Missing out on 100-fold returns: Reflections on VC investors’ investment decisions

I read an article over the weekend titled "How I, as a VC, missed the 100x investment opportunity in Virtuals Protocol." It reminded me of what I wrote about missing out on Pudgy Penguins a few days ago, so I summarized some thoughts and would like to share them with you.

In this article, the author describes in detail the entire process of his interaction with the Virtuals team. In my opinion, the following key events are worthy of attention in this interaction:

First: "The founding team first contacted me in July (during ETHCC), when their fully diluted valuation (FDV) was only 50 million US dollars. Before that, I actually heard about this project through mutual friends in the first quarter, when their valuation was even lower."

Second: "I heard from some friends in the crypto field about their rebranding from the PathDAO era and their theory on the tokenization of AI agents. This perseverance to continue to advance the project in the face of a bear market and no major centralized exchanges (CEX) listing is admirable. Many other founders may have chosen to return funds or abandon the project long ago, but the Virtuals team persisted and returned to the market in a stronger posture."

Third: "Earlier this year, we saw many companies combining encryption and AI of projects attempt to achieve decentralized computing or reasoning. Frankly, many of these projects are just empty talk. ”

Fourth: “GOAT sparked the craze about AI agent tokens because it got the market imagining what possibilities would arise when AI agents could interact with a currency.”

“Recognizing this opportunity, the Virtuals team acted quickly and demonstrated their technical prowess. Their tokenized AI agent LUNA went live on October 16, just a week after GOAT was released.”

When the first event occurred, the track in which the project was located did not see any prospects for the time being, or even if there might be prospects, the future uncertainty was still considerable.

Just a low valuation is not an advantage.

Therefore, if you are conservative, there is nothing wrong with not investing in this project. If it were me, I would not invest either.

This reminds me of the Tesla case.

A technology investor whom I admire very much once said: He began to bet boldly on Tesla only after the Shanghai factory was able to successfully achieve large-scale mass production. If Tesla does not reach this step, it may be finished at any time. Only when it reaches this step, there is a possibility of miracles later.

I agree with this point of view very much, and I think investing in crypto projects is similar. If a track is too uncertain and may die at any time, the risk of betting at this time is still too high.

When the second event occurs, investors can be clear about one thing: the founder of this team is reliable and trustworthy. From the perspective of investing in a project is investing in people, this project has passed the test.

But that's all. Passing the test does not mean that the project will be successful. The success of a project also requires success in execution, strategy and other aspects. These factors need to be tested by the market, and they are still not visible at this time.

So at this point, if it were me, I would still not invest, but I would pay attention to the development of this project. Once I feel that its subsequent operations, strategies and policies are in line with my expectations, I will be ready to join the game at any time.

For the third event, my feelings are exactly the same as this investor. I am not optimistic about most of the early AI + Crypto projects, and I think they are pseudo-demands under the guise of the trend.

I think the most important thing is the fourth event.

If investors believe that AI agents will have great room for development after the emergence of Goat, and see that Virtuals' model of using encrypted assets to help AI agents raise funds and support the development of AI agents works, then they can really enter the game boldly at this time.

Because at this time, investors have confirmed that the team is reliable, the direction is correct, and the strategy is correct, then the remaining risks should be taken boldly.

So as long as you can boldly enter the game at this step, I don’t think it’s a missed opportunity.

Although the return is much smaller than entering the game when the first thing happens, the risk of entering the game at this time is also much smaller. For investors with a slightly larger amount of funds, I think it is most appropriate to enter the game at this step.