Jack Yi, the founder of Liquid Capital, has sparked a discussion regarding the high failure rate of venture capital (VC) backed projects within the cryptocurrency sector. In a recent statement on X, Yi attributed the "wave of deaths" among crypto startups to a fundamental misallocation of capital, specifically the tendency of developers to create products that attempt to mirror the Web2 ecosystem rather than focusing on the inherent financial strengths of blockchain technology.
The Failure of Web2 Benchmarking in Crypto
According to Yi, the core reason for the collapse of numerous projects and VC firms in the past is that financing funds were largely depleted by supporting teams to develop useless Web3 products. He argues that the industry's biggest misconception has been benchmarking its progress against traditional Web2 services. This approach often led to high operational costs without providing the necessary utility to sustain long-term growth in a decentralized environment.
Yi emphasized that Web3 is fundamentally a financial industry rather than a general-purpose software industry. To support this thesis, he pointed toward the most successful business models within the history of the blockchain ecosystem:
- Financial instruments such as Stablecoins (e.g., USDT, USDC).
- Centralized and decentralized Exchanges.
- Digital asset Payment systems and infrastructure.
The Intersection of AI and Financial Innovation
Looking forward to the current market cycle, the founder of Liquid Capital highlighted the arrival of the Artificial Intelligence (AI) era as a transformative moment for early-stage investment. Yi suggests that the traditional model of raising massive funding rounds to recruit large teams is becoming obsolete. Instead, he believes that the synergy between AI and finance presents the most significant opportunities for modern founders.
Excellent founders can build top companies with a few elites, which is the biggest opportunity in current early-stage investment.
By utilizing AI to optimize development and operational processes, small teams can now achieve what previously required hundreds of employees. This shift reduces the dependency on heavy VC financing and allows for a more agile approach to building decentralized finance (DeFi) tools and financial protocols.
In summary, the critique from Liquid Capital suggests a strategic pivot is necessary for the next generation of startups. By moving away from the "Web2 clone" mentality and embracing AI-enhanced financial products, the industry may move toward a more sustainable and efficient capital model, reducing the high mortality rate of projects seen in previous years.
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For educational purposes only. Nothing here constitutes financial or investment advice. Crypto markets are highly volatile — always DYOR before making any decisions.
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