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In this report, we go over our 2022 portfolio health and then share each GCR Deal Lead’s outlook for 2023.
In 2022, GCR invested in 44 projects in the Web3 and crypto space. We are proud to welcome these projects and teams into the GCR community! Our community-led approach has been a success and we are excited to ramp up even more in 2023.
In 2022, the community saw over 500 investment opportunities, of which on average around ~43% came directly from the Community Members vs the Core Team.
The top invested category from the community this year was Infrastructure, followed by Consumer Projects such as Consumer Social and Consumer Gaming, and then DAO Tools and Crypto Services.
Over 10 projects in the portfolio have launched a token and about half of them are trading.
3 portfolio companies did not move forward – one project returned investor capital and is raising for a new venture, one project was part of the Terra ecosystem and is figuring out the next steps, and one has failed to raise follow-up funding.
All, except one, self-reported portfolio projects have a runway of over 14+ months, which gives us confidence about the health of our community investments.
You can check out our Q1, Q2, Q3, Q4 reports here from 2022.
There are a lot of things we are excited about at GCR in 2023.
Our community-led approach has been successful, but we aim to improve our community-led diligence process and portfolio support as we grow. We’ve grown beyond 10k+ Twitter followers and 8k+ Discord members this past year.
We aim to expand our investment horizon into other categories beyond infrastructure, and leverage community expertise to identify promising categories and candidates. Additionally, we have some exciting developments internally that we will be sharing with the community, so stay tuned!
Each of the Deal Leads will share highlights of their excitement below.
Joyce is a passionate community builder and has been building GCR since 2017. She has led investments in projects such as Kraken, Aurora, Magic Eden, and Mysten Labs. In her former life, Joyce went to Harvard for undergrad and spent some time working in finance and tech.
As part of a DAO, I am biased but also in an advantageous position to see the numerous exciting developments taking place in the Web3 social space. Web3 social, along with the tools to support this ecosystem such as on-chain identity verification, are areas in which I’m particularly excited about. These areas are key to building the metaverse we all envision. Currently, it’s crucial to ensure that the Web3 social infrastructure is there and can scale with new incoming entrants. Projects such as Lens Protocol are well-positioned and already building towards that vision. Lens has already penetrated a significant portion of the Web3 community, and the next hockey stick adoption will come from Web2 entrants.
Additionally, with the backdrop of FTX’s downfall and an increasing amount of regulatory scrutiny on the space, it appears that many DAO and tool builders are re-evaluating their product positioning. We envision these builders to be faced with a decision to either build 100% on-chain, or transition to completely off-chain. Having something in between those two will not make sense on a regulatory and operational level.
Another area that I’m particularly excited about is the number of high-quality infrastructure plays – Layer 1s and 2s, ZK projects that will be launching this year. With increased processing throughput coming from these faster L1 and L2s, we anticipate them to rival centralized peers. This will certainly quiet Web3 skeptics and incentivize a new generation of builders and DApps to enter.
In an investment DAO, teamwork matters significantly more than in a traditional VC setting. I was accustomed to individual investing as an angel, but the value of teamwork became particularly pronounced in 2022 when I went on maternity leave. Despite my absence, the team powered through with some impressive internal developments and investments. As a team, we have successfully navigated the ups and downs of the market and I am grateful to have such a talented team to work with. This has been a valuable learning experience and has made the experience even more enjoyable with a capable team by my side.
Separately, as a Deal Lead, it is crucial for me to reflect on our portfolio companies that have failed to move forward. These were all Seed/Pre-Seed investments and we still have high regard for the team behind them. Unfortunately, one project was built on the Terra ecosystem and the team has been since exploring alternative chains to build their footing. Another project, with an exceptional team, faced a founder breakup and the co-founder we were particularly fond of ended up returning investor capital almost in full and decided to raise a new venture. Lastly, we had a project that unfortunately did not have enough runway and did not receive market favor when attempting to raise more funding.
In a dynamic market such as crypto, we need to take our investment learnings from the Web2 space and then layer on unforeseen potential risks that we’ve never encountered before. Despite these valuable lessons, I am nevertheless grateful for an awesome opportunity to work with a variety of stellar founders. I look to continue to iterate and refine our investment approach to make our investments more rigorous and avoid similar situations in the future as much as possible. Despite these setbacks, I remain optimistic and excited about the opportunities and growth ahead in 2023.
Arthur is a dedicated Web3 advocate with a background in technology and business. He has been deeply involved in the crypto space since 2013 and joined GCR in March 2021. He has a passion for building community and has played a key role in the development of several Web3 projects, including helping lead investments in projects like Talent Protocol, Endemic, Passage Protocol, and Nifty Comedians. In his past life, Arthur studied at the University of St Andrews in Scotland and gained consulting experience working in the Banking and FinTech industries.
Being a member of a leading Investment DAO such as GCR provides valuable access to opportunities that would otherwise be difficult to enter or even beyond the reach of regular investors. As a result, I feel privileged to be at the forefront of the latest developments in the crypto and blockchain space and to connect with some of the most talented builders in the industry.
One area that particularly excites me is the emergence of the creators’ market and the protocols that enable it. These protocols allow creators, creatives, and other talents to monetize their work in a decentralized manner while retaining control over their intellectual property. Projects such as Talent Protocol provide meaningful connections and professional tools, such as building Web3 resumes, while Endemic focuses on making premium art more social through their NFT marketplace. Passage Protocol, on the other hand, builds the infrastructure for the new membership economy and is already utilized by projects like Poolsuite, Water & Music, UniWhales DAO, Music NFT artists, and many others. These types of projects are leading the way and are well-positioned to capture significant market share.
Another trend that I am closely monitoring is the growing interest in new scaling solutions and even new blockchains such as Sui Network. With the increasing adoption of blockchain technology, the need for faster and cheaper transactions is becoming more pressing. Additionally, more and more game and creative studios are using NFTs for in-game assets and considering moving to Web3 permanently, making high-throughput, easy-onboarding, and developer-friendly solutions crucial.
As we look back on the past year, it is clear that the crypto and blockchain space has continued to evolve and grow at a rapid pace. However, it also became apparent that some projects were driven more by hype than by actual needs. One such example was DAO Tooling, which despite receiving significant funding and attention, felt like it failed to live up to the actual expectations of usability, i.e. the supply didn’t match the demand.
In the realm of NFTs and Metaverse, we saw a tremendous amount of growth and creativity. However, we also saw some projects like Nifty Comedians which suspended operations due to a lack of proper planning, execution, and team building – despite all, thank you to Jack McDermott and his team for all the effort and work spent on trying their hardest to make the idea come true (read Jack’s heartful thread on why Nifty Comedians decided to wind down their operations here). These experiences serve as valuable lessons for future projects in this space.
One of the key lessons we have learned is the importance of building tools and frameworks for the Web3 space that are not only innovative but also user-friendly and accessible to a wider audience. We have seen that many of the tools and platforms currently available are geared towards crypto-natives and technical-minded individuals. To truly achieve mainstream adoption, we must focus on creating user-friendly interfaces and making the technology more accessible to those without coding experience.
Another important consideration is the importance of reliability and trust in both the technology and the people behind it. The crypto space has been plagued by hacks, scandals, and drama, which have eroded trust in the industry. To regain that trust, we must focus on ensuring the reliability of the infrastructure and building transparency and accountability in our projects.
The past year has been one of growth, innovation, and learning. As we move forward, we must focus on building smarter and more accessible projects for the Web3 space, while also addressing the challenges of reliability and trust. Only by doing so can we truly achieve mainstream adoption and bring the benefits of blockchain technology to the masses.
Junney is a dedicated Web3 evangelist and a member of the GCR Core Team since May 2022. Prior to his full-time commitment to the crypto space, Junney earned his undergraduate degree from Penn and worked in both corporate law and business operations. In addition to his involvement with GCR, he is also a founding member of a project focused on pseudonymous hiring.
The need for a more user-friendly experience to onboard the next billion Web3 users is evident, but security measures must also be improved to make Web2 natives feel comfortable interacting with Web3 applications. Unfortunately, hackers have stolen over $3 billion in 2022 alone, and there have already been numerous exploits in 2023.
This is why GCR’s investment in PwnedNoMore, a guild of white hat hackers that builds infrastructure and the automated tooling to secure the Web3 ecosystem, is so exciting. The hackers in their DAO have already protected over $1 billion in funds across countless protocols. Their automated code review engine is providing the much-needed proactive security measures in Web3.
The same level of proactive and reactive security tools existing in Web2 must also be available in Web3 for both institutions and mass retail. Web3 security is definitely one of the verticals that I am paying attention to right now.
Despite the challenges that the crypto space has faced in 2022, it is important to note that many of the collapses were caused by centralized and opaque businesses. This only further emphasizes the need for trustless blockchains and decentralized applications. We are still in the early stages of this technological revolution, and the current market downturn presents us with attractive investment opportunities that provide an asymmetric risk-to-return ratio.
Jin manages and oversees investments at Global Coin Research. Originally from Boston, Jin has been a digital nomad since joining GCR. After graduating from Princeton, Jin followed the traditional finance route by paying his dues in the M&A group at Bank of America Merrill Lynch in New York and at a private equity firm called Gemspring Capital ($1.5B+ AUM). Jin quickly realized he wanted to be more entrepreneurial and became more interested in early-stage investing. Jin resonated with GCR’s mission to democratize investing and build a community-driven investment platform and decided to join to lead investments at GCR. The rest is history as GCR has been a juggernaut ever since.
It is an undeniable fact that we have seen explosive growth in crypto, driven by DeFi and NFT. Cryptography and smart contracts have been the main drivers behind technological innovation that fueled the craze we experienced between 2020 and 2022. Unfortunately, the fervor was unsustainable as we are still far away from unlocking the full potential of blockchain and the usage cases that follow.
With the macro backdrop of higher interest rates and limited liquidity, I am excited about these two trends that will drive the adoption and usage of crypto and blockchain: Consumer Applications and Tools.
Games will be the driving force behind mass adoption. To expect the full-stack behind a game to be on blockchain at this moment is wishful thinking. However, we will slowly see certain parts of full-stack to be on blockchain as more developers realize there can be more done with blockchain (vs. traditional alternatives). Ownership of in-game assets and the on-ramp & off-ramp of these assets enabled by blockchain will be at the forefront of this change. To date, most game companies do not allow users to monetize their assets; however, with the emergence of new players such as Roblox that enabled monetization of in-game assets (albeit with high take rates), people are becoming more comfortable with the idea of ownership.
Blockchain technology will further drive this adoption by incentivizing users to own their in-game assets and have sovereignty over their game! The main criticism of blockchain games was that games were simply not entertaining and were built by non-experts. Given most of the thought leaders in games are in the APAC region, I expect to see more APAC players like Intella X (parent company is NEOWIZ – one of the largest game companies in Korea) to offer full-stack development tools while developing fun mobile games (and AAA games later down the road) that will appeal to the mass.
Better tools and infrastructure are crucial for developers to easily build applications on the blockchain. The ultimate goal of a protocol is to become the foundational layer that provides a secure platform for applications. My view is that we will see more tools (in the form of APIs, etc.) that will help developers (e.g. it can be as simple as querying data and processing transactions in a timely manner without any security risk). What is more important about these tools is that these tools will push institutions to slowly adopt blockchain and be comfortable with the new technology. Even if large companies (especially financial institutions) do not want to change their full stack to be on-chain, selective adoption of blockchain as a back-end infrastructure will unlock more usage cases and grow the addressable market.
Additionally, to capitalize on the growing adoption of blockchain, we will see more B2B tools that are necessary for companies to handle operations (such as accounting, HR, etc.). Traditional B2B tools will have limited usage cases as organizations need more crypto-native tools that can be interoperable. My bet is that more crypto-native tools will win the market share from traditional incumbents whose primary customer base might not be crypto-native. A few examples of investments that I have made that fit this narrative are Coinbooks, Den, Commonwealth, and HackMD.
2022 has been a humbling year for me. As an early-stage investor, I focused more of my time and energy on non-macro-related factors when evaluating potential investment opportunities: team, business model, go-to-market strategy, etc. Looking back, I should have been more prescient and recognized that an unfavorable macro picture not only affects the future fundraising rounds but the pace at which the team can execute on their roadmap, especially when dealing with new technology like crypto. Simply put, not only does recruiting become challenging but the timeline to find product-market fit gets delayed as the projects have difficulties in looking for potential users (people will spend less time in new, cool technologies when their life is at stake) or companies to partner with (companies will re-prioritize their initiatives).
Further, it was a valuable yet painful lesson to witness Seed-stage companies implement strict cost-cutting initiatives to prioritize survival over growth as the trade-off between strong unit economics and growth is no longer being championed in the public market. I was familiar with the notion of cost-cutting from my days in private equity but being budget-conscious when the company is less than a year old seemed more challenging as the road to revenue was more opaque at this stage of the company. Going forward, this past year has prepared me to think more critically as an investor and be empathetic toward my founders as I focus my efforts on how I can be helpful as a partner and a friend to my portfolio companies.
But, I also had one good takeaway from 2022: even in the most difficult times, communities are a powerful way for people of similar views and interests to connect. At GCR, we surgically designed our marketing and growth strategy to attract a lot of crypto-native people across the world, with a focus on region-specific campaigns. There is nothing more rewarding than seeing the result of successful initiatives, as evidenced by a powerful network effect of a community. We are now one of the largest, if not the largest, investment DAO with 7,500+ members. I believe that community-driven activities will set the tone for crypto as we vie for mass adoption for the sector.
Dan has a background as an ex-PE/HF investor and joined GCR in September 2021 with a mission to build an investment platform that is accessible to everyone.
I’m incredibly excited about the potential of bringing cryptocurrency to real-world use cases, such as real-world assets and everyday stablecoin usage.
Looking back, the events of 2022 have been a wake-up call for the industry. Projects are now being evaluated based on the value they add, rather than just for the sake of doing something in crypto. This shift is a positive step forward, and I can’t wait to see what exciting projects will emerge from this bear market.
Cosmo is the founder of Nova River, a digital assets hedge fund. Cosmo joined GCR in 2022 and has a background of over 10 years in traditional finance, working with Hitchwood (hedge fund), Apollo (private equity), and Evercore (banking).
I’m incredibly enthusiastic about the scalability advancements in blockchain technology, particularly the progress being made in Ethereum L2 solutions, application chains, and the Move ecosystem. Moreover, I am deeply intrigued by the potential for RWA tokenization and the role that gaming and NFTs can play in attracting the next wave of Web3 users.
In my opinion, 2022 was a year of cleansing for the crypto industry, where unsound businesses, excessive leverage, and fraudulent individuals were exposed. This has set a solid foundation for the industry to grow from 2023 and beyond with more stability and maturity.
2023 will be a year of uncertainty, but we remain optimistic and committed to our community-centric approach to investing. The entire community is learning and experimenting together, and we are always looking for curious folks to take part.
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