Dialogue with the founder of Sharding Capital: Investing in value in the encryption market is the only strategy to cross bulls and bears

As of press time, the market capitalization of the encryption market has fallen from approximately US$1,000 billion on November 8 to US$840 billion, and US$160 billion has evaporated in the past week and a half, equivalent to the 2021 Hungarian Annual GDP. More prosperous than the U.S. stock market, the bubble layer in the encrypted market is very high. When the liquidity crisis comes to the encrypted market, after the tide, you can see who is swimming naked, and the naked swimmer is likely to be a former predator.

Speculation can indeed bring huge profits in the short term, but everyone who has taken finance 101 knows that the benefits and risks It must be directly proportional. In addition to high-frequency short-term trading, there is another way to overcome bulls and bears, with value as the vane, and an upward arrow pointing directly at the value target.

When the bubble burst, the author interviewed a very rare entrepreneur in the encryption industry who insisted on early value investment and accompanied entrepreneurs in Dubai Belinda Zhou, founder of Sharding Capital, hopes this Q&A can inspire readers, entrepreneurs, and VCs.

"Let a new track/paradigm It takes a process for the market to recognize the real early demand, and this process is difficult but correct, and often this is the source of the alpha and beta of the track.”

Entered soon after graduation, native crypto kid in Dubai

BlockBeats: Hello Belinda, please introduce yourself. How did you get into the VC industry?

Belinda: My Chinese name is Zhou Qiuling, and everyone calls me Belinda. After graduating from Sun Yat-sen University in 2016, he was selected for the Dubai Business Associate program [Author's Note: An elite business program established by the Sheikh of Dubai. Selected young people will have the opportunity to come to Dubai and be fully sponsored by the government. , sent to business positions in different fields for study, internship and work. The author once applied and failed ~], was sent to Cambridge, UK for a year, and returned to Dubai in 2017 to do consulting. Entrepreneurship came into contact with the field of cryptocurrency and met many I0 project party, trading platform and encrypted capital. Participated in the IC0 project in 18 years as the CMO role in charge of the market and financing, and exited the project after the smooth launch.

In 2019-21, I made personal angel investment, and at the same time acted as a consultant for some projects, including Biconomy, Project Galaxy wait. My label can be said to be a relatively native crypto kid.

Fortunately, my angel investment has performed well, and I also plan to scale up the investment, invest in more projects, and invest in more projects. Bigger bets. In 21 years, my partner Dawn Yang and I met in investment projects. We found that we share common values and love for primary investment. At the same time, we found that our personalities are relatively complete and our abilities are relatively complementary. Therefore, we discussed and prepared to start Sharding together in July 21. Capital. In July 2022, Sharding Capital officially announced its establishment, and I officially became a VC (it is said to be the youngest female VC in the currency circle).

I am also grateful for the opportunity DBA gave me at that time, and then I found the Crypto career that I have been passionate about all my life.

BlockBeats: What do you think is the difference between traditional VC and Web3 VC?

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Belinda:No matter Web2 or Web3, the first priority of investment is capital injection, but in addition to capital injection, Web3 VC investment pays more attention to smart money and the ability to accompany running projects, Therefore, more detailed post-investment support is required. Ideally, Web3 VC also needs to have a certain understanding of Token economics, governance mechanisms, blockchain development and smart contracts, community building, encryption regulations, and security risk control. There are three main differences:

First of all, Web3 VC accounts for a relatively small proportion of project ownership, about 5%-20%. Allocate multiple contributors, ecology and communities, so Web3 VC has strong synergy. Web2's VCs are generally more competitive and do not share deals with each other. In the currency circle, we have a word called WAGMI, which means We All Gonna Make It. When investing in Web3, VCs are willing to share with each other, provide resources for the project, expand the popularity of the project, and are more willing to mingle with Twitter/Discord community users. In contrast, Web2 VC is relatively unearthly.

Second, Web3 VC chooses and considers projects from different angles. Traditional VCs have different ways of thinking and making decisions when investing in Internet projects in the early stage compared with traditional investors of the previous generation investing in real industries and factories. Today, Web3 brings a new paradigm, so it is necessary to sort out the logic and logic of thinking from the bottom. investment logic. For example, Web2 stocks only have financial attributes, but in Web3 tokens, in addition to financial attributes, they also have functional attributes, so the overall token economic model, functional utility, and deflation ratio must be considered. For example, ETH can be used as a gas or loan collateral etc.

Third, Web3 investment involves tokens, and we need to pay attention to fund storage and security. Questions to consider include: How to save the private key? How to use multi-signature wallet? Do I have to transfer assets to a cold wallet? How to place a cold wallet? How to set up the vault? What should I do if I want to earn extra income, such as providing liquidity? How do you keep track of your entire portfolio if held across multiple wallets? In contrast, traditional VCs do not need to consider these at all.

Fourth, Web3 investment must keep pace with the times, because the currency circle is changing rapidly, and it must be live in crypto to capture the alpha. Therefore, Web3 investors must also spend a lot of time learning and understanding industry trends, taking the lead in the market, and cultivating the ability to discover problems and find Product Market Fit.

Insist on making value investments in the crypto circle, a VC based in the Middle East and looking at the world

BlockBeats: Sharding Capital has an idea since July 2021, and since July 2022, it has invested in many projects. May I ask how much fund you raised in this issue? Every time you invest in a new project, you have a preferred check size Is your company’s investment projects biased towards early angel seed rounds, or will you also choose to co-invest with other VCs, co-invest in mid- and late-stage projects?

Belinda:The scale is 20 million US dollars. In 2021, we will use more of our own funds to verify our investment logic and investment strategy. We have formed our own investment methodology this year. The preferred check size is between US$100,000 and US$800,000, with an average of around US$300,000. A total of 60-70 projects will be invested. Currently, as a fund, we have invested in single digits.

Sharding prefers to invest in early angel rounds and seed rounds. It is a consensus that Web3 invests together, which is also a point different from traditional VC. We cover a wide area. Given that Sharding, as the first Chinese fund based in the Middle East, has derived coverage in Asia, Europe and the United States, and has its own engineer team to look at the code and test products, many projects hope to open the door to the Middle East market through Sharding, and many VCs are also happy to cooperate with them. Sharding shares project sources and compare notes.

BlockBeats: Will your investment projects have regional preferences?

Belinda: There is no absolute geographical preference, there are exchanges in projects in Asia, Europe, America, and North Africa! We value the project, the track and the team itself, as well as the communication efficiency between each other! I often go to different continents for meetings, and Sharding often holds Hackathons and Demo Days with organizations and universities around the world, so I can discover many early projects. Because we are in the Middle East, we usually spend more time in Dubai and go to Singapore, so the pipeline of the project may have more contact here.

BlockBeats: Are there any items that were "regretfully" missed? Why is it a pity? What was the reason for not submitting?

BlockBeats: h4>

Belinda:Drift Protocol - Solana Ecological Decentralized Derivatives Trading Platform

Missed the project's $30 million first round of funding. I was still doing angel investment at the time, and I mainly found good projects on Twitter. The project Galxe was found on Twitter. I discovered Drift in early 21, but didn't vote in the first round. Angel investment is mainly suitable for the group of founders who know themselves. If they don’t know themselves, they need to prove themselves, so I contacted Drift and they asked me to open a ticket on Discord. I went to open a ticket. I guess I didn't talk to the decision-maker, and I didn't pay attention to it. This matter was left behind. If there was a fund at that time, I think it might be very convenient for other VCs to make introductions. It is a pity that I failed to invest in the earliest round of this project. Later, the seed round financing was led by Multicoin Capital, and Jump Capital and others participated in the investment.

This is also one of the reasons that inspired us to start a fund, and we may participate in high-quality projects earlier. Interestingly, this year Sharding and the Drift team got acquainted at the Korean Blockchain Week and helped a lot. Drift was invested in the second round. Of course, because the investment was later, the profit and proportion were not as rich as earlier.

BlockBeats: You said in the special live broadcast of Ethereum before that you are optimistic about projects that can capture user traffic and realize cash flow. Can you elaborate on some of the important hard metrics you use to evaluate projects? Is there a benchmark in hard metrics, for example, certain data needs to pass a certain ratio, or does it vary from project to project?

Belinda:First of all, let me explain why we are optimistic about capturing user traffic and realizing cash flow projects. Good development needs to meet two basic conditions:

· More new users enter the market

· There are more developers coming in

The ones that meet the first condition are those that can lower the entry threshold for Web2.0 users Applications, such as the popular MPC wallet and some casual games. Or some applications that are easy to get out of the circle, such as: Utility NFTs direction, which can be well combined with Web2.0 IP to create some new marketing paradigms or fan economies.

The second condition is some infrastructure, developer platform, or development tools. When some development tool modules are universal, they have the attributes of infrastructure. They are between Layer1, Layer2 and applications, and serve as services and links. More exist in the form of middleware SDKs, such as: DAO Some infrastructure of GameFi, or some infrastructure of SocialFi, etc.

Some key indicators for determining traffic-capturing applications:

< p>i) Will the topicality and fun of the project resonate with the market (this determines whether the project has the genes for quick exposure and out of the circle).

ii) The execution ability of the team and the matching degree between the quality of the team and the track of the project.

iii) Timing, the timing of the cold start of the project to the market.

Because our investment is in the early stage, sometimes the product may not be launched yet or the V1 version of the product has just entered the test, so in the data Indicators will vary from project to project. For products that have entered testing, the data we value most is the frequency and time of communication between members of the core team and product-related users in Discord, when they make good suggestions with users, product responses and iterations The efficiency, which determines the speed and quality of early seed user growth.

About some infrastructure for realizing cash flow, the business model of the infrastructure itself is relatively clear, but it takes time to realize profitability The cycle is relatively longer, which is also because Web3.0 is still too early, so for a good infrastructure, we value two capabilities:

a) The team's own ability in product iteration and development, this must ensure that the product continues to maintain competitiveness.

b) The ability of the team in BD and resources, which determines the adoption rate of B-end customers, and the feedback is how long it takes to achieve profitability.

BlockBeats: What about soft metrics?

Belinda:Soft indicators are basically related to the overall quality of the team or the founder. One is the founder’s comprehensive cognition and judgment ability, and the ability to pitch is the ability to digest resources. In the final analysis, investors are more about promoting, guiding, introducing and helping. What really makes progress is whether the team can digest resources and use them for their own use.

The other is the ability, professional ability and complementarity among the team members. These determine whether the project can be implemented and accepted by the market.

BlockBeats: In the impossible triangle of cryptocurrency: scalability, anonymity (privacy), and safety, we all hope You can find items that are as balanced as possible in the triangle. But if it is impossible to balance, which corners will you pay more attention to, and why?

Belinda:I think this balance exists, It's just not happening right now.

At present, the Ethereum chain focuses on solving the problems of security and decentralization, but we believe that we are optimistic about the maturity of technology such as ZK Rollups , it is highly integrated with Ethereum layer1 to solve the problem of expansion and privacy. Of course, it will take some time, but we are very optimistic and looking forward to it.

Another solution is a modular layer1 like Cosmos Celestia, which is re-architected from the bottom, which combines security, privacy , These requirements for performance are solved in a layered and modular way. Of course, the efficiency of this balance also needs to be verified by the market and time. But there are great opportunities for these two new solutions.

So if we really have to choose, we pay more attention to security and privacy in the field of financial applications. We believe it is also necessary to appropriately sacrifice some of the properties of the former two in the non-financial application field to satisfy its performance.

BlockBeats: What are the current promising projects? Can you briefly introduce it? (Not necessarily Sharding Capital involved)

Belinda: ZKX, a decentralized derivatives trading solution.

i) They changed the way of listing new coins through the DAO mechanism voting plan, which is more decentralized compared to dYdX (dYdX is a team decision-making mechanism)

ii) In addition to the incentives provided by the ZKX platform, the liquidity rewards for trading Tokens allow Token project parties to provide them, (improving the liquidity of new coins, compared to dYdX)

iii) Mainstream Token liquidity is officially provided by StarkWare (officially involved in the investment and commitment)

iv) Protocol income will empower Token (dYdX does not currently have it)

v) The team itself is relatively hardcore, Technology (the technical team has seen their solutions and mechanisms) and business are relatively mature

vi) dYdX is going to leave to build its own application chain, ZKX is currently the decentralized derivatives protocol we see on Layer2 The best team

vii) The decentralized derivatives trading market is very large and there are still opportunities for leading projects in the first echelon

BlockBeats: When will the current funding be completed? What kind of project are you still looking for? There are many different channels on Sharding’s official website. Will you invest in infrastructure, public chains, etc., or will you focus on the track?

Belinda:The current plan is to complete the vote in mid-2025, with a total of 60-70. The overall strategy is to invest in infrastructure in the early and mid-term of the bear market, focus on hard-core technology to B-type projects, invest in applications at the end of the bear market and the early and mid-term of the bull market, and focus on research and observation at the end of the bear market.

2023 will focus on infrastructure serving application developers, such as middleware, plug-ins, and protocol layers. 2024-2025 will mainly focus on investing in super applications, such as NFTFi, DeFi, SocialFi, DAO, GameFi, etc. The previous infrastructure can also support d'Apps.

Layer1 is not what we focus on and does not match our fund attributes very well. For the track, for example, DID is one of our favorite directions, as are NFTFi and DeFi. We have invested in several DeFi projects before, as well as security and wallet directions. My technical partner has seen more.

Be optimistic about Chinese entrepreneurship and encourage Chinese to use the efficiency of the currency circle to do things

BlockBeats: What do you think about Chinese Web3 entrepreneurship? Have you seen any projects with better Chinese helms?

Belinda: The Chinese Web3 business is very good, the Chinese are actually very pragmatic in doing things, and the execution speed is very fast. UI. As we do VC, what we earn is poor information, and efficiency is very, very important. However, what Chinese entrepreneurship may need to generally strengthen is: to improve the international vision, cognition and awareness, and to improve the cognition and ability of "narrative" itself.

I really admire Charles Wayn, co-founder of Galxe (Project Galaxy) and Bullet Labs, serial entrepreneur By. First of all, he himself is a powerful idea machine, very good at thinking. After having an idea, Charles has excellent language organization ability and narrative ability to output the idea. After the idea project is established, the international team he leads has a fast execution speed to digest BD and investor resources. When I was an angel investor, I would introduce the cooperation project to Galxe, usually on the same day, Galxe can confirm the details with the project party on the same day, and start the campaign in the same week. This speed of execution led to an explosion in Galxe's user base.

BlockBeats: Bellinda saw that after you participated in Asia Token 2049 in Singapore in early October, you returned to Dubai non-stop to participate in Gitex. What are the similarities and differences between the development of projects and capital in Singapore and Dubai? Do you choose to reside in Dubai because you think Dubai is better than Singapore? How do you see the development of Web3 in Dubai and MENA?

Belinda:Because I frequent both Dubai and Singapore, I personally feel that Singapore is an OG Paradise, more suitable here people who have made it. In contrast, Dubai has a more entrepreneurial spirit and atmosphere.

Sharding Capital chose Dubai as a base for several considerations: First, the encryption market in the Middle East is on the rise, with many opportunities and dividends ; Second, as a founding partner, I participated in the encryption ecology here in 2017, and I have relatively solid resources in the Middle East, which can help other early projects in the market and brand communication to cover Middle Eastern users [Readers who are interested in knowing more can read the author's Previous article: Dubai with 200,000 Chinese: Another Web3 capital in Asia], One of this differentiated post-investment advantages allows Sharding to have a better ability to negotiate a premium compared to other concentrated and introverted American VCs and Chinese VCs based in Singapore.

Moreover, 2022 will be a year of rapid growth for blockchain in the Middle East. The crypto ecosystem in the Middle East is growing at an incredible pace and will prove to be a goldmine for daring investors. The region is at the forefront of emerging technologies and welcomes digital innovation and disruption with open arms.

In fact, this place can expand a lot, TLDR is too long to read the version:

- Friendly policies and regulations, attracting a large influx of projects leads to an influx of trading platforms and capital, sufficient funds and resources to attract more projects, flywheel effect

- China, Singapore, India The influx of project teams such as

- Political neutrality attracts teams from Russia and Turkey to join

-Local capital and the market are friendly to cryptocurrencies, especially USDT is highly accepted

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- Mining Opportunities for Renewable Energy

Postscript - WAGMI

After answering the author's question, Belinda thoughtfully wrote the title for the author's new article. The original title was a dialogue with the founder of Sharding Capital: I am optimistic that it can lower the entry threshold for Web2 users and realize cash Stream project, this title also fully reflects Sharding's strategy and overall view on the development of the Web3 project.

The author originally just had an appointment with Belinda for a coffee interview. Invited by my sister, I participated in the small gathering in the currency circle hosted by Belinda and her friends that night, and met the founders and leaders of some local ecosystems.

The currency circle is very small, so small that the author sometimes goes to parties as if going to work, social is talking about work, but the currency circle is small It also allows everyone to choose to form a group and choose long-term development (if they want to). Belinda often mentions a concept in the chat with the author. This circle is very small. She and her partners still want to develop here in the long term, and don't want to ruin their reputation because of some short-term projects. Through Sharding's recognition of infrastructure projects, we can also see the value orientation of the fund.

When the author asked, there are very few women in the cryptocurrency circle, and female traders account for 5.2% of the overall traders. Men far outnumber women among them, let alone executives, and Belinda replies with great vigor that women are on the rise, too. There are also many admirable female executives and practitioners in the currency circle. She hopes that women working in the currency circle can show more of their own value. They are not beautiful and can only work as BDs in large and small companies. Women can show their compound value, let their voices and ideas be heard, and expand their voice. Power lies within a woman's own mindset.

Although these days often In just a few hours, there was turmoil, and the currency circle ushered in another wave of slaughter. The author thinks that long-term holders can believe what Belinda said at the dinner party, all in crypto, we all gonna make it.

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