Paradigm and a new wave of funding

Good morning/evening
 
Paradigm has a new fund aimed at securing a huge $1.5 billion with a goal of investing more into robotics and AI but also continuing to focus on crypto and blockchain, but who is Paradigm? Well Paradigm is a prominent crypto focused venture capital firm founded in 2018 by Fred Ehrsam and Matt Huang and they are based in San Francisco.
 

• Focus: Investing in crypto, AI, robotics, and new technologies.
• Founders: Co-founded by Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang.
• Background: Founded in 2018, it quickly became a major player in crypto investments.

 
So before we all jump in and try and see what Paradigm is investing in just be aware of the key differences between Venture Capitalists (VCs) and us retail investors. While VCs operate with large pools of capital, insider access, and long term investment strategies, retail investors are individuals with different goals, timelines and risk appetite. If the VCs enter large in just one out of ten winning projects than that is good, how would you like a one in ten success rate? That being said it does give us an insight into what narratives are here for the long term and they will be trying to identify structural shifts and placing their capital on infrastructure that makes that happen.
 

• Access & Pricing: VCs invest in private, early-stage rounds (Seed, Series A) at significant discounts, often obtaining tokens at a fraction of the price available to retail. Retail investors usually buy tokens on exchanges after the price has already increased.
• Asset Type: VCs frequently use SAFTs (Simple Agreement for Future Tokens) or purchase equity, while retail investors buy liquid tokens.
• Time Horizon & Lock-ups: VCs often have lock up periods (e.g., 1–2 years), meaning they cannot sell immediately, but they exit by selling to retail during market peaks. 
• Information Asymmetry: VCs have access to professional and detailed information not available to the public.
• Role & Impact: VCs often provide strategic support, networking, and funding for development, while retail investors provide liquidity, network effects, and hype.  

 
 VCs often secure low valuations and exit to retail investors, who may purchase tokens at high Fully Diluted Valuations (FDV), resulting in lower potential returns for retail, therefore making it more difficult for us to make the same sort of gains. 
 
In the past Paradigm invested in Uniswap. Uniswap did not look like a billion dollar idea when it launched. It looked like a strange experiment in automated liquidity. Optimism did not feel like a breakout company but both ended up becoming foundational layers that other projects had to build on top of. That is the pattern here, Paradigm invests in systems that other systems depend on, and they are willing to fund them when they are still incomplete, and poorly understood.
 
Top Projects Invested in by Paradigm

• Decentralized Exchanges (DEX), Uniswaw and dydx
• Infrastructure & Layer 2, Optimism 
• Centralized Exchanges & Services, Coinbase, Bitso and CoinSwitch
• DeFi & Payments, Lido DAO, Ribbon
• NFT & Gaming, Blur and Axie Infinity 
• Blockchain Data & Custody, Chain analysis

 
They also have made mistakes
 

• FTX, Paradigm cofounder Matt Huang admitted to feeling "deep regret" over the firm's $278 million investment in FTX, which was written down to zero following the exchange's collapse and fraudulent activities. 
• Yield Protocol, A DeFi lending protocol that, despite backing from high-profile investors like Paradigm, struggled to gain traction and announced it was shutting down operations.
• Shadow, A project that Paradigm participated in funding but ultimately ceased operations.
• Blast, Although still operating, this Layer-2 network received significant criticism from Paradigm's own researchers. 
• Paragon Coin (PRG), A 2017 ICO project aimed at integrating blockchain into the cannabis industry. It raised $12 million, settled with the SEC in 2018, and later went bankrupt in 2020.

That being said, there is a more subtle but equally important layer forming around crypto user experience. Interacting with crypto for some has been complicated and risky, some wallets are confusing, onboarding is clunky, and mistakes can be catastrophic. The next generation of startups is focused on making all of that disappear. The goal is not to make crypto easier to use, but to make it invisible. When users no longer have to think about wallets, gas fees, or private keys it could be easier to onboard some people. Things like Moove that I talked about in another post. What are your thoughts on this? Do you try and follow what VCs are doing?
 
As always, thank you for reading and please feel free to comment.
 

 
We now also have the autonomous AI agents that can transact for you on chain, or for themselves which is opening the door to trading without human involvement and Paradigm is looking at these areas of AI meets blockchain to invest in. Now with all that being said that does not mean I am thinking about diving in to some of these investments because I am not, but I do think it gives us some insight to the direction crypto is moving into, but just remember unless you have the same sort of huge capital as the VCs, it is not some sort of copy strategy, but perhaps an indication of the direction crypto is moving in to. So while most of us are not operating with venture level access or capital, we can still observe where conviction is building. Not to copy it directly, but to understand what might still be early, even if it does not look exciting yet.