Why Monad’s Ecosystem Attracts Venture Capital Interest

Author: Yogita Khatri Source: theblock Translation: Shan Ouba, Golden Finance

Among them, Monad liquidity staking platform aPriori performed particularly well, with its $8 million seed funding bringing the token valuation to at least $100 million, which I reported exclusively at the time. It is quite surprising to achieve a nine-digit valuation before the Monad blockchain has even been launched. Two other projects, Monad liquidity staking protocol Kintsu and Monad-based on-chain order book exchange Kuru, raised $4 million and $2 million respectively.

All three projects have attracted well-known investors. The cryptocurrency arm of hedge fund giant Brevan Howard Digital backed Kintsu and Kuru, although the fund has relatively little investment activity in the cryptocurrency field. On the other hand, CMS Holdings has invested in all three of Monad's projects. Other notable investors in these projects include Pantera Capital, Electric Capital, and Castle Island Ventures.

Following closely behind, Monad Labs, the developer of the Monad blockchain, raised $225 million in a Series A round in April, led by heavyweight firm Paradigm, at a reported $3 billion valuation.

So what’s driving venture capital interest in Monad and its ecosystem? I spoke to six investors, all of whom were very bullish on Monad’s prospects, especially its potential for high transactions per second and Ethereum Virtual Machine (EVM) compatibility. “What’s particularly interesting about Monad is that it draws significant inspiration from Aptos and sui in the design of its parallel execution environment, while still maintaining compatibility with the EVM,” Aric Chang, general partner at Manifold Ventures and an investor in aPriori, told me.

Parallel execution allows Monad to process multiple transactions at the same time, increasing throughput compared to traditional sequential methods. On the other hand, EVM compatibility allows developers to use their existing Ethereum to develop projects on Monad without any changes. Citing Electric Capital's latest crypto developer report, Lauren Stephanian, general partner of Pantera Capital, said that the Ethereum and EVM developer communities are the largest communities in the crypto field. Pantera Capital is the lead investor in aPriori's seed round of financing. "Because Monad has differentiated high throughput, it enables the EVM developer community to build projects that can only exist in Solana, such as high-fidelity DeFi, DePIN, payments, etc.," said Stephanian. “The optimism about Monad is that as more developers innovate in these verticals, better products will be built.” Jed Breed, founder and general partner at Breed VC, an investor in Kintsu and Kuru, told me that Monad’s parallel execution and potential throughput of up to 10,000 transactions per second can unlock a lot of on-chain activity that wasn’t possible before. These investors believe Monad will drive cryptocurrency adoption in the next 2-3 years. Matthew Walsh, founding partner at Castle Island Ventures, Monad Labs, and an investor in Kintsu, believes Monad is a solid foundation for stablecoins, calling it a “killer app” that will continue to grow exponentially in the coming years. Manifold’s Chang said: “Monad’s growth trajectory has the potential to surpass Solana, attracting a diverse ecosystem of DeFi and consumer-facing applications.” CMS Holdings co-founder and principal Dan Matuszewski noted that while Monad may eventually reach Ethereum and Solana’s levels of adoption, it will take “years.” Robinson Burkey, co-founder of the Wormhole Foundation and early investor in Monad Labs, Kintsu, and aPriori, shared his thoughts on Monad’s competitive advantages, saying that compared to other EVM blockchains, “Monad promises to deliver an extremely fast and reliable blockchain (supply), and based on its ability to build so much momentum to date, it seems to guarantee an influx of builders and users (demand).” All six investors interviewed for this issue expressed a willingness to invest in more Monad-based projects. “We have committed the majority of our capital to Monad,” said Breed.

CMS Holdings’ Matuszewski mentioned that an increasing number of Monad projects have raised funding over the past few months. “They’ll probably all start going public between now and the fall,” Matuszewski said, hinting at another wave of Monad-based projects before the blockchain’s mainnet launch, scheduled for later this year.

Monad Labs co-founder and CEO Keone Hon acknowledged that it’s still early days for the Monad ecosystem and sees huge growth opportunities. “The number of crypto wallet users using decentralized applications is still small,” Hon told me. “Most crypto enthusiasts have only ever used centralized exchanges to trade crypto. The demand is huge, and the opportunity is huge.”

With opportunities come risks and challenges.

Monad’s Biggest Risks

Manifold Ventures’ Chang highlighted the two biggest risks facing Monad: the potential failure to deliver on its technical promises, and the challenge of attracting a wide range of applications after launch. “All of the Monad-native projects I’ve been involved with are built on Monad because they really need to run in a highly scalable environment, and if Monad doesn’t achieve the level of scalability it’s projected to achieve, its value proposition will fall apart,” Chang said. However, seeing the large ecosystem and community Monad has built “gives me a lot of confidence in its long-term success,” Chang added.

CMS Holdings’ Matuszewski echoed Chang’s sentiments, noting that Monad has to overcome significant technical hurdles. “Right now it’s a bit of a black box. You don’t know how it’s going to pan out,” Matuszewski said. But he also noted that Monad’s early adoption and community-building efforts suggest it could be “a very strong ecosystem to start with.”

Breed VC’s Breed noted that Monad’s platform is still in its early stages, so the technology is unproven, making it one of the biggest risks.

Wormhole Foundation’s Burkey also agreed on the importance of Monad delivering on its promises and expressed confidence in the project’s team. “With momentum comes responsibility to deliver on their promises in a timely manner,” Burkey said. “However, there’s no reason to believe they won’t deliver on their promises.”

Pantera Capital’s Stephanian said Monad’s biggest risk is attracting developers from other EVM chains. Stephanian said that despite Monad’s potential high throughput, it must convince those currently working on Ethereum’s Layer 2 and Layer 3 to make the switch.