Why do most VCs only watch the TON ecosystem but not invest?

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

But although they looked at it, not many actually invested. Most of the VCs that Donald contacted were still waiting and watching. Bruce Lan, the managing partner of Bing Ventures, scanned nearly 100 projects and had not yet made a move.

RootData shows that the number of financings in 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 almost a financing deal every week in the three hot months.

The 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 a revenue of 12 million US dollars without issuing coins. More than one investment institution said, "In the future, it is not necessary for all the projects invested 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.

In early 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 one month ago.

Nearly 1 billion users can trade directly on the chain, which surprised Owen, who has been paying attention to large-scale applications.

After studying 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 the beginning.

Perceptually, Owen felt that many projects were very tasteless, which could be said to be "a pity to abandon and tasteless to eat." "Liquidity is also poor. TON's TVL at the 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 discouraged after scanning several projects. In addition to the small number of projects and generally low quality, he also found that the timing for the entire market was not right. "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 imperfections of the corresponding infrastructure, it is not so easy to build a DEX. ”

However, with the efforts of TON ecological infrastructure and other aspects, in just a few months, the project that Owen "disdained" has millions of users.

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 stable currency.

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 "regular troops" of Web2 to enter the market one after another.

Some Web2 entrepreneurs choose to go overseas in traffic depressions, which are similar to WeChat. Telegarm, with nearly 1 billion monthly active users, naturally becomes an important position. "The methodology refined in the Web2 battle for many years can be partially applied on Telegram. ”

Owen also revealed that Web2 game manufacturers such as Glacier, 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 Asia-Pacific VCs to pay attention to the TON ecosystem is the increased investment of top Western capital in the application layer and the TON ecosystem.

Both Paradigm and a16z participated in Farcaster's $150 million financing this year. Pantera Capital announced a heavy investment in TON in the first half of this year. According to analysts on the chain, 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 TON ecology." Shigeru, who was dissuaded by TON ecology last year, also began to pay close attention to it this year. Donald said, "Many VCs understand that more than 50 VCs put together only have a few billion dollars, and the capital volume of Asia-Pacific VCs alone cannot support a TON ecology. ”

The entry of Western capital also means that it may attract more Western developers and project parties to participate. Currently, most of the people building on the TON ecosystem are Eastern entrepreneurs and developers.

Donald has been in contact with both Eastern and Western entrepreneurs or developers in 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, the Asia-Pacific side will make an Asia-Pacific version and break through with its own traffic cost advantages and better operational capabilities. Two years later, the products with a million DAU may be half in the East and half in the West. ”

Why do most VCs only watch but don’t invest?

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

Ton.app shows that TON ecosystem currently has 910 projects, 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 keep up.

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

Owen came into contact with Notcoin last year The team behind it, "They were working on a TON ecosystem Launchpad platform, Tonstarter. I originally wanted to invest in Tonstarter, but the team said that their focus was on Notcoin and they did not plan to take VC money, but 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 financing in the cold start-up phase, and the amount of financing is very small. Donald has contacted many small game teams and found that "they have strong monetization capabilities." Scarlett, an investor in Pluto, the publisher behind Catizen, said that by adding a paid purchase module for game props, Catizen has achieved more than 12 million US dollars in revenue and more than 500,000 paying customers.

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

Bruce Lan, managing partner of Bing Ventures, has looked at most of the TON ecosystem small games. Like WeChat applets such as Yangleyang, it is expected that the life cycle is very short and disappears after rapid monetization. "It is difficult for VCs to have a positive ROI return guarantee. Such projects are more suitable for participation in the fair launch way. ”

In addition, the number of registered users of small games in the TON ecosystem is often tens of millions or even hundreds of millions, and "the data is still somewhat inflated." 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 being very competitive, CGV Fund partner Shigeru chose to focus more on the TON ecosystem infrastructure. He has recently looked at no less than 20 projects. In the absence of a large number of projects, some targets have "high valuations and are not easy to start with" due to the popularity of this round of TON ecosystem.

Although the market has high hopes for TON on a large scale, 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 will be air of different flavors." The so-called "coming out" means "at least a real 3 million DAU." ”

Many investors Donald has contacted are still waiting and watching. They hope to see TON ecosystem attract more top players from Web2 game giants such as ByteDance, Tencent, NetEase, and Western entrepreneurs to enter, and bring turning point projects to TON ecosystem.

In addition, VC’s own liquidity problems may also constrain investment in TON ecosystem. Donald said that VCs in the entire Asia-Pacific region have made fewer moves recently. Because of this round of ETF bull market, the entire copycat season has not taken off, "Institutions are more anxious about how to sell their chips. "No matter how hot the TON ecosystem is, the investment decision may be passed even if it reaches the partner stage." In Donald's view, the investment boom in TON needs to wait until the next interest rate cut cycle comes, and the traditional Web2 dollar fund and the Asia-Pacific Web3 fund have raised funds, so that the entire Web3 has sufficient funds and liquidity. It's better to 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 earliest investors in the TON ecosystem. Scarlett believes that Tap to earn games will definitely be eliminated, but he sees the growth space for Catizen after it gets huge traffic through games. After accumulating tens of millions of users, Catizen is also expanding its business boundaries and launching the Launchpool model. "In essence, it is more like a gamified Pump.fun. ”

PAKA is one of the few VCs that has made aggressive moves 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, DePIN, etc.

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 project looks simple, boring, or even rough, it is best to attract traffic at this time, and you can do anything with traffic later.

It's like when WeChat just opened its official accounts, the official 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, it becomes more and more difficult to do anything.

Bruce Lan feels that the TON ecosystem is tapping into the future. Earn games are similar to the small web games that emerged after 2000. "Even though they were very simple, many web games at that time could generate tens of millions of dollars in revenue per month. ” He also does not expect that TON ecosystem will produce a masterpiece similar to Honor of Kings in the short term. In his opinion, most of the players have only been in the game for a few months, and how to combine Web3 to play well will require a long exploration. The performance of TON chain also needs to evolve continuously to support high-performance games. Compared with the ecological positioning of PAKA's wide-ranging 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 incubate some projects with several top VCs 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 mutual takeover" in the crypto market.

He feels 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 "the East is bright, the West is not bright", and then the rune "the West is bright, the East is not bright".

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

However, in an ecosystem that does not completely rely 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.