TON Ecosystem May No Longer Work if Viewed Solely from the Perspective of Token Investment
Article by: flowie, ChainCatcher
Editor: Marco, ChainCatcher
Recently, Donald, founding partner of FA institution D2 Capital, spoke with no less than 60 VCs and found that not a single one was not looking at the TON ecosystem, “even if they started researching it three to four weeks ago, when they were a bit late.” However, despite the interest, the actual investments are not many. Most of the VCs that Donald contacted are still in a wait-and-see mode, and Bruce Lan, managing partner of Bing Ventures, has reviewed nearly 100 projects but has not made any investments yet.
According to RootData, the number of financing deals in the TON ecosystem in the past six months is still in single digits. In contrast, the Bitcoin ecosystem, which is just as hot as TON, has seen a financing deal almost every week in the past three months.
Investment institutions interviewed by ChainCatcher firmly believe that the TON ecosystem is different from any other ecosystem or narrative in the past and will not be short-lived. However, the game has changed with the existing traffic in the TON ecosystem. Projects like NotCoin on Binance and OKX did not seek VC financing, and Catizen achieved $12 million in revenue before its token was even issued. More than one investment institution has stated, “Not all projects on the TON ecosystem need to issue tokens in the future.”
If crypto VCs continue to view the TON ecosystem solely from the perspective of token investment, it may no longer be effective.
No VC is not looking at the TON ecosystem
Owen, founder of PAKA, exclaimed that a year ago, paying attention to TON was a niche topic, but now, almost none of his peers are not paying attention to TON.
In early 2023, during a private gathering at the Hong Kong Blockchain Week, Owen received a small amount of USDT transferred by a Telegram friend. This was a new feature announced by Telegram a month ago.
With nearly 1 billion users being able to directly transact on the chain, Owen, who has always been concerned about large-scale applications, was pleasantly surprised.
After conducting research with his team, Owen believes that the TON ecosystem will be different from any other ecosystem. “Other ecosystems propose obscure technologies and ask users if they want to come and play, but users are indifferent except for airdrops. However, Telegram has a large number of real users and can use Web3 technology to meet the needs of these users, which is obviously more in line with the path of large-scale applications.”
But when he really started exploring the TON ecosystem, it was not easy to get started.
Sensory-wise, Owen felt that many projects were very mediocre and could be described as “a waste to abandon and tasteless to eat.” The liquidity was also poor, with the TVL of TON at that time being less than $10 million.
Owen initially looked at a very rough TON ecosystem DEX page and thought, “The PAKA investment team with development experience can probably do better in a week.”
Shigeru, partner of CGV Fund, who also looked at the TON ecosystem in early 2023, was temporarily discouraged after scanning several projects. Besides the fact that there were not many projects and their quality was generally low, he also noticed that the market conditions were not right. “The infrastructure is too scarce, there isn’t even a self-hosted crypto wallet.”
Owen quickly realized, “Due to the new programming language and the imperfect corresponding infrastructure, it is not that simple to create a good DEX.”
But with efforts in various aspects of the TON ecosystem infrastructure, within a few months, the projects that Owen “disdained” had millions of users.
After Telegram announced its exclusive cooperation with TON in September last year, following the commercialization path of WeChat, it not only connected payment wallets and other infrastructure but also allowed 900 million users on Telegram to directly buy and sell tokens, NFTs, and participate in GameFi and other ecosystem projects. In April of this year, Tether reached a partnership with TON, giving TON its own native stablecoin.
At the same time, TON has promoted mini-applications, and a large number of mini-games such as Notcoin and Catizen have quickly registered tens of millions of users. Many mini-applications can generate revenue without issuing tokens.
The partial success of small games like Notcoin and Catizen has also attracted a group of Web2 “regular army” to enter.
An entrepreneur who provides technical solutions for TON blockchain and developers often contacts developers and project parties through offline salons. He mentioned, “Currently, many Web2 game companies and entrepreneurs in ecosystems like WeChat are targeting Telegram.” This is because the traffic on Web2 social media platforms like WeChat and TikTok is already very expensive, and the business is saturated.
Some Web2 entrepreneurs have chosen to enter the underdeveloped traffic territory and find similarities with WeChat. With nearly 1 billion monthly active users, Telegarm has naturally become an important battlefield. “The methodologies developed through years of competition in Web2 can be partially applied on Telegram.”
Owen also revealed that Glacier, Mini Games, and Sanqi, these Web2 game companies, have already entered the TON ecosystem.
But compared to the changes within the internal ecosystem, the increased attention of the entire Asia-Pacific VC community to the TON ecosystem is a key factor, as well as the increased investment from top Western capital in the application layer and the TON ecosystem.
Both Paradigm and a16z have participated in Farcaster’s $150 million financing this year. Pantera Capital has also made a high-profile announcement of its heavy investment in TON in the first half of this year, with the investment amount potentially exceeding $250 million, according to on-chain analysts. Before this, the TON ecosystem was mainly invested in by Chinese or Russian capital.
Donald clearly felt that after Western capital entered the game, more VCs came to inquire about TON ecosystem projects. “Recently, I have talked to more than 50 VCs, and none of them are not looking at the TON ecosystem.” Shigeru, who was discouraged by the TON ecosystem last year, also started paying close attention this year.
Donald said, “Many VCs understand that even if more than 50 VCs’ funds are combined, they can’t create a TON ecosystem with only tens of billions of dollars. The funds from Asia-Pacific VCs alone are not enough.”
The entry of Western capital also means that more Western developers and project parties may participate. Currently, most of the construction in the TON ecosystem is still being carried out by Eastern entrepreneurs and developers.
Donald has been in contact with both Eastern and Western entrepreneurs or developers in the TON ecosystem, and he clearly feels that the Eastern side is still eager for short-term monetization, while Western entrepreneurs are more focused on how to create super applications similar to Web2’s Facebook and Snapchat around nearly 1 billion active users.
“Many VCs may expect that after the West has set a new paradigm with a high profile, the Asia-Pacific region can create an Asia-Pacific version, leverage its traffic cost advantage and better operational capabilities, and achieve a breakthrough. Two years later, products with millions of DAUs could be divided equally between the East and the West.”
Why do most VCs only watch and not invest?
Donald understands why most VCs he contacted are watching but not investing. Compared to a year ago, the rapid growth of the TON ecosystem’s infrastructure and projects is obvious, but there are still not many investment targets.
According to Ton.app, there are currently 910 projects in the TON ecosystem, and 60% of them have appeared in the past 8 months. Donald has mapped out 300-400 ecosystem projects, and “90% of them are games.” Owen also mentioned that there are already too many games in the TON ecosystem to keep track of.
Most small game teams do not rely heavily on VC financing.
Owen had contact with the team behind Notcoin last year. “At that time, they were working on a TON ecosystem Launchpad platform called Tonstarter. They originally wanted to invest in Tonstarter, but the team said their main focus was on Notcoin and they did not plan to take VC money. They wanted to take a purely community-driven approach.” In fact, Notcoin did not announce any financing.
Even if they do seek financing, these small game teams may only raise a small amount in the early stages, and the financing amount is usually small. Donald has contacted multiple game small teams and found that “they have strong monetization capabilities.” Scarlett, an investor in Catizen’s publisher Pluto, stated that Catizen has achieved over $12 million in revenue and has over 500,000 paying customers through the purchase of game props.
Pure small games are not worth the investment for VCs, and many VCs are more concerned about whether the TON ecosystem can develop more models like the 4399 game mall or WeChat mini-games.
Bruce Lan, managing partner of Bing Ventures, has reviewed most of the small games in the TON ecosystem and found that they are similar to WeChat mini-programs like “Sheep’s Turn.” He expects their lifecycle to be short, and they will disappear after rapid monetization. “VCs will find it difficult to guarantee a positive ROI, and these projects are more suitable for fair launch participation.”
In addition, the current small games in the TON ecosystem often have tens of millions or even hundreds of millions of registered users, and “the data may be inflated.” Some important indicators for evaluating game performance, such as real users, user stickiness, and future growth potential, are still at an early or black box stage, according to Bruce Lan.
In the current situation of the game being chaotic, Shigeru, partner of CGV Fund, has chosen to focus more on the infrastructure of the TON ecosystem. He has recently reviewed more than 20 projects, and due to the limited number of projects, some targets have been driven up in valuation due to the recent hype in the TON ecosystem, making it difficult to get involved.
Although the market has high expectations for TON, in Donald’s view, if there are no projects that create turning points, the TON ecosystem is no different from other short-lived narratives, “at most, it’s just a different flavor of air.” To “run out,” at least 3 million real DAUs are needed.
Many of the investors that Donald has contacted are still in a wait-and-see mode. They hope to see more top players from companies like ByteDance, Tencent, and NetEase, as well as Western entrepreneurs, enter the TON ecosystem and bring turning point projects.
In addition, VC liquidity issues may also hinder investments in the TON ecosystem. Donald said that VCs in the Asia-Pacific region have been less active recently. In this ETF bull market, the entire altcoin season did not take off, and “institutions are more eager to sell their chips.” Even if the TON ecosystem becomes hot, investment decisions may be passed by the partners.
According to Donald, the investment heat on TON may have to wait until the next interest rate cycle, after traditional Web2 USD funds and Asia-Pacific Web3 funds have raised funds, to ensure that Web3 has sufficient capital and liquidity.
Seize the traffic opportunity early
In mid-2022, Scarlett invested in Pluto, the publisher behind Catizen, making her one of the early investors in the TON ecosystem.
Scarlett believes that “Tap to earn” games will definitely be eliminated, but she sees the growth potential of Catizen after gaining huge traffic through small games. After accumulating tens of millions of users, Catizen is also expanding its business boundaries and launching the Launchpool model. “Essentially, it is more like a gamified Pump.fun.”
PAKA is one of the few VCs that have made aggressive moves in the TON ecosystem, already investing in more than 10 TON ecosystem projects, covering various fields such as Infra, games, red envelope applications, DeFi, and DePIN.
Owen wants to invest in various different sectors of the TON ecosystem as quickly as possible. In his view, “Capturing traffic first is more important than anything else.” Although the TON ecosystem projects may appear simple, uninteresting, or even rough, it is crucial to capture traffic at this stage, as having traffic allows for any kind of development.
Just like when WeChat first opened its public accounts, even the accounts with rough content quality and formatting attracted millions of users as long as they had some uniqueness, and monetization was also very easy. It becomes increasingly difficult to do anything when the track becomes saturated.
Bruce Lan feels that TON’s Tap to earn games are similar to web-based mini-games that emerged after 2000. “Even if they are very simple, many web games at that time generated tens of millions of dollars in revenue every month.”
He also doesn’t expect TON to produce a blockbuster game like King of Glory in the short term. In his view, most players have only entered the game a few months ago and still need to go through a long exploration process to figure out how to combine Web3. The performance of the TON chain also needs to continue to evolve to support high-performance games.
Compared to PAKA’s broad net approach to ecosystem positioning, Bing Ventures plans to focus on cultivating specific areas.
Bruce Lan doesn’t want to capture a killer application by waiting. He plans to actively seek out top projects or platforms in the market and collaborate with several top VCs to incubate projects that fill the gaps in the TON ecosystem.
Bruce Lan said that in addition to direct investments, Bing Ventures also has its own parent fund and has invested in many European and American institutions. Bing Ventures will inform the projects it invests in to look for opportunities in the TON ecosystem and hopes to influence more European and American GPs and LPs to pay more attention to large-scale application opportunities in the TON ecosystem.
Although it is unknown when large-scale applications will return, in Shigeru’s view, the TON ecosystem may be able to end the current situation of “no cross-play” in the crypto market.
His feeling is that there is a gap between the Eastern and Western perceptions of most Web3 narratives. For example, in the Bitcoin ecosystem that became popular at the beginning of this year, the first “rune” was popular in the East but not in the West, and the subsequent “rune” was popular in the West but not in the East.
The TON ecosystem can rely not entirely on token economics and become a consensus path for large-scale applications in the East and the West.
However, in an ecosystem that does not depend entirely on token investment, as new models emerge, crypto VCs also need to consider how to change the inertia of past token investments and find more suitable investment methods.
Tags:
Telegram
TON
VC
WEB3
Source link: https://www.chaincatcher.com/article/2132215
Note: The translation is a direct translation and may not fully capture the nuances of the original Chinese text.
