The Funding: Why Monad's ecosystem is gaining VC interest
Quick Take This is an excerpt from the seventh edition of The Funding newsletter sent to our subscribers on July 27. The Funding is a fortnightly newsletter written by Yogita Khatri, The Block’s longest-serving editorial member. To subscribe to the free newsletter, click here.
Three Monad-based projects announced their venture capital funding back-to-back on Thursday, signaling a surge of interest in the Monad ecosystem.
One standout, the Monad liquid staking platform aPriori, reached a token valuation of at least $100 million with its $8 million seed funding, as I reported exclusively at the time. Achieving a nine-figure valuation before the Monad blockchain has even launched is quite surprising. The other two projects, the Monad liquid staking protocol Kintsu and the Monad-based on-chain order book exchange Kuru , raised $4 million and $2 million, respectively.
All three projects have attracted high-profile investors. Brevan Howard Digital , the crypto division of the hedge fund giant, backed both Kintsu and Kuru, despite the fund's relatively low investment activity in the crypto space. CMS Holdings, on the other hand, invested in all three Monad projects. Other notable investors in these projects include Pantera Capital, Electric Capital and Castle Island Ventures.
This surge in project funding follows closely on the heels of Monad Labs, the developer of the Monad blockchain, raising $225 million in Series A funding in April, led by heavyweight Paradigm, reportedly at a $3 billion valuation.
So, what's driving VC interest in Monad and its ecosystem? I spoke to six of its investors, all highly bullish on Monad's prospects, particularly its potential for high transactions per second and Ethereum Virtual Machine (EVM) compatibility . "What's particularly interesting about Monad is that it draws significant inspiration from Aptos APT -3.23% and Sui SUI -2.46% in designing its parallelized execution environment, while still maintaining compatibility with EVM," Aric Chang, general partner at Manifold Ventures and an investor in aPriori, told me.
Parallelized execution allows Monad to process multiple transactions simultaneously, enhancing throughput compared to traditional sequential methods. EVM compatibility, on the other hand, lets developers use their existing Ethereum ETH -0.30% projects on Monad without changes. The Ethereum and EVM developer community is the largest in crypto, Lauren Stephanian, general partner at Pantera Capital, which led aPriori's seed round, told me, citing Electric Capital's latest crypto developer report. "Due to Monad's differentiated high throughput, it enables the EVM developer community to build projects that could only exist in Solana SOL +1.18% today, e.g., high-fidelity DeFi, DePIN, payments, etc.," Stephanian said. "The bullish perspective on Monad is that with more developers innovating in these verticals, superior products will be built."
Jed Breed, founder and general partner of Breed VC and an investor in Kintsu and Kuru, told me Monad's parallelized execution and potential throughput of up to 10,000 transactions per second could unlock many on-chain activities that have not been possible before.
These investors see Monad pushing crypto adoption within the next 2-3 years. Matthew Walsh, founding partner of Castle Island Ventures and investor in Monad Labs and Kintsu, views Monad as a strong foundation for stablecoins, calling it "a killer application" that will continue to grow exponentially in the coming years.
Manifold's Chang said, "Monad can potentially surpass the growth trajectory of Solana, attracting a widely diverse ecosystem of DeFi and consumer-facing apps." Dan Matuszewski, co-founder and principal of CMS Holdings, noted that while Monad could eventually reach the level of Ethereum and Solana adoption, it will take "a number of years."
Robinson Burkey, co-founder of Wormhole Foundation and an early investor in Monad Labs, Kintsu, and aPriori, shared his thoughts on Monad's competitive edge, saying compared to other EVM blockchains, "Monad provides the promise of an extremely fast and reliable blockchain (supply) with a seemingly guaranteed influx of builders and users (demand) based on their ability to build so much momentum to date."
All six investors interviewed for this edition expressed their openness to investing in more Monad-based projects. "We've allocated a large portion of our fund to focus on Monad," Breed said.
Matuszewski of CMS Holdings mentioned that an increasing number of Monad projects have raised funding over the past few months. "They are all going to probably start being public from now on into the fall," Matuszewski said, hinting at another wave of Monad-based projects emerging just before the blockchain goes live on mainnet, planned for later this year.
Keone Hon, co-founder and CEO of Monad Labs, acknowledged the early stage of the Monad ecosystem and sees a significant opportunity for growth. "The number of people with crypto wallets using decentralized apps is still tiny," Hon told me. "Most crypto fans have only ever used a centralized exchange to trade crypto. There's a huge need and a huge opportunity."
With opportunities come risks and challenges.
Monad's biggest risks
Chang of Manifold Ventures highlighted two biggest risks for Monad: the potential failure to meet its technological promises and the challenge of attracting a diverse range of applications after launch. "All of the Monad-native projects I've spoken to are building on Monad because they truly need to operate in a highly scalable environment, and Monad's value proposition would be nullified if it doesn't achieve the level of scalability it is projecting," Chang said. However, seeing the large ecosystem and community Monad has already built "gives me confidence in its long-term success," Chang added.
Matuszewski of CMS Holdings echoed Chang, noting that Monad must overcome significant technical hurdles. "It's a bit of a black box right now. You don't know how it's going to land," Matuszewski said. But he also noted that Monad's early adoption and community-building efforts suggest it could be "a pretty robust ecosystem out of the gate."
Breed of Breed VC noted that Monad's platform is still in its early stages, so the technology hasn't been proven yet, making it one of the biggest risks.
Burkey of Wormhole Foundation also agreed on the importance of Monad delivering on promises and expressed confidence in the project's team. "With big momentum comes a responsibility to match it with delivering in a big and timely manner," Burkey said. "However, there is no reason to believe they won't deliver on this."
Stephanian of Pantera Capital said Monad's biggest risk is attracting developers from other EVM chains. Despite its potential high throughput, Monad must convince those currently working on Ethereum Layer 2s and Layer 3s to switch, Stephanian said.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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