After investing in Solana and becoming famous, will Multicoin Capital return to its peak?

Kaoriand others2Authors

24-01-05 09:49

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When it comes to investment targets in 2023 besides Bitcoin, Solana is sure to surprise people. Slowly recovering from the FTX scandal, Solana's market capitalization has returned to the top five. Those who are happy about this include not only SOL holders, but also Multicoin Capital.

As an early investor in Solana, Multicoin Capital received high returns during the bull market in 2021, and its investment style driven by research papers was also highly sought after. However, a series of events led to a rapid decline in its asset management scale, and the number of investments in 2023 was only one-fourth of the previous two years. Since the cryptocurrency market rebounded at the end of last year, not only Solana, but many assets in Multicoin Capital's investment portfolio have also achieved considerable gains.

This is worth our attention. Is Multicoin Capital returning to its peak?

Multicoin Capital portfolio includes Zilliqa

Last December, the decentralized wireless communication network Helium Mobile's token MOBILE saw a nearly tenfold increase in a week, driving the heat of the entire DePin sector to resurface.

Helium has a long-standing partnership with Multicoin Capital. In June 2019, Helium completed a $15 million Series C financing round, led by Multicoin Capital and Union Square Ventures. In August 2021, Helium announced a $111 million fundraising through token sales, with a16z leading the investment and Multicoin Capital, Alameda Research, and others participating.

Helium's native token HNT saw a significant increase in price in 2021, rising from less than $0.2 in the middle of the year to a high of $52, making it one of Multicoin Capital's best investment returns that year. In July 2022, the Helium Foundation launched a new token called MOBILE as a reward for 5G hotspots, which will help expand Helium's 5G coverage. Tushar Jain, co-founder of Multicoin Capital, also released a tweet thread explaining the differences between MOBILE and HNT.

When it comes to the DePin sector, it is impossible not to mention Hivemapper, another DePin project invested by Multicoin Capital. Hivemapper is a decentralized and continuously updated map built by people using dashcams. This new map economy represents a fundamental shift in the way people own maps and share economic benefits with those who create global maps.

In April 2022, Hivemapper announced the completion of a $18 million financing round, led by Multicoin Capital, with participation from the founder of Solana, former Apple Maps executive, and CEO of Helium.

Earlier today, Coinbase added Hivemapper's token HONEY to its listing roadmap. Subsequently, the price of HONEY briefly surged to $0.26, with a 24-hour increase of 85.2%.

Since December last year, Sei (SEI) has been another shining investment target for Multicoin Capital. On the evening of January 3rd, after the mainstream token prices experienced a major waterfall, SEI briefly surged to $0.82 and was priced at $0.77 at the time of writing.

Sei, as a new generation Layer 1 public chain, has attracted attention since its mainnet launch in August this year due to its strong financing background, including Multicoin, which started investing in public chains. In August 2022, Sei Labs completed a $5 million seed round of financing, led by Multicoin Capital, with participation from Coinbase Ventures, GSR, and others. In April 2023, Sei announced a $300 million financing at a valuation of $8 billion, with participation from Multicoin Capital, Jump Capital, and others.

Sei announced in late November last year that it will adopt parallel EVM technology to upgrade v2 this year, and parallel EVM narrative is considered a key focus in 2024 by multiple investment research institutions. If Sei can continue to maintain its current price trend, it will be a high-yield investment target for Multicoin.

Another recent investment target that has seen a price increase in the cryptocurrency industry is the perpetual contract protocol, Perpetual Protocol. As of January 3rd, at the time of writing, the native token of Perpetual, PERP, has risen to a high of $2.1, with a 24-hour increase of over 60%.

In August 2020, Perpetual Protocol completed a $1.8 million funding round with Multicoin Capital as the lead investor. Kyle Samani, co-founder of Multicoin Capital, previously wrote about Perpetual, stating that it combines the advantages of CeFi and DeFi, offering perpetual contract traders the leverage they expect from CeFi, as well as the liquidity and convenience provided by DeFi's AMM system.

"Multicoin: Introduction to DeFi perpetual contract protocol Perpetual Protocol"

After a simple inventory of the investment targets with price increases in the recent Multicoin Portfolio, we must also mention Solana, which was once an investment target that brought Multicoin Capital to the peak.

Multicoin Capital's Success and Failure

Axios reported on December 30, 2021 that Multicoin's hedge fund assets have skyrocketed by 20287% since its establishment in October 2017. Its first venture capital fund has returned more than 28 times the profits to investors after deducting fees, and the highest investment returns include Solana, Helium, and Arweave.

In May 2018, Solana Labs, an unknown company at the time, sold 79.25 million tokens at a price of $0.04 per token. Multicoin Capital was one of the buyers. In 2019, the Solana team initiated five rounds of financing, with four of them being private placements. These private placements began in the first quarter of 2019 and ended in July 2019, when MultiCoin Capital led a $20 million Series A investment in Solana Labs. In June 2021, Multicoin Capital participated in Solana's $314 million financing round.

Solana's price reached nearly $260 during the peak of the bull market in 2021, and its market capitalization jumped to third place in September 2021. As of the end of 2021, since the trading of Solana tokens began in April 2020, Solana's price has risen by about 21,609%. HNT, on the other hand, rose from less than $0.2 in the middle of the year to a high of $52. And this is only the profit multiple of the secondary market, Multicoin, as an institutional investor, has even more exaggerated actual profits.

Solana TVL chart; Image source: DeFiLlama

Therefore, Multicoin Capital's three rounds of investment in Solana made it stand out among the year's cryptocurrency VCs in terms of returns.

In 2021, Multicoin Capital raised $100 million for its second venture capital fund in May, and also raised $250 million for its third venture capital fund. In September of the same year, Kyle Samani appeared on the FTX podcast and stated that Multicoin Capital's current asset management scale has reached $4 billion. As the token prices in its investment portfolio continue to rise, this has even affected traditional venture capital firms such as a16z and Sequoia Capital, who are willing to change their investment structure to hold more digital assets.

Unlike the investment styles of Alameda, 3AC, and other technical and capital flows, Multicoin has always adhered to "thematic investing" since its inception. The two founders, Kyle Samani and Tushar Jain, always explain the "investment logic" behind each transaction in their writings. They dare to invest in "contrarian" projects, buy in dissent, and hold positions against the trend. This investment style also adds a certain "romanticism" to the fund's subsequent success - a style that reached its peak in the Solana battle.

But as Xiao He rose to power, so did he fall. The 2022 FTX bankruptcy event made Solana one of the most affected cryptocurrency projects, with its coin price dropping to single digits. Due to the FTX bankruptcy, Multicoin's assets under management fell by 55% in about two weeks. In addition to 9.7% of assets being held by FTX, losses were also due to its long-term bullishness on Solana and Solana's ecosystem assets, such as Mango, holding FTX.US equity, and unfinished derivative contracts.

At the end of December 2022, Soldman Gachs, who had previously disclosed a lot of information as a creditor of Three Arrows Capital, announced on Twitter that he had just received his November investor statement from Multicoin Capital, which stated that "the fund has fallen by as much as 90% in the past 11 months".

In March 2023, Multicoin Capital stated in its annual investor letter that its hedge fund had lost 91.4% in 2022, marking its worst performance since its inception. Recently, Kyle Samani and Tushar Jain wrote to LP again, stating that about 10% of Multicoin's fund assets are still waiting to be withdrawn on FTX.