How did I miss the 100x opportunity with Virtuals Protocol?

Author: Marco Manoppo Translator: TechFlow

In the bull market, our social media is always flooded with success stories that have achieved 100x returns (such as Hyperliquid's publicity, please stop flooding the screen). However, we rarely discuss the opportunities that were missed.

Today's article, I want to review the story of Virtuals Protocol, share how I got in touch with the founding team in the early days, and how I missed my first 100x opportunity as a venture capitalist.

Note: Strictly speaking, the first 1,000x opportunity I missed was participating in Solana's seed round investment through an angel friend in 2019, but I was not a real investor at that time.

Disclaimer: I am an investor in @primitivecrypto (PV). Although PV is not a venture capital firm in the traditional sense, we also conduct venture capital-like investment operations. The views in this article are my own.

Virtuals is one of the biggest investment opportunities I missed in this cycle. The founding team first contacted me in July (during ETHCC) when their fully diluted valuation (FDV) was only $50 million. Prior to this, I actually heard about this project in Q1 through mutual friends when their valuation was even lower. Fast forward six months later, this AI agent tokenization platform has become one of the focal points of the current crypto cycle.

Virtuals’ co-founders Jansen and Wee Kee have indeed shown extraordinary perseverance.

I clearly remember how they tirelessly introduced Virtuals to investors and industry insiders. As they are mostly based in Southeast Asia (SEA), I heard about their rebranding from the PathDAO days and their theories on AI agent tokenization from some crypto friends. This perseverance to continue to push forward the project despite the bear market and the lack of major centralized exchanges (CEX) listings is admirable. Many other founders would have returned the funds or abandoned the project, but the Virtuals team persevered and returned to the market in a stronger position.

Why did I make the wrong decision?

Earlier this year, we saw a lot of projects that combined crypto and AI to try to achieve decentralized computing or reasoning. Frankly speaking, many of these projects are just empty talk. Most of them don’t have an effective way to really attract ordinary users to participate. Sure, you may get some airdrops by joining the network and running some calculations, but these are far less attractive to large-scale ordinary investors than the pool2 model of GameFi or DeFi.

At first, I thought these projects would collect unique data in some gamified way and combine it with consumer-centric applications to make the experience more unique - maybe with some elements of "Ponzi economics". After all, data is still the core of any AI model; and using "free Internet currency" to incentivize people to share unique data seems to be a better way.

Remember Westworld Season 3?

However, it turns out that the crypto market is polarizing. We skipped right past what I just mentioned and entered the asset issuance phase - which is still the most important product-market fit (PMF) in the crypto space.

The Virtuals team, with all their previous efforts, is very well suited to seize this opportunity.

The Emergence of GOAT

It is often said that luck is what happens when preparation meets opportunity.

I don’t need to go into detail here about what GOAT is; if you are not familiar with this phenomenon, you can refer to this explanatory article. In short, GOAT sparked the AI ​​agent token craze because it got the market imagining what’s possible when AI agents can interact with a currency. While GOAT has some limitations, such as requiring a certain level of human intervention, the key point is that it makes people believe that when AI agents meet cryptocurrency, a whole new field of experimentation will be opened up.

Recognizing this opportunity, the Virtuals team acted quickly to demonstrate their technical prowess.

Their tokenized AI agent LUNA went live on October 16, just a week after GOAT’s release. If you know anything about the crypto industry, you’ll know that being a “protagonist beta” is far from enough. At a breakfast meeting in Bangkok, Jansen told me that the Virtuals team sprinted to make LUNA the first AI agent that can autonomously conduct on-chain transactions.

Reflection: How to seize winning opportunities in the crypto market?

Reflection is often subjective, but here are some of my takeaways:

• Tenacity: The Virtuals team has demonstrated extraordinary perseverance by continuously iterating its products. While different founders perform differently due to their personal backgrounds and motivations, investing in teams that don't give up easily, always maintain high ambitions, and keep up with market trends is key.

• Geographical advantages and rapid experimentation: Typically, projects that attempt rapid experimentation (such as platform or launchpad models) find it difficult to succeed in Western markets because of the higher costs. The Virtuals team, being located in Southeast Asia, is able to iterate quickly at a lower cost while benefiting from a user base and capital markets denominated in U.S. dollars.

• Resilience and pragmatism: The strength of Southeast Asian founders lies in their resilience and pragmatism. The business culture in the region has always focused on "pragmatism first", whether it is traditional business, Web2 or the crypto industry, it is to localize the successful experience of the Western or Chinese market. This pragmatic and business-oriented way of thinking is fully reflected in the Virtuals team.

What are the future trends?

The AI ​​agent craze has only lasted for about two months, but I feel as if I have experienced two years of baptism. Although the market has shown some fatigue, I believe that by 2025, we will see more AI crazes combined with cryptocurrencies. Innovations in the crypto industry often start from the most enthusiastic areas and gradually develop into more mature practical application scenarios.

One ​​fact that cannot be ignored is that without cryptocurrency, AI experiments will be greatly limited.

This is particularly evident in the experiments of AI agents. Imagine that you cannot let a random AI agent touch real capital in the traditional financial system (TradFi) unless you prepare a lot of documents and lawyers to support it. Not to mention handing cash directly to an AI agent. Cryptocurrency, as a purely digital form of currency, provides the most suitable carrier for these experiments.

Therefore, the experiments of AI agents will gradually develop from simple functions (such as a GPT wrapper that can tweet, valued at $100 million) to more interesting application scenarios. Here are some of the directions I personally look forward to:

• More AI agent tokenization frameworks and platforms: Although the Virtuals team has been launching new products at a rapid pace, there is still a lot of room for competition in the market. For example, platforms like @ai16zdao, @MoemateAI, @Spectral_Labs, and @griffaindotcom have begun to emerge and gradually occupy market share.

• Niche AI ​​agent experiments: Some projects (such as @freysa_ai, @aiwdaddyissues, and @Big_Pharmai) have demonstrated more niche experiments and application scenarios. The key to these projects is how to develop from an interesting experiment to a real protocol with long-term commercial value.

• Consumer-oriented crypto x AI applications: How to keep the uniqueness and innovation of AI agents while turning them into practical applications that attract consumers? This can even be combined with other AI products such as data collection, model training, or inference services. The key is to make the experience of using AI agents both novel and practical.

• Combination of AI agents with "sideline" businesses: I dare not make too many predictions here, but it is foreseeable that in the future, more AI agents will create significant cash flow by participating in certain "sideline" fields (such as gambling, adult industry, etc.), rather than relying solely on token issuance or crypto market transactions.

• Combination of AI agents with payment systems: As the ability of agents to interact with each other improves, we can explore how to use AI agents to achieve a more seamless on-chain and off-chain payment experience, thereby optimizing the payment process.

When faced with community-driven innovation, the traditional venture capital mindset can sometimes seem limited. The core of learning is to remain open to new experiments, not bound by traditional ideas, and be able to adapt quickly, rather than blindly pursuing idealism. Primitive is always looking for brave founders. If you are looking into any of the above directions, please get in touch with us!