Original Interview: Jack, BlockBeats;
Original Editor: Zhouzhou, BlockBeats

In this cycle, the top-tier investment institution that is "doing the best" in the crypto space is undoubtedly AllianceDAO. At least among retail investors, it remains the dark horse VC that "incubated applications with $1 billion in revenue." Currently, the primary crypto market is bleak, with fund managers on social media comparing their IRR and DPI, lamenting their situations. Facing the future, some funds have "run out of ammunition" and shifted to secondary markets, while others have ceased operations and stopped fundraising. At this moment, Qiao Wang, the founding partner of AllianceDAO, stated: "We want to increase investments and become more aggressive."

Of course, Alliance is not blindly optimistic, nor is it simply "greedy when others are fearful." What lies before them is a collapsing narrative in the Web3 world and a crypto industry suffering from a talent drain. At the crossroads of Crypto and AI, how does a niche VC make choices? How do they position themselves? This is not a simple question and is something Qiao Wang truly needs to think about and resolve. Fortunately, he understands: "Most VCs in this industry do not know how to invest in the application layer."

"The Most Knowledgeable About China" Dollar VCs Decide Whether to "Pull the Trigger" in 5 Minutes

From "Trump supporter" to "Trump critic," the group that has changed its attitude the most in American politics over the past few months may be the crypto community. Since Trump launched the meme coin $TRUMP, industry liquidity has begun to dry up, and the bullish sentiment that had been heating up since Trump's election in November has gradually dissipated. The "tariff black swan" on Liberation Day became the catalyst for a 180-degree reversal in the crypto community's attitude.

Now, many in the crypto community have become avid followers of macroeconomics, with no one caring about undervalued quality assets in the market or "the future crypto narrative." According to industry media reports, investment activities in the primary market have reached a historical low in recent years. However, AllianceDAO has decided to invest in more projects, and to do this, Qiao Wang can now make judgments after just 5 minutes of conversation with startup teams.

BlockBeats: As a founding partner of a prominent crypto investment institution, do you often consider the impact of macroeconomic changes on your company?

Qiao Wang: As a lean startup, the external environment actually has little impact on us. We don't spend much money to begin with, and our limited energy is still focused on those expenses. As long as we maintain a lean management philosophy, the impact is minimal.

But I believe the biggest issue between China and the U.S. is mutual misunderstanding. This misunderstanding is fundamental. For example, the U.S. tax policy towards China assumes it can force China to make concessions, but this completely misjudges the situation. This strategy may have been effective in 2018, but now China's reliance on U.S. exports has significantly decreased, and the economy is transforming, actively reducing dependence on the U.S.

Moreover, the trade war has actually united the domestic front. The economy may be under pressure, but external threats have brought people together. The U.S. has completely messed this up. Of course, I'm not an expert; this is just my understanding based on observation, and I hope everyone learns more.

BlockBeats: Is this misunderstanding reflected in the English crypto community? Does it have a significant impact on the crypto industry?

Qiao Wang: This misunderstanding is indeed deeply rooted. For the past decade or so, from the government to the media to society, the U.S. has generally viewed China as an "enemy" rather than a competitor. This zero-sum thinking—"If China wins, we lose"—has dominated policy, culture, and social decisions, and it is difficult to change in the short term. This exists from top to bottom and cannot be changed overnight.

The situation in the crypto industry is somewhat better. Most practitioners are smarter and have a more comprehensive understanding of the world than the average American. Among the people I interact with, they usually see China as a respected competitor rather than an enemy. This differs from the views of mainstream U.S. media and government, where ordinary Americans are more influenced by the media and see China as a threat.

In the medium to long term, the macroeconomic impact on the crypto industry is not significant. There will be short-term fluctuations because the market will move with U.S. stocks. However, several executive orders signed by Trump are very favorable for the crypto industry, overall being positive. For our business, the focus remains on finding good projects; macro fluctuations will not change our investment logic.

BlockBeats: Many believe that the performance of U.S. stocks largely determines the performance of BTC, and many also think that global M2 is a dominant factor in BTC prices. What are your expectations for the performance of the crypto market this year?

Qiao Wang: I do not have a strong judgment on the short-term trends of the crypto market because there are two opposing forces at play. On one hand, U.S. stocks may decline in the short term (3-6 months) due to economic recession or inflation data, dragging down the crypto market. Especially since U.S. stocks are currently highly valued, they may go down in the next 3-6 months. On the other hand, global liquidity is increasing, such as through money printing, which may push up crypto asset prices. I cannot predict which of these forces is stronger. Therefore, I do not have a clear view on the short-term crypto market, but U.S. stocks are likely to fall.

The calculation of M2 varies by person, such as whether to include data from China or other countries. But overall, global M2 is rising, and the long-term trend of crypto assets is highly correlated with M2. In the short term, other factors like U.S. stock fluctuations may dominate the market.

BlockBeats: According to media reports, investment activities in the primary crypto market have dropped to a freezing point in recent months. Is AllianceDAO itself feeling this "cooling change"?

Qiao Wang: Over the past year or two, VC investments in the primary market of the crypto industry have basically remained flat. If the secondary market (like coin prices) rises while the primary market remains stagnant, it indicates that the primary market is underperforming compared to the secondary market. Once the secondary market declines, the primary market may suffer even more, and it may continue to decline in the next one or two quarters. However, Alliance's incubation program is not affected by the number of investments from other VCs. If market investments decrease, we may actually invest more. The key is whether there are good projects; we will not invest blindly without good projects.

BlockBeats: AllianceDAO has always had a unique methodology in product entrepreneurship and incubation, especially during the previous MEME craze. Now that the MEME cycle seems to have been deemed "in the past," will you reflect on your previous investment and incubation strategies?

Qiao Wang: We review and reflect every day, but our overall investment approach will not change due to the decline of a particular sector. We focus on excellent teams and promising directions. Over the past year, we have optimized our decision-making process: previously, we would talk with the team for an hour and have two in-depth discussions.

Now we find that after carefully reviewing the application materials, a 20-minute conversation is sufficient, and we can make a decision within 24 hours. Because early information is limited, intuition and industry experience become more important. The core is the clarity of the team's logic, their ability to express themselves, and their desire for success; these can often be sensed in just 5 minutes.

BlockBeats: When judging a team's potential in 5 minutes, what details do you mainly look for?

Qiao Wang: First is logical clarity; they should be able to explain complex issues simply. Second is passion; I need to feel that they genuinely want to make things happen. The remaining time is mainly spent understanding areas or project details that we are not familiar with, but the overall feeling about the team can usually be determined in 5 minutes. In the very early stages, the team's direction or sector may not be clear, but these are not key factors.

Crypto Entrepreneurs "Flee" to AI

Recently, IOSG founding partner Jocy posted on social media, stating that another project in his investment portfolio has transitioned to AI, expressing concerns about the prospects of the crypto industry.

"Crypto entrepreneurs are fleeing to AI" is a sad statement, but it is indeed a fact. Qiao Wang does not deny the existence of this situation; in the latest AllianceDAO incubation program, one-third of the projects are pure AI startup teams, whereas in the previous incubation program, pure AI projects were only a small part. During this period, many projects have also shifted to the AI field.

The phenomenon of crypto VCs being "forced" into AI investments may be becoming increasingly common in the industry. When fund managers find themselves with a number of AI entrepreneurs in their investment portfolios, they seem to have to consider: what advantages do they have in the AI field? How should they position their funds?

Crypto VCs "Forced" into AI Investments

BlockBeats: In this cycle, many fund managers have mentioned that many projects in their investment portfolios have transitioned to AI. Does AllianceDAO have a similar situation?

Qiao Wang: In our latest incubation program, we have 25 projects, about 1/3 of which are related to AI. Some teams started out doing pure AI projects, while others originally worked on crypto projects and later transitioned. They choose us mainly because the team has a background in the crypto industry and understands our incubation model.

BlockBeats: Why would pure AI projects choose crypto institutions as their incubation platform?

Qiao Wang: These teams previously worked or started businesses in the crypto industry and now want to do AI. They happen to know us and applied for our program. The AI projects they are working on are mostly vertical applications, such as in education, law, or advertising, where industry experience is more important than AI technical background.

BlockBeats: When did this transition phenomenon start to occur frequently?

Qiao Wang: About the past six months, starting from the end of last year.

BlockBeats: Is the transition process initiated by the teams themselves notifying you, or is it a decision made together during discussions with you?

Qiao Wang: Some teams have very strong ideas of their own, make decisions first, and then come to discuss with me. Others will first think about how to consult with me on the next steps, and I will give them some advice. If I feel they have a strong understanding of users and the market in a certain area, I might even give them some AI ideas. Then we discuss together what the next steps should be. So, basically, both situations exist.

BlockBeats: When the Web3 craze first emerged, many internet teams chased the trend. Now crypto entrepreneurs are chasing the AI trend. How do you judge whether a project is engaging in "trend arbitrage"? Do you have concerns about the success rate of those teams that are seriously transitioning to AI?

Qiao Wang: We are very vigilant about this issue. When Web2 transitioned to Web3 in 2021, we invested in some projects and later found that some teams were just chasing trends. Now, when communicating with AI teams, we delve into product details, target markets, user pain points, and why they are pursuing this project. The core is to determine whether they truly understand the industry and whether they are solving real problems. Ideally, the team should be addressing their own pain points; this motivation is the most genuine.

The biggest reason for startup failure is that the problem being solved does not exist. Teams transitioning from Web2 to Web3 often assume there is market demand, but that may not be the case. Now, when communicating with AI teams, we focus on: Who are the target users? What are the pain points? How do we validate these pain points? The ideal situation is when the team is solving their own problems because they understand the authenticity of the pain points best.

For example, one team we invested in has a background as a product manager at Uniswap. They discovered that TikTok advertising costs are high and used AI to significantly reduce those costs, which is a pain point-driven startup. Moreover, some individuals feel that if this problem is not solved, it is very uncomfortable for them because they personally face this issue, so they must solve it.

BlockBeats: Some entrepreneurs are concerned that the iteration of large models may render vertical applications worthless. How do you view the investment logic for AI projects, and how does it differ from crypto investments?

Qiao Wang: The key is whether the project can provide value that large models cannot replace, such as a unique user experience or exclusive data. Take Cursor as an example; it uses AI to assist in coding. Although it relies on large models, its value increases with the iteration of the large model through developer data and optimized user experience.

When we invest in AI applications, we focus on the team's deep understanding of the industry and their ability to solve real pain points, rather than just their technical background. The main focus is on the product and market: Who are the target users? What pain points are being addressed? Why choose this market? What unresolved issues exist in the market? Each project is different, and the questions are very specific, aimed at confirming whether they have thought deeply and truly understand user needs.

BlockBeats: In your view, what is the main driving force behind most teams transitioning to AI?

Qiao Wang: Yes, it mainly revolves around seizing opportunities and trends. Additionally, they find the work itself very interesting, which is very important.

BlockBeats: What does "interesting" specifically refer to?

Qiao Wang: "Interesting" means they find the technology itself fascinating and that it can solve user pain points. For instance, one of the biggest issues in Crypto over the past decade is that many teams did not solve a real problem.

However, in the AI field, they may see some genuine pain points and believe that AI can help address these issues, which is where they find it interesting. Do you understand? Look, as you mentioned earlier, many large companies, like Tencent, produce strong products and market them quickly, but ultimately they still rely on issuing tokens. It is quite clear that this is not solving real problems but merely a way to make money.

BlockBeats: Will the trend of entrepreneurial teammates or allies "turning to AI" affect the momentum and confidence of other crypto entrepreneurs in your investment portfolio?

Qiao Wang: Yes, this will definitely have an impact. Every person starting a business in the Crypto field will be influenced by this. It could be the influence of friends around them or the impact of public opinion. At such times, everyone starts to think: Why am I still doing Crypto? Why haven't I moved to AI? This mindset is actually quite normal.

BlockBeats: Crypto entrepreneurs seem to be showing a similar enthusiasm for AI as internet entrepreneurs did for "Web3" and "the Metaverse."

Qiao Wang: Yes, in the last cycle, there were two mainstream narratives: one was the Metaverse, and the other was Web3. I have always thought that was a "false narrative," and there was nothing truly interesting about it for me. However, I found Web3 to be very interesting at that time, and I still think it is very interesting now.

Web3 accomplished what I believe is the most core thing: decentralized social media. This is fundamentally very interesting because it does not give such immense power to companies like Twitter or Facebook. However, perhaps at that time, users did not truly feel a significant demand for this, or the technology had not yet developed to a level that could address user pain points.

From Crypto verticals to general technology, Alliance is rethinking branding issues.

BlockBeats: After the projects you invested in transition to AI, do they need to adjust their financing models and amounts?

Qiao Wang: In terms of application, the financing model does not differ much. However, I believe that AI's first true killer app in the past few years has significantly improved developer efficiency.

You may have seen some articles I posted recently. Since ChatGPT first came out—around November 2021—I have been asking the teams we invest in one question: How much has AI improved your engineering efficiency?

In the first few months, their responses indicated an efficiency improvement of about 20% to 50%. But I track this question every year, and the most recent time I asked them, their response was: It has improved to 2 to 4 times. From the initial 20%-50% to now 2-4 times, this is a remarkable change.

So, if this trend continues, the funding required by entrepreneurs in the next 5 to 10 years will actually decrease. Because one engineer may be able to accomplish what it previously took four engineers to do. Based on this judgment, our current investment philosophy has become very simple: We give you $500,000, and you take two or three people to work on it. Two or three people can sustain for about two years, which should be enough for you to find product-market fit.

Then, once you find product-market fit, either you have started making money and can begin hiring more people, or it will be easier for you to raise funds, whether it's a Series A round or a later seed round, to hire more people and scale up. In this regard, whether it's an AI project or a Crypto project, as long as it is in the application layer, there is essentially no difference. Of course, if you are working on something more foundational or infrastructure-related, then you may indeed need more money, right?

BlockBeats: Does AllianceDAO currently have any cases of transitioning to AI and successfully finding PMF?

Qiao Wang: My definition of product-market fit is actually quite strict. In my view, true product-market fit means that your product's weekly or monthly growth rate can stabilize at 10% to 30%, or even higher. At the same time, you have started to achieve annual revenues in the seven figures or even higher.

Moreover, the key is that user demand is continuously pouring in, to the extent that your team finds it difficult to cope. Only in this state do I consider it to have reached PMF. If we look at this standard, currently, I have not seen any projects that have transitioned from Crypto to AI and truly reached this level.

BlockBeats: Is it because these teams are just starting out? Or have they encountered some issues?

Qiao Wang: I think it is mainly because they are just starting out. In fact, the trend of transitioning from Crypto to AI has only begun in the last six months or so, so they may need more time to truly find product-market fit.

Moreover, the competition in AI is also extremely fierce; it can be said to be "intensely competitive." In almost every vertical field, there are dozens or even hundreds of teams doing similar things, making the competition very intense.

BlockBeats: Returning to AllianceDAO itself, which is an investment institution focused on the crypto field, do you think about branding issues now that your portfolio includes a number of pure AI startup teams?

Qiao Wang: Yes, we will think about some branding issues, and we are gradually improving our branding. Ultimately, we want to create an accelerator that continues to focus on Crypto but will also venture beyond Crypto.

Because technology always feels like a wave after wave, and each wave may last 5 to 10 years, or even longer. However, once this wave passes, the investment opportunities may not be as abundant as they were in the early stages. Therefore, you need to look at what the next wave is, and ultimately we will create accelerators in various fields.

BlockBeats: When crypto VCs venture into the AI field, do you feel that the risk factor you face has increased? Additionally, does this phenomenon of entrepreneurs "fleeing" affect your personal confidence in the industry?

Qiao Wang: I do not feel that the risk factor has increased. Although AI is indeed highly competitive, it is still a very large trend. I believe this trend may be an order of magnitude larger than cryptocurrency.

So, overall, I do not feel that the risk factor has increased. As for the impact of AI on cryptocurrency, there is certainly an effect, as I have personally witnessed many cryptocurrency entrepreneurs turning to AI. From my personal feeling and the data, it is indeed true that many talents have flowed into the AI field.

"Every Entrepreneur Who Has Transitioned from AI to Crypto, We Have Invested In"

BlockBeats: Are you concerned about the situation where more and more projects are transitioning to AI, and there are fewer crypto entrepreneurs, leading people to feel that the industry seems hopeless?

Qiao Wang: I do worry about this issue. But what I am most concerned about is whether the entrepreneurs we have invested in will ultimately succeed.

If they want to transition to AI, I will focus on confirming two things. First, do they no longer have passion for what they are currently doing? Do they feel that the current direction will not yield good results in the long term? I need to clarify this.

Second, for the new direction they want to pursue—such as AI—are they prepared? Do they have the capabilities and resources needed to succeed in this endeavor? More importantly, can the new project they are working on truly solve user pain points? If the answers to these two questions are positive, I will not stop them from pursuing a new direction; I might even encourage them to try.

BlockBeats: You mentioned earlier that the crypto industry has lost many talented individuals to AI. Are these talents primarily developers or visionaries?

Qiao Wang: Both. I believe the talent drain in the Crypto field has two main reasons: one is AI, which I have personally witnessed. The other is the U.S. government's crackdown on Crypto over the past four years. The combination of these two factors has indeed led to a significant loss of talent, whether they are visionary entrepreneurs or developers.

BlockBeats: Can I make a judgment that most of these lost entrepreneurs entered Crypto during the last cycle?

Qiao Wang: Yes, that's right. In fact, over the past six months, there have been some Web2 people who want to come into Crypto. They know they could work on AR, but they choose to do Crypto instead because they find it very interesting. There might still be about four or five such individuals. We have invested in almost every person who has transitioned from Web2 to Crypto in the past six months to a year because we find these individuals very interesting.

They could easily work on AI, but they specifically want to do Crypto, and since they have good ideas, we invest in them. Such people are often very intriguing. So, there are still such individuals, but there are likely more people transitioning to AI, possibly by an order of magnitude.

BlockBeats: So, the emergence of 4-5 Crypto vertical projects is accompanied by 10-20 projects transitioning to AI.

Qiao Wang: Yes, it could be a couple of orders of magnitude higher; it’s not just 10 to 20, but there could be dozens to hundreds of such projects in the entire industry, or even more.

BlockBeats: What directions are these few entrepreneurs who are determined to do Crypto currently pursuing?

Qiao Wang: They are working on projects that combine social elements and speculation. For example, they see projects like Palm Fantasy, Moonchat, and other social projects. Although these products may have failed, they believe the execution may not have been done well, but the underlying principles are very good. So, they want to pursue this.

At the same time, they feel that the AI field is too competitive and are uncertain whether they can succeed in AI, so they prefer to work on something interesting that is not as fiercely competitive.

BlockBeats: Conversely, which verticals are the AI projects in the Alliance investment portfolio currently focused on?

Qiao Wang: We currently do not have many AI projects; in this recent batch, AI projects account for about one-third, which is around seven or eight projects. They are working in various directions, such as some aimed at developers, similar to the previous Y Coding, which generates code directly from language—this is very interesting.

There’s also the team I mentioned earlier that does AI video advertising, and teams working on educational projects aimed at children, middle school students, and even younger age groups. Some are using AI to create games, essentially converting language generation directly into a game. There are all sorts of projects, but we haven’t invested in many.

Moreover, all seven or eight teams we invested in have come from the Crypto field. You see, they have previously worked on startups in Crypto or come from reputable companies like Uniswap or Coinbase.

BlockBeats: So, they have a strong background in the Crypto industry.

Qiao Wang: Although these teams have a strong Crypto background, as I mentioned earlier, I believe that experience in AI applications may not necessarily be very helpful.

BlockBeats: That’s quite sad; the best people in the industry are now not planning to stay in this field.

Qiao Wang: In fact, there are still some strong teams that are purely focused on Crypto. However, the AI content in the last batch was far lower than in this one. The last batch was basically zero, but later there might be one or two teams transitioning to AI. They indeed started out doing Crypto, worked for a while—maybe around six months—before transitioning to AI.

Does Crypto + AI have a future?

BlockBeats: The concept of Crypto + AI is still hot right now. Do you think this is a "false narrative"?

Qiao Wang: I think 90% of it is a false narrative, but perhaps 10% will create something interesting. You can imagine Crypto and AI as two large circles, and the intersection between them is actually very small. Although both circles are large, the overlap may be quite small. However, within that small intersection, there might be some interesting things, such as decentralized training, which could be quite intriguing.

We have seen some similar projects, but most are infrastructure-related, and many VCs are chasing these projects, giving them very high valuations, which makes it difficult for us to participate. Although the teams behind these projects are strong and I like them, these types of projects are hard to execute and may take several years to develop properly. Currently, decentralized training has not made significant progress.

The biggest challenge is how to aggregate the small models trained by each data center. The data transfer between different data centers is very expensive, and the cost of transmitting this information over the network is high. Therefore, whether decentralized training can be cheaper than centralized methods remains an unknown.

BlockBeats: Given the current market context, has there been a noticeable decline in the primary market valuations and popularity of Crypto AI projects?

Qiao Wang: In fact, there are still some very large funds that do not have many options and can only focus on investing in this type of project. So, ultimately, multiple VCs will invest together in the same large project.

I think many VCs do not truly understand the application layer of Crypto, so they can only invest in technical infrastructure, but there aren’t that many interesting things in these infrastructure projects. For example, Layer 2—there are already hundreds of them on the market, and you can only find a few slightly interesting tracks to focus your investment on.

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