Jinjin Finance Blockchain July 2 In November 2022, ChatGPT, a powerful artificial intelligence tool, was born, which aroused the amazement of artificial intelligence technology from all over the world, and even attracted some risky people with keen sense of smell. investors. Indeed, it is no longer so easy for venture capital firms to deploy capital in a downturn in the market, but breakthroughs in artificial intelligence technology have opened up a whole new world for VCs. Soon, many generalist venture capital firms involved in the whole industry seized the hot spot of “artificial intelligence”, but those venture capital firms that focus on cryptocurrency funds had to be more cautious. San Francisco-based venture capital firm Paradigm is a prime example.
** FTX failed to invest and chose to escape from the encryption industry and turn to AI? **
Founded in 2018 by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang, Paradigm mainly invests in cryptocurrencies. However, the company’s recent interest in the field of artificial intelligence has angered some investors and portfolio company founders. They don’t know what Paradigm’s intentions are, and they lack the necessary communication.
At the end of May this year, The Block, an encryption news website, observed some changes on the homepage of Paradigm’s website. They completely deleted the content about Web3 and cryptocurrency, indicating that the company is repositioning to deal with some thunderstorms in the encryption field and US regulations. uncertainty.
Unsurprisingly, the move sparked a wave of ridicule in the crypto community, with some even calling it a “crypto VC scumbag” for the company’s previously touted focus on "disruptive crypto/Web3 companies and “Protocol” investment, but now has quickly changed its face, turning around to show a broad interest in “research-driven technologies” (including artificial intelligence). In recent months, the meme “From Web3 to AI” has become a popular meme material on Twitter.
The room leak happened to rain overnight. When Paradigm was ridiculed by the industry for its slap in the face, the company was also facing pressure to bet on FTX. One of its founders, Matt Huang, had criticized this in mid-November this year. One expressed “deep regret” over the decision. Paradigm reportedly had to reduce its $290 million investment to zero just after FTX’s liquidity collapsed.
However, Paradigm did not publicly announce the shift to artificial intelligence. Instead, it made an understatement. Its chief operating officer Alana Palmedo revealed to Fortune magazine: "The new website content emphasizes the research-driven approach that Paradigm has always adopted. approach, our focus on cryptocurrencies has not changed.” It is worth mentioning that Matt Huang wrote in a tweet earlier this month, “We are not giving up on cryptocurrencies, our research team is Continue to explore the combined investment direction of artificial intelligence and cryptocurrency.”
Not only that, but Matt Huang posted a longer tweet this week, emphasizing that Paradigm has “never been so focused on encryption technology”, adding that "defining encryption technology and artificial intelligence as a zero-sum competition seems to be the same. It’s a trend, but we don’t agree with it.”
**Fleeing the crypto industry and coming back? **
While Paradigm has struggled to clarify its shifting strategy, the industry’s well-known forays into artificial intelligence, particularly its communications strategy, have unnerved some limited partners. An anonymous limited partner complained to Fortune that the public changes to Paradigm’s corporate website and the quiet shift in investment focus were not communicated with them first, “Paradigm is notoriously bad at handling relationships with partners.” . It is worth noting that Paradigm has not set up a department dedicated to dealing with investor relations, which has led to complaints from investors about the company’s arbitrary approach.
In addition, the founders of many portfolio companies complained that Paradigm did not notify them of the change to the content of the website, and they all found this decision very “weird”. One of the founders said: "If a new company founder asks me whether they should choose Paradigm for cooperation, I will tell them that Paradigm is no longer the first choice. Because I find that they don’t seem to be so committed to investment affairs. Now, it feels a bit like ‘we invested in all these hot spots, but we don’t really care anymore’. So that’s one of the reasons why they say the investment direction hasn’t changed.”
However, some founders did not care about the incident. Tom Walton-Pocock, the co-founder of Aztec, a portfolio company of Paradigm, said that he did not understand what caused the widespread dissatisfaction in the encryption community. He believed that the change in investment direction should not give Paradigm negative impact on the company. Walton-Pocock is currently working on another of his projects, Geometry. Geometry is an early-stage venture capital firm and research lab focused on cryptography. Walton Pocock believes that the bigger challenge for crypto funds is to repair the reputational damage suffered in the process of promoting the rapid flow of token sales last year, because they emphasize that the attitude towards tokens is to exit quickly, not long-term holding, "crypto funds It does feel a bit like an island in itself.”
“Interestingly,” Paradigm co-founder Matt Huang acknowledged the mistake in a tweet on July 2, writing: “We previously removed all references to ‘cryptocurrency’ from the site’s lead page, which is kind of ridiculous. That was a mistake. We never left, but now we (the site) are back."
Paradigm’s official website shows, “We focus on cutting-edge cryptocurrencies and related technologies.” The top and bottom borders of the official website also cycle through “CRYPTO.”
Summarize
At this stage, many venture capital firms are already chasing deals in the field of artificial intelligence, but it is unclear whether crypto-native funds have the ability to participate in the competition. Matt Huang believes that the best strategy for crypto fund companies may be to invest in projects that combine cryptocurrencies and artificial intelligence. Recently, one such transaction project has attracted the attention of the industry: Gensyn, a blockchain AI computing protocol called “Airbnb for GPUs”, announced the completion of a $43 million Series A financing led by a16z, leading a new round of AI field revolution.
In fact, Paradigm has yet to announce any investments in AI startups. And the company’s development in 2023, like many other venture capital companies, is very slow. So far, Paradigm has only announced a few deals: a $15 million round in January for ZK-proof startup Ulvetanna; a $7 million round for encryption infrastructure startup Conduct in March; dollar transactions. Nonetheless, Paradigm continues to publish cryptocurrency-related research on topics including amicus curiae in regulatory filings to support important court cases.
Other Paradigm founding partners believe that the venture capital is still a leader in the digital asset industry. Dee Goens, co-founder and chief operating officer of the NFT casting platform Zora, said frankly: “I don’t know if there is a venture capital company in the encryption field that has a better investment than Paradigm.” The overall vision of encryption, at the protocol level, they are absolutely outstanding."
Now, Paradigm has returned to the encryption community, but whether it can regain trust is worthy of attention.
Part of this article is compiled from “Fortune” magazine
