jakiro
Author: Folius Ventures, Source: Author Twitter@FoliusVentures
summary
In the past 30 years, the Chinese Internet industry has nurtured countless technology giants and super applications, and has accumulated huge number of engineers, technology entrepreneurs, and Internet talents who are good at consumer-oriented (2C) applications, which constitutes the basic foundation andBackground color.We estimate that there are currently about 2-3 million Chinese Web2 practitioners who have the awareness and potential to start a business in Web3 and will end up in Web3 in the next three years.This means at least 200-300 potential Chinese-backed top projects will appear in the market at a rate of 1-2 per week over the next three years.
In recent years, China’s Internet growth has slowed down, traffic dividends have peaked, and the shrinking financing and exit opportunities in the Web2 field have been superimposed. As an emerging blue ocean market with a positive environment, abundant liquidity and great room for growthIt forms a sharp contrast.Therefore, we expect more Chinese-speaking Web2 talents to accelerate their transfer to Web3 in the future.For those Chinese Internet people who are full of competitive and innovative spirit, executive learning ability and sufficient background conditions,We believe that Web3 is the next stop of their time, just like the A-shares in the 1990s, H-shares in the 2000s, and Nasdaq in the 100s., and go hand in hand with AI, thus opening up a new wave of Internet entrepreneurship and innovation in China.At the same time, we believe that the Web3 industry has accumulated and precipitated infrastructure for several years, which has given the industry a soil to carry super applications.The pendulum that is about to allow the industry to develop is transferred from “strong infrastructure, weak applications” to “strong applications, weak infrastructure”.History shows that technology follows the development law of application-infrastructure: applications appear before infrastructure and promote its iterative upgrades, and the improvement of infrastructure promotes the emergence of new application paradigms.All signs such as the significant reduction in on-chain interaction costs, the popularity of customized solutions, the reduction of friction in fiat currency interaction, the improvement of data and middleware, and the update and iteration of financial gameplay, all indicate that Web3 is currently on the eve of the application dividend period, the turning point will arrive within the next 12-18 months.
Chinese Internet entrepreneurs should make good use of Web2 methodology to form differentiated advantages, focus on the scenario of Web2 migration to Web3, and expand the incremental market.Chinese Internet practitioners in the Web2 era have made great achievements in C-end applications such as social, entertainment, and e-commerce. They have rich cognition and methodology, and are well versed in user psychology, product design and operation.However, Web2’s cognition is a double-edged sword in Web3: these experiences are both wealth and constraints.Web3’s smaller user base, different product strategies, financialization, and cultural differences are all new challenges for Chinese entrepreneurs.But we believe that the methodology of Chinese Internet entrepreneurs in Web2 can still be reused. In the projects that Folius has already laid out (StepN, Matr1x, SleeplessAI, Memeland, Metacene, Myshell, etc). We have observed the full potential of this group.We encourage Chinese teams to leverage their advantages in Web2, especially differentiate with overseas teams in terms of user growth, community construction, business model innovation, products and operations, and should focus on exploring scenarios that promote Web2 to migrate to Web3.At the same time, we should also attach importance to cross-cultural exchanges and cooperation, broaden our international horizons, and better adapt to the international environment of Web3.
one,Three elements of the explosion of Chinese entrepreneurs this cycle
Great dividends of consumer engineers, strong catalysis of internal and external factors, and the turning point of Web3 infrastructure.Its advantages and disadvantages are equally prominent.
China’s engineer dividend for consumer-oriented Internet products over the past 2000 years has laid a base of about 15-20 million potential entrepreneurs for the entire Web3.
“Web3 Total base of potential entrepreneurship for Chinese people: 15-20 million people
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China’s Internet industry has accumulated 15-20 million employees in just 30 years, and has accumulated a large number of reserve talents for consumers and applications during the rapid take-off stage of the mobile Internet in 2008.This number of people determines the basic basis for Chinese entrepreneurs to start businesses in Web3.
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As the world’s largest single user market, China has emerged in the past golden decade of mobile Internet, many innovative application categories that have led the world, including social media (such as WeChat), mobile payment (such as WeChat Pay, Alipay), and entertainment platforms (Such as Bigo, Huya, Douyu), content sharing platforms (such as Xiaohongshu, Douyin), and e-commerce retail (such as Alibaba, Pinduoduo, Meituan).These fields each have developed innovative models and product forms that are completely different from those of the overseas market, and have their own characteristics in terms of interaction methods and gameplay.The team behind the top products stand out after full market competition, and has accumulated rich and proven methodologies in user insight, product design, operation strategy, traffic acquisition, growth fission, and commercialization.This group of Internet talents is the most competitive group (volume).We have observed that many Internet people have begun to invest in the crypto industry and expect this trend to continue to accelerate in the future.
Under this base, we believe that there are 2-3 million potential core tribe groups, which have initially established the foundation for entrepreneurship and the ability to successfully obtain financing.
The core top tribes of Chinese: 2–3 million people (10-15%)
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Many well-known Web2 Internet manufacturers are not only the cradle of technological innovation, but also an important source of the Web3 talent ecosystem.In our preliminary evaluation of talents in China’s top factories, even conservative estimates indicate that there are more than hundreds of thousands of product technology elites with high quality, rich experience and outstanding innovation capabilities.These talents not only include a wide range of grassroots developers, but also many executives from the top of the industry, whose ranks are equivalent to or exceed ByteDance’s 3-2 level and Alibaba’s P9 level.They have entered the Web3 field and devoted themselves to the Web3 field. The projects they have founded not only demonstrate the efficient execution of the large factory team, but also demonstrate the ultimate pursuit of fine polishing and perfecting of products.
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In addition to the top Internet manufacturers, China’s game talents are worth developing separately: China has 1.5 million game industry practitioners, of which R&D personnel account for about 70%. China has shown top development since the Shanda/Giant Times game companies.And commercial innovation capabilities, especially the new production pipeline innovation and changes brought about by the mobile game era, have the ability to iterate products quickly in a short period of time, maintain the development rhythm of fine-tuning while playing the market, listen deeply to user feedback and improvements, and try multi-product matrixBy waiting for the wrong method, a group of developers with super strong execution have been trained, and this group of game developers are naturally more adaptable to Crypto’s development.
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Therefore, we believe that about 15% of the 15-20 million practitioners in the entire industry, or 2-3 million, have initially had the vision, ability and background to start a business and successfully obtain financing and attention.This group of people is also the group that Web3 needs to strive for the most.
Under this base, we believe that the current Web2 -> Web3 conversion rate is about 1% in three years.In the next three years, the Chinese Web2 industry will deliver 200-300 top teams to Web3, with an average of 1.5-2 high-quality teams a week.
Web3 field enthusiasts: 200,000 – 300,000 (10%)
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In the head circle, we believe that there is currently 10 people who are not too prejudiced about Web3, are very curious, and have a passion for learning, and finally have a deeper understanding of the industry and have conducted on-chain interaction (non-pure hype).There are about 1 person in the market.This ratio will change with the cycle.
Meet the conditions and are willing to start a business in the next 3 years: 20,000-30,000 people (10%)
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Among enthusiasts, we believe that we are willing to go overseas in the end. Our personality, wealth accumulation, industry accumulation, and family background are suitable for entering the Web3 industry in the next three years without the macro environment. 10 enthusiasts may not exceed1 person.In other words, we believe that within the core Web2 circle, the conversion rate for Web3 entrepreneurship is about 1%.
An average of 5 people founding teams: 4-6,000 teams emerged within a three-year cycle.Head 5% Teams: 200 – 300 Teams, average 65 – 100 per year, 1.5 – 2 Teams per week
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Given the relatively irregular industry and the uneven team level, we believe that we have both polygonal combat effectiveness, long-term values, business models and insights, culture and language have the ability to go overseas, and a team with a relatively understanding of Web3 finance.There will be more chances to run out and become the head.There may be 1 out of 20 teams in this ratio.
Therefore, we believe that the Chinese Web2 industry will deliver 200 – 300 top teams to Web3 in the next three years, with an average of 1.5 – 2 teams per week.We will be extremely looking forward to in-depth exchanges and cooperation with it in the earliest stages.
Since 2020, a new world pattern of confrontation between China and the United States has been formed, and the traditional Web2 Internet industry has formed a sharp contrast with the starry sky-high Web3, which will make the latter the best cradle for these excellent Web2 teams (especially the Chinese team).
Web2 to Web3 Singularity is revealed, and the gradual improvement of Crypto infrastructure has given the industry a soil to carry super applications.The pendulum of Web3 development is about to be dialed to the “strong application” end.
Looking back at the history of science and technology, the iteration cycle of App – Infra is like a pendulum: Apps always appear before Infra and inspire the latter to iterate and upgrade, and the improvement of Infra has prompted the new app paradigm to emerge.Email precedes TCP/IP, which prompted the emergence of early portals; portals prompted the emergence of browsers (Mosaic) and high-level programming languages, which brought about the prosperity of Web1.0; a high-speed network born to meet the needs of Web1.0(Broadband) and cloud service providers (AWS) make more complex social applications and streaming possible, which brings the prosperity of Web2.0, while better and faster demands drive further iteration of unlimited technologies and semiconductors, allowingAI/AR/VR applications have become possible.
We believe that Web3 also follows the above rules, and with the technological iterations over the past few cycles,The industry pendulum of cryptocurrencies is about to be dialed to the “strong application” end.
The Web3 industry has developed infra components that can carry hot consumer applications in the past cycle. We are in the transition from accumulation period to dividend period, and we expect the inflection point of the application explosion (LTV>=CAC) to be in the future 12-18.Month is coming.
In the past cycle, the industry has developed infra components that can carry hot consumer applications, and we are in the transition from accumulating period to a bonus period.Drivers include: 1/The cost of on-chain interaction is greatly reduced, making user conversion possible; 2/The popularization of development and customized solutions allows most developers to try and make quick trials and errors; 3/The friction of fiat currency interaction is reduced, greatly increasing usersPay willingness; 4/The improvement of the financial and token model can boost ARPU in all aspects, increase retention, and reduce user acquisition costs.These factors greatly promote the unit economy (LTV/CAC) of dApps and can form a forward flywheel.We expect the inflection point of the application outbreak (LTV>=CAC) to arrive in the next 12-18 months.
two,Seven advantages and seven disadvantages of Chinese entrepreneurs
But we are still optimistic and see many advantages from Chinese entrepreneurs, and these advantages will continue to shine in Web3 in the future:
1. The mechanism design of grasping human nature and matching
The major Chinese manufacturers are good at cultivating excellent product managers with delicate human perception and aesthetic pursuits. They not only explore different interaction methods and gameplay strategies in the mobile era and Europe and the United States, but also extremely good at fission growth, using WeChat’s social interaction and Pinduoduo.As an example, these strategies not only accelerate the expansion of user base, but also improve user activity and brand loyalty.These product strategies that have been tested in practice are particularly prominent in the current relatively monotonous and primary growth methods in the Web3 field.It is a general consensus that Web3 urgently needs excellent and high-quality consumer products and can be promoted to the public. How to identify the native needs of the Web3 user group and the obstacles to Web2 user migration is an important issue.
2. Comprehensive operational capabilities
China’s Web2 platform operational strength and its commercial closed-loop capabilities facing the lower ARPU market are eye-catching. Whether it is the complex creator ecosystem, diversified revenue distribution mechanism, or advanced algorithm-driven content recommendation system, it shows its team.Deep foundation in platform operation.The achievements of Chinese entrepreneurs in the field of platform operations such as cryptocurrency exchanges have proven their outstanding ability to build and manage complex platforms.Web3 content creation and operation are still in the exploration stage. The Chinese team should focus on measuring how to combine the incentive effect of token model on the original basis to further amplify the network effect on the creator and consumer side.
3. Core technical strength
The technical strength of the Chinese team is a key that people can easily forget. Chinese people have advanced technical accumulation and research in many future technical aspects such as ZK, ML, AI, etc., and Chinese scholars/technical talents in related directions are allIt accounts for a considerable proportion, but the Chinese team is often the technology provider behind many front-line projects, and should focus on exploring key technical leaders-like talents standing in the center of the stage.
4. Methodology of rapid iteration
Chinese people are diligent and already versatile in the methodology of the paper. They are not stupid people working overtime, but have the strong execution ability of fast delivery products. Faced with the dual blessings of China’s existing supply chain dividends and engineering dividends, abandon the thinking of big manufacturers, and in the futureThe rapid growth requires rapid PMF. The rapid trial and error of the Web3 era takes advantage of strong execution.
5. The insights and pursuits of Chinese entrepreneurs
It is a very valuable natural advantage. The growth rate of China’s mobile Internet in ten years is a miracle. Chinese entrepreneurs born in “high-speed systems” have a pursuit of system efficiency, strong learning ability and fastest reaction speed.Being pragmatic about needs, having experienced large-scale, systematic and efficient business systems, and having practical experience in high-speed environments is more important. This group of people are native globalized generations.
6. Understanding of the latest consumer application routines
Copy from China has proven that it can succeed in the past few years and is still creating new greatness. The time machine theory has been transferred to the host and guest. Referring to the models, products and businesses that have been verified in the Chinese market, we will seek a blue ocean in the overseas market. In the futureChinese entrepreneurs are very likely to have the advantage of having strong copy from Web2 in 2C/game and other fields.
7. Chinese people all over the world
For the Web3 entrepreneur group that must and can only go overseas to start a business, another advantage is the Chinese group all over the world. Chinese people have had the spirit of adventure in the world since ancient times. The innate population base has led to gathering areas and fellow villagers all over the world.For example, Singapore/Hong Kong has gathered a large number of Web3 OGs from the previous era, and even Chinese people have the dominance in mining, exchanges and other fields. Give full play to the resource advantages of the race, it will achieve twice the result with half the effort.
three,The Advantage Track of Chinese Developers
Large DAU base, creator economy, strong platform economic system, and business models that have been verified in Web2.
We believe that tracks with the following characteristics can unlock the greatest potential of Chinese entrepreneurs:
1. Big DAU base, strong social attributes
It can form a powerful network effect by combining token motivation and gamification gameplay.Compared with traditional marketing and customer acquisition, this model does not require close cooperation, high costs and increasingly inefficient efficiency, and can especially realize the potential of Web3 decentralized marketing/distribution.
2. Creator Economy
China has a huge group of content creators and abundant human resources, and ai’s breakthrough further improves individual creativity.In such an environment, everyone has the possibility of becoming a traffic node or a creative node and becoming a “super individual/node”.
3. Strong operational platform economic system
A platform economic system that can make full use of China’s operating experts’ capabilities, especially through crypto, can provide new ways of exchange of value and incentives to promote wider participation and collaboration.
4. Business model that has been verified in Web2
Business models have been successfully verified in Web2, especially directions with the characteristics of high ARPU, good cash flow and high profit margin potential.If the user behavior, user relationship chain, user data, etc. in the vertical direction can be superimposed, there is a possibility that the user can be assetized, and the scene can be embedded in transactions, and the probability gameplay modes such as blind boxes can be added, so the business potential can be further released..
At the same time, we believe that the entrepreneurial track screened through the above dimensions combined with Web3 token playbook (wealth effect/revenue share) can greatly amplify this flywheel effect:
1. Lower customer acquisition costs;
2. Higher user ARPU and Retention;
3. Lower group operating costs, especially platform systems of multilateral networks;
4. More diversified business models bring more revenue possibilities, and the addition of off-market liquidity has been further strengthened.
But it should be noted that different types of directions will be different. For example, high ARPU products are easier to drive user growth through revenue share, thereby getting rid of the dependence on traditional channels.
Four,Chinese entrepreneurs come to Web3 to start a business
1. Because I don’t understand, it is easy to make mistakes
Confidence in Web2’s own methodology, misjudgment of the development level of the Web3 industry, and lack of understanding of the overall Web3 industry.This leads to all-round deviations in user needs, direction selection, and final product level derivation.
2. Customer groups with huge differences in habits
The cultural and language differences between Web2 and Web3, China and overseas are huge.This has led to the situation of “civil war and foreign war” in many aspects of product design.There is a huge gap between domestic product design concepts, UIUX, aesthetics, etc. and whether overseas users recognize it.
3. A very fragmented market compared to China
Web3 has a small user base and its user ethnic group is scattered across countries.Traditionally relying on large-scale user groups, customer acquisition methods and GTM strategies in the single cultural and language market are not applicable.Cultural differences make the final plan extremely poorly implemented.
4. Over-equipped functions compared to scale and industry progress
Similar to the above two points, when building products, based on the past Web2 habits, they tend to over-align their functions and advance to the platform too early, ignoring the characteristics of Web3’s current market size and users tend to be small but beautiful products.In the end, the vertical track was not fully understood, the products were left unattended, and the company’s resources were wasted.
5. Discomfort towards the need to acquire customers from zero to one
Many entrepreneurs are used to the customer acquisition dividends brought by their parent companies with platform-level traffic and cash flow that are close to monopoly.When it is really necessary to acquire customers from 0 to 1, it is exposed to a series of problems such as inaccurate demand capture, insufficient product polishing, and lack of customer acquisition capabilities.
6. The conflict between openness and closure
China lacks an open developer ecosystem, closed-loop concepts and pursuit of monopoly.This concept has natural conflicts in creating a product ecosystem, especially in creating a developer consensus level, and cannot effectively gather real global recognition.
7. Lack of understanding of the financial amplifier
Due to the influence of various cultures and the general environment, there is generally insufficient understanding of financial financing, secondary markets, and the expected management that matches them.The specific results are all behind in terms of Web3 functions, narrative and public trust, final financing amount and ecological valuation.
