Who is Cypher Capital?
Cypher Capital is a multi-strategy cryptocurrency investment firm based in the United Arab Emirates. Its business encompasses areas such as venture capital, public markets, node operations, and mining. The company collaborates with globally renowned Web3 operators, providing not only financial capital support but also utilizing its international connections and industry knowledge to ensure the long-term success of projects.
《Tech Flow》invited Bill Qian, the President of Cypher Capital, to conduct an in-depth interview regarding Cypher Capital’s investment situation and the current bull market.
Full Q&A can be found here
Q: Hi Bill, could you talk about your recent investments?
Bill: Hello. We’ve been quite fortunate with our fund. During this bear market cycle, we heavily invested in Solana, Ton, and Sui, while also investing in star projects in the application layer such as Peaq, Uxlink, and Bouncebit. So overall, we currently have returns of over 6x, and the overall liquidity is very good.
Q: We’ve heard that many VCs are not having an easy time during this cycle. What’s your perspective?
Bill: In the previous cycle, everyone was rushing in after the listing (including VCs).
In this cycle, it’s a “let the bosses run first” cycle. Who are the “bosses”? Exchanges and founding teams. VCs are required by exchanges and founding teams to practice a “long-termism” value, so they’ve been tied up with lock-up periods averaging 3 to 4 years. They can only watch the price charts, watch exchanges and founding teams cashing out, and be idle and anxious.
I often joke that VCs in this cycle are not in a profitable business, but rather becoming “inferior” financial consumers, making donations (grants) to the industry and promoting its development. This can also be considered a good deed.
Q: But don’t founding teams also have lock-ups and follow a “long-termism” approach?
Bill: Are you referring to the lock-ups in the Team Allocation section of the financing pitch deck? That’s just a formal Team Allocation. You can understand that the entire token pie belongs to the founding team, so all the continuously unlocking tokens in the pie can be sold by the founding team under various pretexts.
Some projects sell tokens to continue developing their business, while others sell tokens to buy Ferraris.
Q: Few funds have captured projects like Solana/Ton and Sui in this cycle simultaneously. Can you share the stories behind these investments?
Bill: In this cycle, I directly bought our platform into becoming the largest investor in Solana in the Middle East, and probably one of the top three globally. When you feel that an opportunity is right, the remaining decision factors are courage and position.
As an investor who has experienced the entire journey from Web1 to Web2 to Web3, the training I received made me deeply understand the concept of “concentrate to get rich”. Whether it’s Tencent, JD.com for Hillhouse Capital, ByteDance for SIG, or Tesla for Baillie Gifford in Scotland, or Apple for Warren Buffett in his later years, heavy positions in core assets have always been the source of significant returns.
Q: You supported Ton very early on, could you talk about it?
Bill: We were the first institutional investor in Ton globally, and I was the first external director of the Ton Foundation. Our cost was less than a quarter of many funds in Silicon Valley that later invested.
The logic behind my joining the Ton Foundation as a director and advisor was that out of the top five social communication software companies in the world, one is in China, three are in the United States, and none of them can do Web3. There is only Telegram. So we invested. To be honest, at that time, Western investors had doubts about Ton. They thought they should avoid projects from Russians and feared being influenced by the previous Telegram Gram incident.
But because I live in Dubai and frequently meet with their team, I understand their passion and vision, so I became very determined. And if we take a step back, isn’t Crypto anti-establishment? Among those who make big money in this industry, who isn’t anti-establishment? For example, USDT and Binance.
Q: I remember that the primary market financing for Sui was quite competitive, mostly a16z, Sequoia Capital, and other US firms. At that time, Cypher was just a very young investment institution. How did you secure an allocation?
Bill: We are the first team globally to help a sovereign country establish a strategic Bitcoin reserve. We are the only listed Crypto company in the Middle East and the only listed state-owned enterprise in the Crypto industry (our group Phoenix’s major shareholder is a physical entity of the UAE government).
When communicating with the founders, instead of positioning ourselves as “a young investment institution,” we prefer to introduce ourselves as “industry investors” from the Middle East. So the founders were very willing to cooperate with us and allocated a separate $5 million quota to us. This also made us the only investor in Sui in the Middle East and probably the highest proportion among Chinese investors globally.
Q: Why did you heavily invest in Solana and become their largest investor in the Middle East?
Bill: Because we saw that developers were still engaged in the Solana ecosystem even after the emergence of FTX. At the same time, memes started to emerge. So when the market was still uncertain about Solana, we decisively went heavy on it and became the largest investor in Solana in the Middle East in 2023. We also brought Solana to the Middle East, and next year Solana will host the Breakpoint Summit in Abu Dhabi.
Q: Many people are criticizing VCs during this cycle, feeling that VCs are neither likable nor profitable. What do you think?
Bill: Things change over time. I’m not pessimistic about the VC industry at all, although we must admit that VCs in this cycle and this vintage are facing challenges. For the next cycle, it is very likely that the VC industry will have a better time due to the clearing out in this cycle and the emergence of numerous new innovations in the environment of technological progress and regulatory relaxation.
It’s like the VC vintage established in Silicon Valley in 1999, which was a bad vintage with most investments ultimately leading to bankruptcy. However, the VC funds established after the bursting of the Silicon Valley tech bubble experienced a turnaround in performance.
I am optimistic about the VC industry as a whole because the industry needs us. This includes selecting good teams and development directions for the industry, providing vision and resources to founders, improving the success rate of projects, and ultimately providing good assets to the secondary market.
Q: Web2 VCs are still conducting various billion-dollar AI projects. What do you think is different between Web2 and Web3 VCs?
Bill: They are still quite different. The Web2 industry needs to “build high walls, accumulate grain, and slowly claim kingship,” so the typical approach is: raise enough money in the primary market, such as $1 billion, $10 billion, or even more, which is “accumulating grain”; continuously expand market share, delay profitability, and build their own moat, which is “building high walls”; delay listing, so they don’t have to worry about quarterly reports and public investors, and delay dividends. These are all “slowly claiming kingship.”
The core support behind this strategy is private market capital, which is VC. That’s why we can see Web2 VCs getting bigger and bigger, with some funds managing $100 billion in a single fund, as they need to provide enough ammunition for the “nuclear war” between founders.
But the logic of Web3 is different. It emphasizes getting famous early. The current market cycle from the primary market to the secondary market is a bit too short, which doesn’t support good teams to solidly work on their products. This fast wealth creation industry encourages founders to chase hotspots, do market-making, and quickly list on exchanges.
Therefore, I believe that Web3 needs more “patient capital” and should move closer to the style of the Web2 industry, so as to accompany founders in accumulating more in the primary market.
Q: Thank you. One last question, how do you view the top of this bull market? Will there be a top or 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; the tree will definitely grow to the sky.”
The big logic of the Crypto industry is still growth, but the specific form is definitely a spiral rise within cycles. Market timing is difficult. We usually construct our portfolio based on the current market sentiment to make it more aggressive or defensive. Thank you!
This article is authorized to be reproduced from “Tech Flow”.