In April, in addition to the dramatic fluctuations in the overall crypto market, the most explosive news was that Du Jun, co-founder of ABCDE, announced that he would officially stop investing in new projects and suspend the fundraising plan for the second phase of the fund. At the same time, he also elaborated on the next investment shift: turning to a new path centered on strategic incubation and secondary market allocation.
In fact, as early as the end of 2024, many articles about crypto venture capital were "accusing" of a tragic fact: the primary market can no longer make money. Players no longer buy VC accounts, resulting in more than 80% of VCs facing losses. Including Du Jun, who wrote in early March 2025 that the book loss of ETH held in the past year has exceeded 20 million US dollars.
In this context, ABCDE's move was rumored by the market to be "bankruptcy."
However, from a fundamental perspective, this phenomenon of VC losses also raises another problem: if crypto VCs are unsustainable, how should new investors choose new paths to participate?
Portal Labs believes that this is an issue that every high-net-worth investor should pay attention to. Therefore, Portal Labs first uses this article to systematically sort out the main investment methods and participation mechanisms in the Web3 industry.
Early-stage Investment
Primary market investment refers to participating in the early financing rounds (pre-seed, seed, private placement, etc.) of Web3 projects through crypto funds. The fund management team (GP) is responsible for screening projects and formulating investment research strategies. Investors invest as limited partners (LPs) and enjoy the overall returns of the fund.
This path mainly relies on standardized fund structures (such as Cayman, BVI, Bermuda, etc.), focusing on token asset investment, and a small number of funds will also make equity allocations.
Funding requirements
Usually the minimum investment threshold is more than 100,000 US dollars, and top funds often require LPs to invest 1 million US dollars, which is suitable for investors with larger asset sizes. Funds are usually locked for 3 to 5 years and cannot be withdrawn at any time. You need to wait for the overall liquidation of the fund or the exit window.
Exit Cycle
The medium- to long-term cycle, ranging from 1 to 3 years on average, depends on the project tokens being launched and then exiting through the secondary market after being opened for circulation. Some funds may adopt a phased exit mechanism, but the overall flexibility is far less than that of the secondary market. If a bear market occurs, the launch cycle of primary projects will be extended, and sometimes it may not be realized even after 3 years.
Strategic Initiative
For LPs, the margin is extremely low, and the fund management team is fully responsible for investment research and strategy execution. Investors do not participate in specific project selection or post-investment management. The initiative within the fund depends on the team's project screening capabilities, depth of support, and exit rhythm.
Revenue Model
It is a typical high-risk, high-return path, relying on entering the market at a low valuation in the early stage to capture the Alpha returns after the project goes online. However, when the cycle enters a bear market and the token valuation shrinks systematically, the overall return rate of the fund may fluctuate greatly or even return to zero. Most funds established in 2021-2022 face the pressure of a token retracement of 90%+ in 2024, and the IRR performance generally falls short of expectations.
Compliance Tips
Most crypto funds adopt offshore structures, such as Cayman or BVI funds, and are aimed at qualified investors (meeting local net asset or income standards). As global regulation becomes stricter, some countries have clear requirements for fund raising and token asset management. Investors need to confirm the fund's fundraising compliance and custody arrangements to avoid liquidity or legal risks. In some jurisdictions, especially the United States and Europe, fund investors may need to meet specific qualification requirements to avoid legal risks caused by compliance issues.
Typical Cases
Paradigm: Known for its investments in crypto infrastructure and DeFi, it participated in projects such as Uniswap and dYdX in its early stages.
Multicoin Capital: Focuses on L1 and L2 ecosystem investment, supporting projects such as Solana and The Graph.
ABCDE Capital: Once active in the Asian market, investing in over 30 projects, but recently announced a halt to new investments.
Suitable for
It is suitable for high-net-worth investors who pursue early-stage project alpha and are willing to accept liquidity lock-in, especially those who do not have direct project investment and research capabilities and hope to allocate assets through the fund team. However, they need to have sufficient anti-cyclical fluctuation capabilities and understand the uncertainty of exiting the primary market.
Secondary Market Investment
The secondary market path refers to investors buying and selling, making markets, hedging and arbitrage of listed tokens through public trading markets (such as CEX, DEX, OTC channels, etc.). This is the most flexible and market-oriented investment method in the crypto market, which usually relies on market volatility and liquidity to obtain returns.
High net worth investors can participate in secondary market investment through professional means such as quantitative funds, hedge funds or strategy products, pursuing more precise market positioning and optimizing risk-return.
Funding requirements
It is extremely flexible and can accommodate amounts ranging from tens of thousands to tens of millions of dollars. However, to really play it well, you need a mature strategy, risk control system, or the help of a professional team/product.
Exit Cycle
Assets can be traded and recombined at any time and have full liquidity; however, they are extremely volatile and the market environment changes rapidly, so close attention must be paid to market conditions and risk management.
Strategic Initiative
Very high, investors need to actively build a strategy portfolio (such as spot allocation, futures hedging, arbitrage, event-driven, etc.) and constantly adjust it according to market dynamics. The intensity of active management can also be reduced through structured products or custody platforms (such as strategy portfolio packages, yield enhancement products).
Revenue Model
The income mainly comes from volatility arbitrage, market trend capture and short-term event-driven. Compared with the traditional market, the secondary market is more volatile, so the income model can be significantly higher than the traditional stock market. High net worth investors rely on professional strategies such as quantitative hedging and algorithmic trading to obtain higher returns in market fluctuations while reducing systemic risks. It should be noted that the income of the secondary market has a high volatility, especially when the market sentiment fluctuates violently, the income may be greatly affected.
Compliance Tips
When participating in the secondary market, high net worth investors need to use compliant trading platforms (such as CEX, DEX) to ensure that the platform complies with the regulatory requirements of the country or region where they are located. Since some countries impose taxes on secondary market gains (such as capital gains tax), cross-border traders need to pay attention to tax compliance and choose appropriate structures to reduce the tax burden. The use of custody platforms and quantitative funds also needs to pay attention to custody security and fund compliance to ensure the flow and security of funds.
Typical Cases
Amber Group: Provides diversified strategy services such as secondary trading, market making, arbitrage, etc., targeting institutions and high net worth clients.
Wintermute: A leading global market maker in the crypto market, active in the field of secondary liquidity capture.
QCP Capital: Focuses on strategies such as options and volatility arbitrage, suitable for hedging and yield enhancement configurations.
Du Jun personal account: Du Jun plans to release a buying list in May to showcase his secondary market allocation path, reflecting his personal shift in focus to liquid assets.
Suitable for
Investors who have the ability to design strategies and monitor the market, such as quantitative funds and hedge fund managers; high-net-worth individual investors, especially those who wish to flexibly manage asset liquidity and avoid systemic risks; for investors without trading experience, they can indirectly participate in the secondary market through quantitative strategy products, asset management platforms or custodial accounts and enjoy the benefits and risk optimization brought by professional management.
Incubation Investment
Incubation investment is different from traditional VC financial investment, which focuses more on the combination of strategic collaboration and capital injection. Investors not only provide funds, but also deeply participate in key links such as product design, market strategy, resource integration, etc. to help projects go from 0 to 1.
The incubation investment model is usually seen in platform-based institutions (such as exchanges, infrastructure providers) or industrial capital, which provide resources and capabilities in exchange for early large-scale tokens or equity shares, and amplify their own ecological value through strategic collaboration.
Funding requirements
Compared with fund-type investments that start at a million dollars, incubation-type investments have relatively flexible funding requirements, ranging from tens of thousands to millions of dollars. Incubation-type investments require not only capital investment, but also non-capital resources (such as traffic, products, markets, talent, etc.).
Exit Cycle
The medium cycle is generally 6 months to 2 years, depending on the launch of the project, the pace of financing, and the speed of ecological advancement. The incubator obtains a large proportion of tokens or equity in the early stage of the project, and exits in stages after the project gradually matures and the ecosystem gradually advances. This exit method usually requires patience to wait for the project to grow and market acceptance to increase.
Strategic Initiative
Very high. The core of incubation investment lies in active involvement and in-depth collaboration. Investors or institutions often directly influence the direction of the project, the rhythm of the product, and even participate in key links such as operation and marketing. The relationship with the project is a co-construction relationship, not just financial investment.
Revenue Model
The income of incubation investment mainly comes from the large proportion of tokens or equity obtained in the early stage. If the project is successful, investors can usually get more than ten times the return. However, this kind of income is also accompanied by a high execution risk. The success of the project depends not only on the market's acceptance, but also on the close cooperation between investors and the project team. If the project fails, the investment may return to zero. This high Beta model is a typical feature of incubation investment.
Compliance Tips
The compliance of incubation investment mainly involves issues such as the place of token issuance and equity structure design. Investors need to pay special attention to whether the project party complies with the regulatory requirements of the region, such as securities laws and token issuance compliance. If investors provide non-funding resources such as markets, users, and products in addition to funds, it may involve compliance issues such as shareholder-related transactions and interest disclosure. Therefore, the rights, responsibilities and compliance obligations of each party need to be clarified when signing the agreement.
Typical Cases
Binance Labs: The world's leading crypto incubation platform, which has incubated well-known projects such as Polygon and Injective, and provides a full range of services such as funding, resources, and exchange support.
Alliance DAO: An incubation platform for entrepreneurs in the Web3 field, emphasizing deep collaboration between the community and founders.
Vernal: After Du Jun closed ABCDE, he turned to the incubator path, emphasizing companionship, strategic investment, and ecological synergy. The first batch of projects and purchase lists will be announced in May.
Suitable for
It is suitable for investors with industrial resources, product capabilities, and market channels, who are willing to invest time and energy to deeply participate in the incubation of projects, and high-net-worth investors who pursue long-term synergy effects. At the same time, it is suitable for investors with entrepreneurial backgrounds, who understand the project life cycle, who can bear the risk of project incubation failure, and who are willing to provide support and guidance during the growth of projects.
Structured Investment
The structured investment path refers to the combination allocation, strategy execution and risk management of crypto assets through professional asset management platforms, custodians, or fund structures. Investors do not need to personally participate in specific project selection or daily transactions, but rely on professional investment teams and tools to achieve asset appreciation through one-stop configuration services.
This path is common in crypto asset funds, funds of funds (FOF), portfolio strategy accounts, etc. Investors' funds will be allocated in a diversified strategy based on preset risk preferences and investment objectives.
Funding requirements
Medium to high capital requirements, usually the minimum investment threshold is 50,000 to 500,000 US dollars, which varies according to the complexity of product design and the depth of strategy. Through the custody platform or asset management platform, investors can choose different strategy combinations within the capital threshold to achieve personalized investment goals.
Exit Cycle
Medium to short term. Unlike the long-term lock-up in the primary market, most structured investment products have flexible exit cycles. Investors can choose to adjust the window regularly (such as monthly or quarterly) according to the product design and make timely adjustments. However, some structured products still have a minimum holding period, and compared with the full liquidity of the secondary market, the exit cycle is still limited. For high-net-worth investors, this path can be used to flexibly adjust the investment portfolio, but it is necessary to pay attention to the relationship between flexibility and return volatility.
Strategic Initiative
Medium to low. The structured investment path relies on a professional management team to execute the strategy, and investors do not need to participate in specific project selection or daily transactions. High net worth investors make investment decisions by choosing appropriate investment platforms or funds, relying on their professional investment research capabilities and market judgment capabilities. This path does not require investors to participate too much in operations, but they can adjust the investment direction according to their own risk preferences.
Revenue Model
The income mainly comes from the allocation of diversified strategies. Structured investment aims to obtain stable returns by optimizing risk allocation and improving capital liquidity by distributing funds to different projects, asset classes or markets. The income model is usually more stable and suitable for long-term asset allocation. Compared with the high volatility of the secondary market, structured products pay more attention to risk management and portfolio optimization, balancing returns and risks through diversified investment and income enhancement strategies. However, this stable income model is also accompanied by lower income elasticity.
Compliance Tips
Most structured investment paths involve compliant custody, especially those products for qualified investors. Investors need to ensure that the selected platform or fund complies with local regulatory requirements to avoid legal risks caused by non-compliance with regulations. For cross-border investors, cross-border tax compliance is also an area that requires special attention, especially related regulations such as capital gains tax and value-added tax. Investors also need to ensure that the selected products comply with KYC/AML (know your customer/anti-money laundering) requirements.
Typical Cases
Matrixport: Provides a diversified strategy portfolio, including DeFi yield enhancement, RWA bonds, option structured products, etc., and provides personalized asset allocation services for high net worth investors.
HashKey Capital: Relying on Hong Kong's compliance advantages, it provides strategy portfolio and custody services, and is committed to helping institutions and high-net-worth clients make diversified investments.
Anchorage Digital: As a leading global compliant custody platform, Anchorage provides structured products to assist institutional clients with crypto asset allocation and risk management.
Fidelity Digital Assets: Provides diversified asset management and investment strategies, including strategic portfolios and hedge funds through its institutional custody services.
Suitable for
It is suitable for high net worth investors who wish to entrust professional teams to manage assets, optimize risk-return, and focus on compliance and long-term returns; or those who wish to diversify investment risks and achieve stable appreciation through a combination of strategies, especially for those who do not have direct investment research capabilities or are unwilling to invest a lot of time and energy in investment decisions.
In addition to paths, there are trends
In this article, we have sorted out the four main paths of Web3 investment in detail. Each path has its own unique mechanism, suitable population and risk characteristics.
One point that Portal Labs always emphasizes is that there is no absolute advantage or disadvantage in the investment path itself. The key lies in whether it matches your resource structure, risk preference, expected goals and operational compliance.
However, in addition to the path, the market itself is undergoing profound structural changes. With the decline of the VC model, the revival of the incubation model, and the accelerated evolution of secondary market strategies, the Web3 investment ecosystem is moving towards a more flexible and diversified direction. This series of changes reflects the continuous adaptation and adjustment of the market and capital, and is also driving the entire industry towards a more mature and rational development stage.
In the following articles, Portal Labs will continue to use Du Jun’s strategic adjustments as a starting point to deeply analyze the industry trends and cyclical logic behind this round of “path evolution”.
