2 years 6x, outperforming Bitcoin/99% of global VCs in the same period, how did Cypher do it?

Q: Hi Bill, can you talk about your recent investment situation?

Bill: Hello. Our fund has been quite fortunate; during this cycle, we heavily invested in Solana, Ton, and Sui in a bear market, and we also hit some star projects at the application layer like Peaq, Uxlink, and Bouncebit. Overall, we currently have more than 6x returns, and the overall liquidity is quite good.

Q: We've heard that many VCs are having a tough time this cycle. What do you think?

Bill: In the last cycle, everyone was rushing to exit after the IPO (VCs followed suit). This cycle is about "letting the bosses exit first." Who are the "bosses"? The exchanges and founding teams. VCs are being asked by exchanges and founding teams to practice the value of "long-termism," so they are often bound by an average lock-up period of 3 to 4 years, just watching the candlestick charts, seeing exchanges and founding teams cash out, feeling helpless and anxious. I often joke that being a VC in this cycle is not a profitable business; rather, it’s about becoming a "subordinate" financial consumer, making donations (grants) to promote the industry's development, which can be seen as a good deed.

Q: But don’t founding teams also have lock-ups? Aren't they also "long-termists"?

Bill: You're referring to the "Team Allocation" lock-up in the fundraising PPT, right? This is merely a formal "Team Allocation." You can understand that the entire token supply is essentially owned by the founding team, so all the continuously unlocked tokens in the supply are pools that the founding team can sell under various pretexts. Some tokens are sold by the team to continue developing the business; others are sold to buy Ferraris.

Q: Few funds like yours have managed to capture both Solana/Ton and Sui in this cycle. Can you share the stories behind these investments?

Bill: In this cycle, I directly turned our platform into the largest investor in Solana in the Middle East, possibly ranking in the top three globally. When you believe an opportunity is right, the remaining decision factors are courage and position. I have experienced the entire investment journey from Web1 to Web2 to Web3, and the training I received has deeply ingrained in me the idea of "concentrate to get rich." Whether it's Tencent or JD for Hillhouse Capital, ByteDance for SIG, or Tesla for Baillie Gifford in Scotland, or Apple for the later years of Buffett, heavy investment in core assets has always been a source of significant returns.

Q: You supported Ton very early on. Can you talk about that?

Bill: We were the first institutional investor in Ton globally, and I personally was the first global external director of the Ton Foundation. Our cost was less than a quarter of what many Silicon Valley funds invested later. My logic for joining the Ton Foundation as a director and advisor was that among the top five social communication software globally, one is in China, three are in the U.S., and they can't do Web3, and the last one is Telegram, so we invested. Frankly, at that time, Western investors had doubts about Ton, thinking it was a project to avoid due to its Russian origins, and they were also wary of the previous Gram incident with Telegram. However, since I live in Dubai and frequently meet with their team, I understood their passion and vision, which made me more resolute. Moreover, if we think about it, isn't crypto about being anti-establishment? Those who make big money in this industry are all anti-establishment, like USDT and Binance.

Q: I remember the primary market financing for Sui was very competitive, mainly involving a16z, Sequoia U.S., etc. At that time, Cypher was just a young investment firm. How did you secure your allocation?

Bill: We are the first team globally to help sovereign nations establish Bitcoin strategic reserves, the only crypto listed company in the Middle East, and the only listed central state-owned enterprise in the global crypto industry (our group Phoenix's major shareholder is an entity of the UAE government). When communicating with the founders, rather than positioning ourselves as "a young investment firm," we preferred to introduce ourselves as "industrial investors from the Middle East." Therefore, the founders were very willing to collaborate with us and granted us a $5 million allocation. This also made us the only investor in Sui in the Middle East, likely holding the highest share among global Chinese investors.

Q: Why did you heavily invest in Solana and become their largest investor in the Middle East?

Bill: Because after seeing FTX, developers were still active in the Solana ecosystem. Meanwhile, it became a meme, so when the market was still uncertain about Solana, we decisively increased our position, making ourselves the largest investor in Solana in the Middle East by 2023. We also brought Solana to the Middle East, and next year Solana will hold the Breakpoint annual conference in Abu Dhabi.

Q: In this cycle, many people are pessimistic about VCs, feeling that VCs are neither likable nor profitable. What do you think?

Bill: The cycle of prosperity and decline is inevitable. I am not pessimistic about the VC industry at all, even though we must acknowledge that VCs from this cycle (vintage) are facing challenges. For the next cycle, it is very likely that due to the clearing of VCs from this cycle and the emergence of a large number of new innovations under the backdrop of technological advancement and regulatory easing, VCs will have a better time. It's similar to how the Silicon Valley VCs established in 1999 were from a poor vintage, with most investments ending in bankruptcy, but VCs established in the years following the tech bubble burst saw a reversal in returns. I am optimistic about the VC industry overall because the development of the industry needs us, including: filtering good teams and development directions for the industry, providing vision and resources for founders, improving project success rates, and ultimately providing good assets for the secondary market.

Q: Web2 VCs are still actively working on various multi-billion dollar AI projects. Do you think there is a difference between VCs in the Web2 and Web3 industries?

Bill: Yes, there is a significant difference. The Web2 industry requires "building high walls, accumulating grain, and delaying kingship," so the typical strategy is to raise enough money in the primary market, like $1 billion, $10 billion, or even more, which is "accumulating grain"; continuously expanding market share, delaying profitability, and establishing their own moat, which is "building high walls"; delaying IPOs, thus not having to worry about quarterly reports and public investors, and delaying dividends, all of which are "delaying kingship." The core support behind this strategy is private market capital, which is VC. Therefore, we see Web2 VCs growing larger, to the point where a single fund can raise $100 billion because they need to provide enough ammunition for the "nuclear war" among founders.

However, the logic of Web3 is different; it emphasizes "fame should come early." The current cycle from primary to secondary markets is a bit too short, which does not support good teams in steadily developing products. This rapid wealth accumulation in the industry encourages founders to chase trends, market aggressively, and quickly list on exchanges. Therefore, I believe Web3 needs more "patient capital," leaning towards the style of the Web2 industry, which can accompany founders in accumulating more in the primary market.

Q: Thank you. One last question: what do you think about the peak of this bull market? Will there be a peak, or will there be a super cycle?

Bill: When people start talking about a super cycle, one must be cautious. It's like when someone starts telling you: this time is different; this time the tree will definitely grow to the sky. The overarching logic of the crypto industry remains growth, but the specific form will certainly spiral upward within cycles. Market timing is very difficult; we usually build our portfolios based on current market sentiment, making them more aggressive or defensive. Thank you!