Dragonfly Partners: 10 Lessons to Learn from Crypto Investments

Written by: Haseeb Qureshi, Partner at Dragonfly Capital

Compiled by: The Way of DeFi

Dragonfly Capital summarizes some significant lessons learned each year. This year, we have compiled the top 10 lessons that venture capitalists need to learn in 2023.

Sharing these insights should be quite useful.

1. Due diligence really matters.

The FTX, LUNA, and 3AC events of 2022 taught everyone in the industry a lesson.

No matter how impressive the founding team looks, if you don't verify what they say, you will end up getting hurt.

2. When everything seems crazy, it might actually be crazy.

Last year, valuations and narratives were overly optimistic. We felt something was off, and later valuations proved unsustainable. However, people might easily overlook this and think, "Well, the market must be smarter than I am."

But that's not the case.

3. Push for deals to close faster and harder.

One of the mistakes we made in 2022 was progressing too slowly on deals we were excited about. In venture capital, speed is everything—though this doesn't mean sacrificing due diligence. However, if your momentum is lacking, you may lose a deal.

4. Don't mock crazy ideas.

Crazy ideas are often just that—crazy. But sometimes, they can change everything.

Listen to every proposal with an open mind. Imagine what would happen if this entrepreneur is right. Think through the consequences.

The future often looks strange.

5. Don't blindly follow the "Ethereum cool kids" (not everyone is Vitalik).

There are many trendy ideas and concepts in crypto that do not meet real needs. If you invest in these concepts, you might gain some influence, but it's not a wise investment.

6. The macro environment can destroy everything.

This year's performance across asset classes has been primarily determined by the macro environment. Changes in the macro environment will alter how you assess growth, judge unit economics, and evaluate relative valuations across industries. You must reconsider everything.

7. Regulation is slow.

For some investments, you might prematurely distance yourself: "This will definitely be regulated." But the time it takes for regulation is always much longer than you think.

You passed on a deal out of regulatory concerns, only for it to grow 50 times (with a small fine).

8. Companies with clear business models will be priced up. You need to find unique advantages to make money.

If everyone (growth investors) can see the potential of a company or a deal, it will come at a high cost. This investment won't make money.

To profit, you need to find your unique insights.

9. The best deals are won through branding.

Winning deals is primarily about marketing, not sales. By the time you show up at the proposal meeting, most of the work is already done. If you are not seen as a good partner for the entrepreneur, winning the deal becomes even harder.

Invest in your brand upfront.

10. Don't trust the judgment of other VCs.

Because when you look at what other VCs are investing in, it's easy to start questioning yourself: Are we falling behind? Do we not understand these? Are we not true believers?

Be true to yourself and only invest in what makes sense to you.

11. 2022 was a brutal year for crypto investments. But it might have been the most educational year I've experienced as an investor.

Hope this topic is useful to you.