds, it generates a sense of FOMO among other funds and retail investors, thereby attracting more resources.
Lightspeed Venture Partners undoubtedly belongs to one of the Brand Funds. As a well-known institution in the financial sector, this name will undoubtedly add a layer of prestige to startups.
However, Brand Funds can easily rest on their past achievements. Lightspeed's numerous successes in the traditional internet sector cannot mask its somewhat passive position in the crypto industry. As VCs like a16z, Coinbase Ventures, and Multicoin Capital rapidly advance in the crypto world, Lightspeed's slower pace appears to be a step backward.
From the perspective of an objective and neutral third party, a good investment institution needs to be able to identify promising companies and sectors in advance and present them to the world. As Chen Yuetian stated in his article "Spark Prophecy 2021," VCs should be the ones preserving various possibilities for change in this world. Prometheus brought fire; VCs should be the ones passing it on.
In terms of investment behavior, for the same transaction price, institutions investing on the left side of the price curve peak are at a higher level than those investing on the right side. Institutions that capture Alpha in the seed round are better than those that enter later due to FOMO. For Lightspeed, being able to capture Alpha in investments like Terra or FTX is certainly impressive; however, it still has not achieved the fastest and top-tier performance.
In the rapidly evolving and competitive crypto VC industry, while other players are running at full speed, Lightspeed, which still has some leeway, will inevitably struggle to occupy a leading position. By the time it truly values the increasingly robust crypto world, the industry's dynamics may have completely changed, and it may be too late.
