Exclusive Interview with Tang Yi, Managing Partner of Qiming Venture Partners Supporting Chinese Web3 Entrepreneurs, Optimistic about the Market Next Year

Insightful Interview with Tang Yi, Managing Partner of Qiming Venture Partners – Championing Chinese Web3 Entrepreneurs and Forecasting an Optimistic Market Outlook for Next Year

Interview | Frank, LianGuaiNews

Written by | Zen, LianGuaiNews

LianGuai Ventures manages a total of 18 funds under its Qiming Venture Partners brand, with a total managed asset size of $9.5 billion. The company primarily invests in early-stage and growth-stage projects in the technology and consumer, as well as healthcare sectors. It has invested in over 530 high-growth innovative enterprises, with over 200 of them successfully going public or being acquired, and more than 70 becoming industry-recognized unicorns and super unicorns.

In fact, Qiming Venture Partners has also been actively involved in the Web3 industry in recent years. Its investments include Ethereum scaling project Scroll, Web3 infrastructure provider InfStones, decentralized wallet imToken, and encrypted financial services provider Matrixport. During the ETH Hong Kong event, LianGuaiNews had the opportunity to interview Tang Yi, the executive director responsible for Qiming Venture Partners’ investments in the Web3 sector, regarding the company’s investment strategy, focus areas, and industry analysis.

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LianGuaiNews: Please briefly introduce yourself and Qiming Venture Partners.

Tang Yi: Hello everyone, I am Tang Yi from Qiming Venture Partners. Qiming Venture Partners is a globally leading venture capital firm with 17 years of experience in the VC industry. In the crypto field, we started investing in 2019 and have already invested in 16-17 projects. Our investment strategy mainly focuses on supporting Chinese entrepreneurs and expanding into the global crypto market.

Our investment scope is very broad, ranging from infrastructure to application layer, and even some middleware, including wallets, and so on. Before joining Qiming Venture Partners, I was working at ConsenSys, which is a very large company within the Ethereum ecosystem.

LianGuaiNews: As an investment firm that has achieved remarkable success in both traditional and Web2 sectors, how does Qiming Venture Partners view the cryptocurrency and Web3 industry?

Tang Yi: We officially started investing in this field in 2019, which was a period when the market was relatively low. However, we strongly believed in the long-term potential of the crypto/Web3 industry. From a technological and talent perspective, we find this market very interesting, with many smart engineers and developers working on their own products and research in different domains.

We believe that the initial vision of crypto is to build a value network where users can have their own digital assets, value, and identity, and can swiftly exchange these values. Therefore, from a vision and goal standpoint, we find it very interesting. From the current state, it has some similarities to the early days of the internet. It has already established some de facto standards globally, such as the format and interaction rules of digital assets. Regardless of location, everyone recognizes and adheres to these standards and rules. Based on these factors, we see early signals indicating a great potential in this direction, and because of that, we have a long-term positive outlook. So from 2019 until now, whether during periods of market highs or lows, we continue to actively explore and make investments in this field.

LianGuaiNews: As a venture capital firm, 70% of your investments at QiMing are in Series A or Series B rounds. In the Web3 industry, where there are many startups, do you still maintain this habit and style?

Tang Yi: We feel that Crypto projects do present some differences when it comes to fundraising and related matters. Additionally, because the industry is still relatively early, many projects raise funds in the earlier stages, with generally smaller investment amounts that may be considered small for our fund size. We have made some adjustments internally to accommodate this situation, so we also make investments in earlier stages such as seed rounds or pre-seed rounds. Additionally, there are projects that have already reached the growth stage or have relatively high valuations, requiring larger amounts of capital for their ecosystems and subsequent development. We can also invest in these types of projects. Because our fund size is quite large, we have the ability to invest in a wider range of stages, so we can invest in early-stage as well as mid to later-stage projects. In terms of investment amounts and approaches in this industry, we can be relatively flexible.

LianGuaiNews: Besides Scroll, what other Web3 projects has QiMing invested in? Which directions do you think are worth paying attention to?

Tang Yi: Our investment coverage in the Web3 space is quite broad. From a user perspective, we believe that Crypto users can be more individual-focused or institution-focused, with the latter having a larger scale. In both cases, we pay more attention to projects related to user entry points or infrastructure. For example, imToken, a self-custodial wallet project, was one of our earlier investments (Editor’s note: Completed a $30 million Series B funding in 2021, with QiMing as the lead investor). From the perspective of institutions or users with larger amounts of funds, we have also invested in projects that lean towards traditional CeFi or attract more funds by combining CeFi with DeFi in a compliant manner. An example is Matrixport, an Asian cryptocurrency financial company that we have invested in (Editor’s note: Completed a $100 million Series C funding in 2021, with QiMing participating).

In addition, we have also made many investments in underlying infrastructure. A notable example is in 2019 to 2020, when we saw Ethereum transitioning from PoW to PoS as a clear change. Before it switched to PoS, we invested in two stake service providers, which we believed didn’t exist in the PoW era but had great opportunities and market space after the switch.

Overall, we have invested in around sixteen to seventeen companies, with a greater focus on underlying infrastructure (such as zero-knowledge proofs, middleware, security) and some early attempts in application layers, such as DeFi, NFT, and Gaming.

LianGuaiNews: In the prolonged bear market, the primary market has become increasingly quiet. How long do you think this situation will continue?

Tang Yi: The rhythm of this market is actually quite hard to judge. Most of the industry professionals I’ve encountered are optimistic that the market will turn around before the end of next year. But personally, I think this timing is very difficult to predict. I am relatively optimistic about the market getting better before the end of next year, but I’m also prepared for the unpredictability of the market. For the companies we invest in, the key is to ensure they have enough long-term financial reserves and ideally sustainable income and value capture. This way, even if there is no improvement next year, they still have opportunities in the following years and won’t be forced to exit the market in the harsh winter.

LianGuaiNews: What is the investment strategy of Qingming Venture Capital? What are the important influencing factors? Will the investment pace remain the same in bull and bear markets?

Tang Yi: Directionally, I don’t think it will change. We hope to invest at a relatively stable pace regardless of how the market is. However, it’s true that during a bull market, because of intense competition and a large number of projects being launched, the result is that everyone’s pace will be faster. In a bear market, on the other hand, because the market is colder, people tend to be more rational. We can have more in-depth discussions with the project team and spend more time on due diligence. The result is that the investment pace during a bear market will be slower. However, personally, I think this investment and financing state in a bear market is actually healthier for the entire ecosystem, including the projects.

LianGuaiNews: Referring to the Web2 unicorn companies in Qingming Venture Capital’s portfolio, what elements do you think are necessary for Web3 to truly achieve mass adoption?

Tang Yi: From a numerical perspective, for example, comparing the user base of Web3 and Web2 products of the same level, Web2 is probably at least two orders of magnitude higher than Web3. This difference is quite significant. In terms of user experience, the gap between the two is also larger than most people imagine.

The specific reasons are, first, for the majority of users, the acceptance and comfort of using cryptocurrency for payments differ significantly from Web2. Second, there are many areas where the underlying infrastructure is still incomplete. Including some very detailed points, for example, from the perspective of encrypted data, suppose you are a DeFi user, how much daily earnings can you actually get from the money you have locked in protocols like Ethereum staking? Many details in terms of data are not that well-developed. Not to mention the work that still needs to be done for EOA (Externally-Owned Account) wallets and AA (Account Abstraction) wallets that everyone is discussing. Therefore, overall, from the perspective of infrastructure, we still have a considerable distance to achieve mass adoption as imagined by everyone. This is definitely not something that can be quickly resolved in the short term, like within two or three years. Personally, I believe that more patience is needed.

LianGuaiNews: Many Web2 entrepreneurs are getting into Web3 entrepreneurship. Are you inclined towards this type of serial entrepreneur?

Tang Yi: Yes. Based on my personal observation, there are quite a few Web3 entrepreneurs that I know or that are in our investment portfolio who have had good entrepreneurial experiences in Web2. It’s a great choice for these entrepreneurs to venture into Web3 because they have undergone professional training, possess strong technical and execution abilities, and have a good understanding of product awareness, such as product-market fit. As long as they spend time learning and understanding user needs and industry requirements in Web3, they can grow quickly. Personally, I think this type of entrepreneur is quite good.

LianGuaiNews: Many Web3 entrepreneurs switch to the AI track after AI becomes popular. How do you view this phenomenon?

We are a comprehensive VC firm, and some team members have invested in the AI direction and had many discussions with friends in the industry about this topic. My feeling is that this phenomenon is quite understandable. Firstly, the problem in the Crypto industry right now is that some new use cases and scenarios have not emerged. This is indeed a dilemma, especially for application-layer entrepreneurs, who may feel a lot of confusion. Secondly, as I mentioned earlier, the development of widespread adoption may not be as fast as everyone imagined during the bull market, resulting in a significant psychological gap.

On the other hand, there have indeed been some major changes in the underlying AI technology. After a long period of development behind the scenes, the effects of large-scale models have finally reached a turning point, and many exciting things have happened. However, let me bring the conversation back to Crypto. It has also gone through the same cycle. When new changes in underlying technology come out, people may be overly optimistic and overestimate the short-term effects they can achieve in the application layer. Therefore, whether entrepreneurs choose AI or Crypto, they will face many challenges at the application layer and require a considerable amount of time to explore. I think entrepreneurs should explore more based on their own interests and abilities, while being aware of the uncertainties on both sides.

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