Web3 Investment Fund ABCDE Ceases New Investments and Fundraising

ABCDE, once one of the largest home-grown $400 million Web3 investment funds, recently announced that it will stop making new investments and fundraising. This decision comes despite the fund continuing to perform well, still boasting an IRR that is competitive worldwide. The fund will inside continue to primarily orient itself towards supporting its existing portfolio companies.

ABCDE has put more than $40 million into over 30 projects in the last three years. The fund’s portfolio is currently overweight to Bitcoin (BTC) scaling technology, at 28% of its investments. Ethereum liquid staking derivatives finance (LSDFi) infrastructure accounts for 16% of this total. Layer 2 solutions, restaking platforms, and smart contract platforms only make up 12%.

Given their success to date, the decision to stop their fundraising efforts was not a choice made out of financial distress. Rather than objecting to regulation itself, ABCDE raised red flags over the industry’s trajectory thus far on the path towards self-regulation.

“Frankly speaking, I am increasingly unable to agree with the current ecological atmosphere of the primary market,” - Jun

Du Jun, co-founder of ABCDE and founder of Huobi exchange, has expressed his concern. He is concerned that the industry is too focused on immediate returns, rather than creating long-term value.

“What is more worrying is that some primary funds not only have no reflection on this, but also hype up their ‘listed projects’ and short-term market value performance, but never mention the value creation of the projects themselves,” - Jun

ABCDE closed its doors to invest in new projects and has elected not to raise capital for a second fund. It is deeply invested in protecting its past bets. The fund will provide a range of post-investment support and help exit arrangements for its portfolio companies.

Though ABCDE is betting heavily on the change of investment strategy noted above, it’s rolling out a new incubator brand – Vernal. Vernal is planning to disclose its shareholder list, incubation criteria, and first investments in May. This new climate is undoubtedly indicative of a waning trend in terms of public sector commitment to nurturing innovation within the Web3 ecosystem through a new lens.

The current market structure in the cryptocurrency space has come under attack from other luminaries of that industry. Charles Hoskinson, a prominent figure in the blockchain space, has highlighted the challenges of the current tokenomics and market structures.

“The problem right now, with the way we’ve done things in the cryptocurrency space, is the tokenomics and the market structure are intrinsically adversarial. It’s sum 0,” - Charles Hoskinson

“Instead of picking a fight, what you have to do is you have to find tokenomics and market structure that allows you to be in a cooperative equilibrium,” - Charles Hoskinson