Remove the official website's cryptocurrency statement, venture into AI, what is the Paradigm shift for?

Author: 0xmin

Source: Shenchao TechFlow

If you ask which VCs are the most powerful in the cryptocurrency field, Paradigm is definitely on the list. Going all in on Bitcoin during the bear market and deeply incubating Uniswap to become famous, Paradigm's name is derived from "paradigm shift," indicating a scientific revolution where one paradigm replaces another.

Now, Paradigm is once again experiencing a paradigm shift, no longer focusing solely on cryptocurrency/Web3, but expanding its areas of interest to include AI.

Sharp-eyed netizens have noticed that Paradigm recently quietly modified its homepage, changing the title from "Paradigm supports disruptive crypto/Web3 companies and protocols with funding as low as $1 million and as high as over $100 million" to "Paradigm is a research-driven technology investment firm," and removing expressions related to cryptocurrency/Web3 such as "We believe cryptocurrency will define the coming decades."

Let's make a comparison.

Old Website:

Paradigm supports disruptive crypto/Web3 companies and protocols with funding as low as $1 million and as high as over $100 million.

Every so often, a new technology emerges that changes everything. The internet defined innovation over the past few decades. We believe that cryptographic technology will define the coming decades.

Paradigm is an investment firm focused on supporting future crypto/Web3 companies and protocols. Our approach is flexible, long-term, multi-stage, and global. We often participate in the earliest stages of formation and continue to support our portfolio companies over time.

From technology (mechanism design, smart contract security, engineering) to operations (recruitment, regulatory strategy), we take a hands-on approach to help projects reach their full potential.

New Website:

Paradigm is a research-driven technology investment firm.

We invest and contribute to companies and protocols with funding as low as $1 million and as high as over $100 million. We often get involved in the earliest stages and continue to support our portfolio companies over time.

From technology (mechanism design, security, engineering) to operations (recruitment, public listing, legal and regulatory strategy), we take a hands-on approach to help projects reach their full potential.

According to a recent article from The Block, insiders have revealed that Paradigm is shifting its focus from solely cryptocurrency to also include "cutting-edge" technologies like artificial intelligence. People familiar with the strategy indicate that the company has not changed its mission and continues to focus on cryptocurrency and Web3, with the updated website copy aimed at emphasizing its technological research.

This has inevitably disappointed many, as the leading VC in the crypto industry, Paradigm, seems to be betraying the revolution, and the long-dormant meme faces are starting to see some use.

So, why is Paradigm proactively "shifting paradigms"?

First, from an external perspective, AI is booming while cryptocurrency is waning.

OpenAI's ChatGPT has sparked an AI whirlwind, with both primary and secondary markets taking off under the influence of AI concepts. When Nvidia's earnings report was released, its market value increased by $220 billion overnight, just a step away from the trillion-dollar market cap milestone.

In contrast, the cryptocurrency market remains in a bear market, with trading volumes continuously shrinking and increasing regulatory pressure from the U.S.

Secondly, Paradigm may have its own frustrations.

In November 2021, Paradigm announced the completion of a new $2.5 billion fundraise, holding a large amount of investable capital.

In January 2022, Wall Street's largest market maker, Citadel Securities, announced it had secured $1.15 billion in financing led by Sequoia Capital and cryptocurrency investment firm Paradigm, with a valuation of $22 billion.

This seemingly unrelated investment to Web3 once caused a stir. At that time, we commented on Twitter that as a VC, Paradigm had an urgent task to deploy capital. When fundraising is too high, the options for investment may actually decrease, and to achieve expected returns, investing in Citadel Securities might have been a more cost-effective choice in the overall high-valuation environment of cryptocurrency.

For any fund, the larger the fundraising scale, the greater the investment pressure. They need to deploy all their capital within a limited time and achieve expected returns. For a crypto VC, in a bear market with unclear future narratives, deploying capital is far from easy.

At this point, there are often two choices:

(1) Dive into the secondary market and purchase more liquid assets.

For example, on May 13, Paradigm's entity Paradigm One LP purchased approximately 810,000 shares of Coinbase stock for a total price of about $50 million, currently holding a total of 4.5 million shares of Coinbase.

(2) Diversify investments into other fields.

Just like various A-share theme funds, whether in pharmaceuticals or new energy, they all buy Moutai, turning into liquor funds.

Finally, for Paradigm, cryptocurrency has also brought trauma.

Paradigm was a major supporter of FTX, investing $278 million, and with the collapse of FTX, that investment also vanished, accompanied by skepticism.

In November 2022, Paradigm co-founder Matt Huang issued an apology, stating, "We are sorry for investing in a founder and company that ultimately did not align with the values of cryptocurrency; they caused significant damage to the crypto ecosystem."

It is worth mentioning that in July 2022, after the collapse of Luna, Matt Huang sent a letter to LPs explaining the reasons and impacts of the recent collapse of the cryptocurrency market, providing psychological reassurance.

In conclusion, he wrote: "Looking ahead, we will continue to focus on the decades of opportunities in cryptocurrency. Our team and the entrepreneurs we support find it easier to concentrate on substantive content in a quieter environment, without distractions. Speculative tourists have left, and valuations are beginning to rationalize. Strong companies are finding it easier to hire excellent talent. Overall, we are optimistic that the next 12-24 months will be a good time to build and invest in cryptocurrency."

Hopefully, they will deliver on their promises.