Venture capital firm Electric has just raised $1 billion, focusing on five major investment areas

Source: Electric Blog

Compiled by: The Way of DeFi

On March 1, the crypto venture capital firm Electric Capital raised a total of $1 billion for two new crypto funds: a $400 million fund investing in equity and tokens, and a $600 million fund solely investing in tokens and stablecoins.

Electric Capital declined to disclose the supporters of the new funds, noting that they are almost entirely university endowments, large non-profit organizations, and foundations. Electric Capital co-founder Avichal Garg stated that this group of investors is crucial for the way Electric Capital hopes to invest, requiring the establishment of these two large funds with investors willing to commit for a 10-year lock-up period.

It is reported that the new fund's individual investment size ranges from $1 million to $10 million, targeting investments in DAOs, NFTs, DeFi, infrastructure, and tools that enable more people to access Web3.

DAO

For DAOs, Electric Capital primarily focuses on the following:

Performance-based talent recruitment systems------DAOs will become organizations that attract talent, comparable to the best companies. Many people join DAOs by purchasing tokens, but this does not ensure that the most talented or productive contributors join. Electric Capital aims to fund the research and development of relevant mechanisms to allow more people to join DAOs.

Governance aggregators------It is challenging for people to track new proposals and determine their priorities, especially across multiple DAOs. Electric Capital hopes to support governance proposal aggregation platforms that make it easier for members to participate in governance.

Improving mechanisms for distributed decision-making------Currently, many decisions are made by those who hold the most tokens. Electric Capital needs mechanisms that not only increase the number of participants and their engagement but also ensure that the right people are more involved.

Compensation reward mechanisms------DAO contributors need fair and transparent compensation reward mechanisms. An effective way to compensate contributors today is through DAOs issuing bounties on platforms like Layer3. Contributions to DAOs can be on-chain, off-chain, one-time, or recurring. As the complexity of DAOs increases, these types of contributions will also grow and evolve. Electric Capital hopes to fund projects that allow DAOs to fairly and transparently distribute rewards to all types of contributors.

DAO discovery platforms------The creation of DAOs is growing exponentially. The largest DAOs control treasuries worth billions of dollars, issuing grants and employing large teams. In contrast, the smallest DAOs can be small groups pooling resources to purchase NFTs. Electric Capital needs DAO discovery platforms to help more users find and explore DAOs that meet their needs and interests.

Recruitment platforms------DAOs need to leverage talent networks and expertise. Electric Capital is willing to invest in various projects across the recruitment pipeline that can help DAOs identify and recruit top talent.

Treasury management------Today, DAOs can have complex treasuries that include different types of tokens and stablecoins. DAOs face the challenge of effectively managing their treasuries through distributed decision-making. Organizations like LlamaDAO are experts in creating proposals and assisting DAOs in making financial decisions. Electric Capital hopes to fund more economic tools that enable DAOs to effectively grow and utilize their treasuries.

In this vertical, Electric Capital hopes to support projects such as DAO creation platforms like Syndicate, talent gateways like Rabbithole, DAO-centric bounty systems like Layer3, platforms like Gitcoin that allow DAOs to complete engineering work, and financial tools for DAOs like LlamaDAO.

NFT

NFT pricing mechanisms------Accurately pricing NFTs is a challenge. The lack of pricing leads to two problems: (1) most NFTs lack liquidity; (2) financial derivatives cannot form on top of NFTs. Projects that enable us to accurately price NFTs will unlock new use cases and greater adoption.

Infrastructure supporting NFTs as productive assets------Currently, there are two mechanisms for generating capital through NFTs: (1) generating income through leasing, lending, etc.; (2) sharing revenue through royalties and profit-sharing. Both mechanisms are in their infancy. As this field matures, we expect to see music NFTs sharing royalties with fans, Hollywood films sharing revenue based on NFT characters, and cash flows from lending and leasing through these NFTs. Electric Capital firmly believes that infrastructure supporting productive NFTs will become important platforms in Web3.

Discovery platforms------We currently find it difficult to quickly discover NFTs or understand new minting information. Effective discovery platforms will increase NFT adoption and help more people find their niche markets.

NFT financial derivatives------Like real-world assets, NFTs will have futures markets, hedging options, insurance, and other types of financial derivatives. Financial products built on NFTs will make NFTs more useful.

Creator guilds------Creators will monetize using NFTs and mobilize their fans with them. However, today, creators lack best practices and infrastructure for using NFTs. Electric Capital believes that creator guilds could allow creators to share resources, such as community managers, scripts, and fan groups.

Vertical secondary markets------As NFTs can represent a wide variety of things like music, virtual land, and tickets, new markets will emerge to support the specific needs of each type of NFT.

Bridging physical to digital------NFTs can be digital representations of the physical world. We will see more generalized mechanisms to obtain physical assets through the destruction of digital assets, using NFTs to design event ticketing systems, and NFTs serving as storage for medical records, course attendance, identification, etc.

In this vertical, Electric Capital hopes to support projects such as curation platforms like JPG, social platforms like Hyype and Myty, and lending and trading markets like Taker Protocol and 4k.

DeFi

Developing DeFi on non-Ethereum chains------For the next wave of users entering DeFi, non-Ethereum chains may provide a more affordable entry point. Electric Capital sees a significant opportunity to build DeFi services for these new users.

Cross-chain yield opportunities------As more users join the ecosystem on one chain, they will seek potential yield opportunities on other chains.

Simple entry for complex strategies------Platforms like Ribbon simplify complex options strategies. Electric Capital hopes to invest in such platforms that can help users easily understand strategies like delta-neutral yield, leveraged market making, and downside protection lending.

New liquidity incentive mechanisms------As more protocols are launched and developed, the demand for incentive mechanisms will increase. With the introduction of new protocols, new and innovative incentive mechanisms will emerge.

Payment streams and vesting------Standardizing crypto payment streams will unlock many use cases: employment contracts, vesting contracts, DAO-to-DAO contracts, and even unsecured loans.

In this vertical, Electric Capital hopes to support projects such as accessible DeFi solutions like Kresko; algorithmic stablecoins like Frax; crypto-native exchanges like DerivaDEX, dYdX, Hashflow, Saddle, and Slingshot; DeFi credential systems like ARCx; lending platforms like Sublime and Swivel; liquidity aggregators like Tokemak; liquidity management systems like Gamma; options protocols like Primitive and Zeta; privacy solutions like Anoma; and protection protocols like Cozy.

Decentralized infrastructure

Verified front-end hosting------The BadgerDAO hack resulted in a loss of $120 million, even though the smart contracts were completely secure, as hackers could inject malicious code into the dApp front end. Verified front-end hosting will help ensure that when users interact with dApps through their web browsers, they are using a securely built official version. Such services will alleviate the security burden on developers and enhance usability and trust.

Decentralized computing------AWS, Azure, and others have brought centralization issues, necessitating a decentralized computing infrastructure.

Zero-knowledge development tools------Zero-knowledge technology is useful not only for private payments and Rollup validity proofs but also for interesting new use cases like gaming. For example, many games need to hide certain game states: poker hands, inventories in MMORPGs, fog of war, etc.

Security audits for every code submission------Nearly $200 billion in assets are locked in DeFi chain protocols. Due to the immutability and trustlessness of blockchains, the security of on-chain assets will become increasingly important. Electric Capital hopes to fund tools that can review security during the development process.

In this vertical, Electric Capital hopes to support projects like verified submission systems such as Radicle, bug bounty systems like Immunefi, identity and user data solutions like Spruce, decentralized computing solutions like Internet Computer, and formal verification solutions like Certora.

Expanding access pathways to Web3

Crypto games with interoperable backends------Crypto games have the potential to create user experiences superior to traditional digital games. With fully interoperable backends, anyone can easily build plugins or mods into games or fork games in a trustless manner, rapidly evolving the gaming experience. Electric Capital hopes to invest in relevant gaming companies that can leverage cryptocurrencies to create engaging experiences that are impossible in traditional gaming.

Mobile DeFi experiences------Most DeFi applications are optimized for desktop experiences, neglecting the user base operating on mobile devices. As complex DeFi strategies become simpler and wallet connection security and verification processes improve, Electric Capital hopes to invest in companies that can enhance mobile DeFi experiences.

Multi-chain wallets for verifying contracts------As cryptocurrencies evolve, new challenges arise. For example, the rise of various types of Layer 1 brings new usability challenges, such as difficulties in moving assets between chains or accessing multiple chains with a unified wallet. Electric Capital hopes to fund wallet infrastructure to provide a seamless user experience.

Earning cryptocurrency------Fiat entry points have two key issues that exclude significant user groups from cryptocurrency: (1) many people do not have money to invest in cryptocurrency; (2) centralized exchanges do not support fiat from every country. Electric Capital hopes to fund bounty protocols, task platforms, P2E models, and performance-based deposit mechanisms.

In this vertical, Electric Capital hopes to support projects like low-fee, high-throughput platforms like Aurora and solutions for accessing cryptocurrency through traditional financial channels like Bitwise, Bitnomial, and Kraken.