Who is Cypher Capital?
Cypher Capital is a multi-strategy cryptocurrency investment company based in the United Arab Emirates, with operations covering venture capital, public markets, node operation, and mining, among other areas. The company collaborates with globally renowned Web3 operators, providing not only financial capital support but also leveraging its international connections and industry expertise to ensure the long-term success of projects.
“Tech Flow” invited Bill Qian, the President of Cypher Capital, for an in-depth conversation regarding Cypher Capital’s investment situation and the current bull market.
Full Q&A can be viewed here:
Q: Bill, could you talk about your recent investment situation?
Bill: Hello. Our fund has been relatively fortunate, heavily investing in Solana, Ton, and Sui during this bear market cycle, while also successfully investing in star projects on the application layer like Peaq, Uxlink, and Bouncebit. Currently, we have seen over 6x returns overall, and the overall liquidity is very good.
Q: We’ve heard that many VCs are having a tough time in this cycle. What’s your perspective?
Bill: In the previous cycle, everyone rushed in after the listing (VCs followed suit).
In this cycle, it’s a period of “let the bosses go first.” Who are the “bosses”? Exchanges and founding teams. VCs are now required by exchanges and founding teams to practice a value of “long-termism,” thus being tied up with an average lock-up period of 3 to 4 years, only being able to watch the candlestick charts and witness the exchanges and founding teams cashing out, feeling helpless and anxious.
I often joke that VCs in this cycle are not in a profitable business but rather turning themselves into “inferior-grade” financial consumers, providing grants to the industry, promoting the industry’s significant development, which can also be seen as a virtuous deed.
Q: But don’t founding teams also have lock-ups and follow a “long-termist” approach?
Bill: Are you referring to the lock-up in the Team Allocation section of the financing pitch deck? This is merely a formal Team Allocation. You can understand it as the entire coin pool belonging to the founding team, so all the continuously unlocked coins in the pool can be sold by the founding team for various purposes.
However, for some coins, the team sells them to continue developing the business, while for others, the team sells them to buy a Ferrari.
Q: Few funds have managed to capture Solana/Ton and Sui in this cycle simultaneously. Could you share the stories behind these investments?
Bill: In this cycle, I directly made our platform the largest investor in Solana in the Middle East, likely ranking within the top three globally. When you believe an opportunity is right, the remaining decision factors are courage and position.
Having experienced investments from Web1 to Web2 and now to Web3, my training has deeply ingrained the concept of “concentrate to get rich.” Whether it’s Tencent, JD.com for Hillhouse Capital, Bitmain for SIG, or Tesla for Baillie Gifford in Scotland, or Apple for Warren Buffet in his later years, heavy concentration in core assets has always been a source of significant returns.
Q: You supported Ton early on. Could you elaborate?
Bill: We were the first global institutional investor in Ton, and personally, I was the first external director of the Ton Foundation. Our cost was less than a quarter of what many Silicon Valley funds later invested.
The logic behind my joining the Ton Foundation as a director and advisor was this: among the top five social communication software globally, one is in China, three are in the United States, none of them can do Web3, except Telegram. So, we invested. Frankly, at that time, Western investors had doubts about Ton, wary of touching Russian projects, and also afraid of being influenced by the previous Telegram Gram incident.
But because I live in Dubai and frequently meet with their team, understanding their passion and vision, I became very resolute. Furthermore, if we take a step back, isn’t Crypto all about anti-establishment? In this industry, where do the big profits come from if not from anti-establishment projects? For example, USDT, Binance, etc.
Q: I remember there was intense competition in Sui’s primary market financing, mostly involving a16z, Sequoia US, and others, while Cypher was a relatively young investment institution at the time. How did you secure the allocation?
Bill: We are the first team globally to help a sovereign nation establish a strategic Bitcoin reserve, the only Crypto-listed company in the Middle East, and the only listed national Crypto enterprise globally (our group Phoenix’s major shareholder is a physical entity of the UAE government).
During discussions with the founders, instead of positioning ourselves as a “young investment institution,” we preferred to introduce ourselves as “industrial investors from the Middle East.” Consequently, the founders were very willing to collaborate with us, granting us a separate allocation of $5 million. This made us the sole investor in Sui in the Middle East and likely the highest among global Chinese investors.
Q: Why did you heavily invest in Solana, becoming their largest investor in the Middle East?
Bill: Because we saw that developers were still active in the Solana ecosystem post-FTX. At the same time, MEME began to rise. So, when the market was uncertain about Solana, we decisively increased our position, becoming Solana’s largest investor in the Middle East in 2023. Additionally, we brought Solana to the Middle East, and next year Solana will host the breakpoint summit in Abu Dhabi.
Q: This cycle, many are criticizing VCs, feeling that VCs are neither likable nor profitable. What’s your perspective?
Bill: Everything has its time, prosperity and decline are transient. I am not pessimistic about the VC industry at all, although we must acknowledge that VCs in this cycle and vintage are facing challenges. For the next cycle, it is highly likely that due to the clearance of VCs in this cycle and the emergence of a large number of new innovations in the environment of technological progress and regulatory relaxation, the days of VCs will improve.
It’s like the VCs founded in Silicon Valley in 1999, which was a bad year, with most investments eventually leading to bankruptcy. However, VCs founded after the bursting of the Silicon Valley tech bubble saw a reversal in performance.
I am optimistic about the VC industry as a whole because the industry’s development requires us to: select good teams and development directions for the industry, provide vision and resources to founders, increase the success rate of projects, and ultimately provide good assets for the secondary market.
Q: Web2 VCs are continuously working on various billion-dollar AI industry projects nowadays. Do you see any differences between Web2 and Web3 industry VCs?
Bill: They are still quite different. The Web2 industry requires “building high walls, accumulating grain, and proclaiming king slowly,” so the typical strategy is: raising enough money in the primary market, such as $1 billion, $10 billion, or even more, which is the “accumulation of grain”; continuously expanding market share, delaying profitability, establishing their moat, which is “building high walls”; delaying listing, thus not needing to consider quarterly reports and public investors, delaying dividends, all of which are “proclaiming king slowly.”
The core support behind this strategy is private market capital, i.e., VCs. Hence, we see Web2 VCs growing larger and larger, with some funds reaching $100 billion in a single fund, as they need to provide sufficient ammunition for the “nuclear warfare” among founders.
However, the logic of Web3 is different, emphasizing “get famous early.” Currently, the cycle from primary to secondary seems a bit too short, not supporting good teams to steadily develop products. This fast-paced industry model encourages founders to chase hotspots, capture market share, and quickly list on exchanges.
Therefore, I believe that Web3 actually needs more “patient capital,” leaning towards the style of the Web2 industry, to be able to support founders in accumulating more in the primary market.
Q: Thank you. One last question, how do you view the peak of this bull market cycle? Do you think there will be a peak, or will there be a Super Cycle?
Bill: When people start talking about a Super Cycle, one must be cautious. It’s like someone telling you, “This time is different; this time the tree will definitely grow to the sky.”
The fundamental logic of the Crypto industry is still growth, but the specific form undoubtedly spirals upward within the cycle. Market timing is challenging, and we typically construct our portfolio based on the current market sentiment to make it more aggressive or defensive. Thank you!
This article is authorized for reprint from “Tech Flow.”