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VCs are all watching the TON ecosystem, but why are they just watching but not investing?

BlockBeats2024/07/08 05:01
By:BlockBeats
Original title: "The explosively popular TON ecosystem, why do most VCs only watch but not invest?"
Original author: flowie, ChainCatcher


Recently, Donald, the founding partner of FA institution D2 Capital, talked to no less than 60 VCs, and he found that none of them was not watching the TON ecosystem. "Even if they were late, they started researching three or four weeks ago."


But watching is watching, not many actually invest. Most of the VCs Donald contacted are still watching, and Bruce Lan, managing partner of Bing Ventures, has scanned nearly 100 projects and has not yet made a move.


RootData shows that the number of financings for the TON ecosystem in the past six months is still in the single digit. In contrast, the Bitcoin ecosystem, which is as popular as TON, has received a financing almost every week during the three hot months.


Investment institutions interviewed by ChainCatcher all firmly believe that the TON ecosystem is different from any previous ecosystem or narrative and will not be a flash in the pan. But in the TON ecosystem with ready-made traffic, the gameplay has also changed.


NotCoin, which is listed on Binance and OKX, did not seek VC financing; Catizen achieved $12 million in revenue without issuing coins. More than one investment institution said, "In the future, it is not necessary for all invested projects in the TON ecosystem to issue coins."


If crypto VCs look at the TON ecosystem completely according to the inertia of token investment, it may no longer work.


No VC is not looking at the TON ecosystem


PAKA founder Owen lamented that it was a bit niche to pay attention to TON a year ago, but now there are almost no peers around who don't pay attention to TON.


At the beginning of 2023, at a private gathering of Hong Kong Blockchain Week, Owen received a small USDT transfer from a Telegram friend. This is a new feature announced by Telegram a month ago.


Nearly 1 billion users can trade directly on the chain, which surprised Owen, who has always been concerned about large-scale applications.


After researching with the team, Owen believes that the TON ecosystem will be different from any other ecosystem in the past. "Other ecosystems all propose an obscure technology and ask users if they want to come and play, but users are indifferent to this except for airdrops. Telegram has a large number of real users and can use Web3 technology to satisfy these users. The latter is obviously more in line with the path of large-scale applications.


But when I really started to scan the TON ecosystem, it was really hard to start at first.


In terms of perception, Owen felt that many projects were very tasteless, which could be said to be "a pity to abandon and tasteless to eat." The liquidity was also very poor, and TON's TVL at that time was less than 10 million US dollars.


Owen first saw a TON ecosystem DEX page that was extremely rough. Owen thought, "The PAKA investment team with development experience can probably do better in a week."


Shigeru, a partner of CGV Fund, who also looked at the TON ecosystem in early 2023, was temporarily persuaded to withdraw after scanning several projects. In addition to the fact that there are not many projects and the quality is generally not high, he also found that the timing of the entire market has not arrived yet, "the infrastructure is too scarce, and there is not even a self-hosted crypto wallet."


Owen also quickly realized that "due to the new development language and the imperfection of the corresponding infrastructure, it is not so easy to make a DEX."


However, with the efforts of TON's ecological infrastructure and other aspects, in just a few months, Owen's "disliked" project users have already reached millions.


After Telgeram announced its exclusive cooperation with TON in September last year, it borrowed the commercialization path of WeChat and opened up infrastructure such as payment wallets, allowing 900 million users to directly buy and sell tokens and NFTs on Telegram and participate in ecological projects such as GameFi. In April this year, Tether reached a cooperation with TON, and TON also had its own native stablecoin.


At the same time, TON promoted the application of mini-programs. A large number of mini-program games such as Notcoin and Catizen quickly completed the registration of tens of millions of users. Many small applications can have many means of revenue without relying on the issuance of coins.


The phased success of small games such as Notcoin and Catizen has also attracted a group of Web2 "regular troops" to enter the market. Max, the founder of TownSquare Labs, which provides technical solutions for TON blockchain and developers, often contacts developers and project parties through offline salons.


"At present, many Web2 game manufacturers and entrepreneurs in the WeChat ecosystem are targeting Telegram." MAX mentioned that the traffic of Web2 social media platforms such as WeChat and TikTok is already very expensive, and the business is also saturated.


Some Web2 entrepreneurs choose to go overseas in the traffic depression, and Telegarm, which is very similar to WeChat, has naturally become an important position. "The methodology that has been refined over the years in Web2 can almost be copied to Telegram."


Owen also revealed that Web2 game manufacturers such as Bingchuan, Weiyou and Sanqi have already started projects in the TON ecosystem.


However, compared with the changes in the internal ecosystem, the more critical factor that drives all VCs in Asia Pacific to pay attention to the TON ecosystem is the increased investment of top Western capital in the application layer and the TON ecosystem.


Paradigm and a16z both participated in Farcaster's $150 million financing this year. Pantera Capital announced a heavy position in TON in the first half of this year. According to chain analysts, the investment amount may exceed $250 million. Before that, the TON ecosystem was basically invested by Chinese or Russian capital.


Donald clearly felt that after the entry of Western capital, more VCs came to ask about TON ecological projects. "More than 50 VCs I talked to recently are all looking at the TON ecosystem." Shigeru, who was dissuaded from TON ecosystem last year, also began to focus on it this year.


Donald said, "Many VCs understand that the total investment of more than 50 VCs is only a few billion US dollars, and the capital volume of Asia-Pacific VCs alone cannot afford to stir up a TON ecosystem."


The entry of Western capital also means that more Western developers and project parties may be involved. At present, most of the people building on the TON ecosystem are Eastern entrepreneurs and developers.


Donald has contacted both Eastern and Western entrepreneurs or developers on the TON ecosystem. He clearly feels that the Eastern side is still anxious to realize in the short term, while Western entrepreneurs are more thinking about how to create super applications such as Facebook and Snapchat similar to Web2 around nearly 1 billion active users.


"Many VCs may expect that after the West has made some new paradigms, Asia-Pacific will make an Asia-Pacific version and break through with its own traffic cost advantages and better operational capabilities. Two years later, the number of products with millions of DAU may be half in the East and half in the West."


Why do most VCs only look but don't invest?


Donald understands why most VCs he has contacted look but can't make a move. Compared with a year ago, the rapid growth of infrastructure and projects in the TON ecosystem is obvious, but there are still not many targets to invest in.


Ton.app shows that there are currently 910 projects in the TON ecosystem, and 60% of the projects have appeared in the past 8 months. Donald mapped 300-400 ecosystem projects, "90% of which are games." Owen also said that there are too many games in the TON ecosystem to look at.


Most small game teams do not rely much on VC financial financing.


Owen contacted the team behind Notcoin last year. "They were working on a TON ecosystem Launchpad platform, Tonstarter. Originally, they wanted to invest in Tonstarter, but the team said that they would focus on Notcoin and would not take VC money. They would take a pure community route." In fact, Notcoin did not announce any financing.


Even if they raise funds, these small game teams may only raise one round of funds during the cold start phase, and the amount of funds raised is very small. Donald contacted several small game teams and found that "they have strong monetization capabilities." Scarlett, an investor of Pluto, the publisher behind Catizen, said that by adding a paid purchase module for game props, Catizen has achieved a revenue of more than 12 million US dollars and more than 500,000 paying customers.


Simple mini-games are not worth investing in for VCs. Many VCs are more concerned about whether the TON ecosystem can run more 4399 mini-game malls and WeChat mini-game models.


Bruce Lan, managing partner of Bing Ventures, has seen most of the mini-games in the TON ecosystem. Like WeChat mini-programs such as Yangleyang, they are expected to have a short life cycle and disappear after rapid monetization. "It is difficult for VCs to have a positive ROI guarantee. Such projects are more suitable for fair launch participation."


In addition, the mini-games in the TON ecosystem currently have tens of millions or even hundreds of millions of registered users, and "the data is still somewhat watered down." Bruce Lan feels that some important indicators for evaluating game performance, such as real users, user stickiness, and future growth potential, are still in a very early or black box stage.


With the whole game very competitive, CGV Fund partner Shigeru chose to focus more on the TON ecological infrastructure. He has recently looked at more than 20 projects. In the absence of many projects, some targets have been hyped up due to the explosion of TON ecology, and "the valuation is not low, and it is not easy to start."


Although the market has high hopes for TON, in Donald's view, if there are no more projects that create inflection points, the TON ecosystem will be no different from other short-lived narratives, "at most, it is a different flavor of air." The so-called coming out, "at least to do a real 3 million DAU."


Many investors Donald has contacted are still waiting and watching. They hope to see the TON ecosystem attract more top players from Web2 game giants such as Byte, Tencent, and NetEase, as well as Western entrepreneurs, to bring inflection points to the TON ecosystem.


In addition, VC's own liquidity problem may also constrain investment in the TON ecosystem. Donald said that VCs in the entire Asia-Pacific region have made fewer moves recently. Because in this round of ETF bull market, the entire cottage season has not started, "institutions are more anxious about how to sell their chips." No matter how hot the TON ecosystem is, the investment decision may be passed at the partner level.


In Donald's view, the investment boom in TON needs to wait until the next interest rate cut cycle arrives, and after the traditional Web2 dollar fund and the Asia-Pacific Web3 fund have raised funds, the entire Web3 will have sufficient funds and liquidity.


Grab traffic as early as possible


In the middle of last year, Scarlett invested in Pluto, the publisher behind Catizen, and was considered one of the earlier investors in the TON ecosystem.


Scarlett believes that the Tap to earn mini-game will definitely be eliminated, but he sees the growth space for Catizen after it gets huge traffic through mini-games. After accumulating tens of millions of users, Catizen is also expanding its business boundaries and launching the Launchpool model, "Essentially it is more like a gamified Pump.fun."


PAKA is one of the few VCs that has taken aggressive actions in the TON ecosystem, and has invested in more than 10 TON ecosystem projects, covering multiple segments such as Infra, games, red envelope applications, DeFi, and DePIN.


Owen wants to invest in all the different segments of the TON ecosystem as soon as possible. In Owen's view, "getting traffic first is more important than anything else." Although the TON ecosystem projects look simple, boring, and even rough, it is best to attract traffic at this time, and you can do anything with traffic.


It’s like when WeChat just opened public accounts, public accounts with rough content quality and layout attracted millions of users with a little bit of characteristics, and it was also very easy to monetize. After the track is saturated, everything becomes more and more difficult.


Bruce Lan feels that TON ecosystem Tap to earn games are similar to the small web games that emerged after 2000. "Even if they are very simple, many web games at that time could reach tens of millions of US dollars per month."


He does not expect the TON ecosystem to produce a masterpiece like Honor of Kings in the short term. In his opinion, most of the players have only been in for a few months. How to combine Web3 to play out requires a long exploration, and the performance of the TON chain also needs to continue to evolve to support high-performance games.


Compared to PAKA's wide-ranging ecological positioning model, Bing Ventures plans to focus on cultivation.


Bruce Lan does not want to wait to capture a killer application. He plans to take the initiative to find the top projects or platforms in the market, and join several top VCs to incubate some projects to do some blank tracks in the TON ecosystem.


Bruce Lan said that in addition to direct investment, Bing Ventures also has its own mother fund, which has invested in many European and American institutions. Bing Ventures currently tells the projects it invests in to find opportunities on TON, and also hopes to influence more European and American GPs and LPs to pay more attention to large-scale application opportunities in the TON ecosystem.


Although it is unknown when large-scale applications will return, in the view of Shigeru, partner of CGV Fund, the TON ecosystem may end the current situation of "no takeover" in the crypto market.


His feeling is that in the past, there was a gap in cognition between the East and the West in most Web3 narratives. For example, in the Bitcoin ecosystem that was popular at the beginning of this year, the first inscription that exploded was that the East was bright and the West was not bright, and then the rune was that the West was bright and the East was not bright.


The TON ecosystem can be driven by token economics without being completely dependent on it, and it has become a consensus path for the East and the West to achieve large-scale applications.


However, in an ecosystem that does not rely entirely on token investment, as more new models emerge, crypto VCs also need to think about how to change the inertia of past token investment and find a more suitable investment method.


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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