Exclusive interview with crypto AI investor Jasmine: It is more cost-effective to develop applications with PMF than to follow the trend of developin

In the first half of this year, crypto AI was undoubtedly one of the most sought-after top narratives in the market, and the growth of related tokens was far ahead of other tracks.

The craze for AI is not limited to the secondary market, VCs have also bet heavily in the primary market. Crypto AI projects have raised large rounds of financing one after another, and Sentient's $85 million financing announced earlier this month has pushed this craze to the peak.

However, Jasmine, an investor in well-known crypto AI projects such as Bittensor, Kaito, MyShell, and FLock.io, calmly pointed out that the current primary funds are too focused on large-scale infrastructure, and the financing difficulties of small project teams may be more significant.

In this case, how can crypto AI projects gain the favor of VCs? In addition to financing from VCs, are there any better ways to obtain funds? Recently, BlockBeats had a conversation with Jasmine. Jasmine shared her observations and thoughts on the current status of primary investment in crypto AI, and provided advice from an investor's perspective to the founders of crypto AI projects.

From initial involvement to deep cultivation: Jasmine's AI investment journey

When did you enter the crypto industry?

Jasmine: It was at the end of 2018. Because my undergraduate major was mathematics and my graduate major was statistics, after graduation I did some quantitative research in the bank, and later turned to management consulting. I entered Crypto in 2018 through a friend's introduction. I first worked as a partner in several VCs, and then established my own fund in 2021. Now that the fund is in the normal exit stage, I look at projects more personally.

What was the first AI project you invested in?

Jasmine: Kaito is the first AI project I invested in. It should be the angel round from the end of 2021 to the beginning of 2022. At that time, Kaito's vision was to make a decentralized Google, including a lot of content about indexing and search engine design. The current centralized search engine sorting logic is not transparent. Kaito hopes to solve this problem in a decentralized way, especially for information in the Crypto field. Crypto information is often very scattered, and it is necessary to consult information sources on multiple platforms such as Twitter and Discord. Kaito's goal is to make a decentralized Google specifically for Crypto information.

The reason why I invested in this project: First, I personally agree with this direction; second, I have a lot of intersections with the founder, and I knew him before. Also in 2022, I also invested in Rabbit, whose founder Lu Cheng is my classmate. This project was very popular at CES (Consumer Electronics Show) at the beginning of this year. It is an orange pocket device. Its goal is to make a large-scale action model, which is basically an AI agent. By interacting with the device, the agent behind it can help you complete many different types of operations. For example, if you tell this device that you want to book a flight, it can connect to accounts such as Ctrip to help you complete the operation.

This is the initial situation, but I don’t think I saw some directions of encrypted AI at that time. Since I studied mathematics and statistics, I don’t have much insight into AI. Moreover, most AI technologies were still relatively rudimentary at that time. For example, Boston Dynamics' robot could only jump and was just a toy. It was not until after 2023 that AI developed rapidly.

At that time, I was mainly focused on Crypto. I was not an expert in machine learning, natural language processing (NLP) or AI, so my knowledge was limited. It was just because I happened to invest in early projects and came into contact with some top talents that I had some AI positions. As the positions kept getting bigger and people kept telling me about this thing, I began to think that there seemed to be something in AI. In 2023, I invested in Bittensor in the secondary market.

When did I start to think that AI had changed from a small position to a track that needed to be paid serious attention to?

Jasmine: It was when ChatGPT suddenly became popular in 2023.

In the field of Crypto, many things are still very niche despite having been developed for a long time. Whether it is Ethereum's innovation, or Layer 2, Layer 3, Rollup, or ZK technology, they are relatively niche, and it is difficult for ordinary users to have practical applications.

In addition, Crypto is difficult to attract non-crypto users. Every time there is a big bull market in the market, it is usually external funds that come in. These external funds may be optimistic about Bitcoin and Ethereum, thinking that this is a good investment target that can diversify their investment portfolios. There are also some ETFs or interest rate hikes and cuts in the market, which have led to more surplus funds flowing into these high-risk assets.

But after ChatGPT appeared, AI attracted the attention of many project parties at once, and everyone felt that this was a good intersection. At this stage, you can feel that the direction of AI has some Crypto nativeness and can interact with traditional industries. It will not disappear with the disappearance of a certain narrative. Even in traditional industries, the most discussed and most meaningful narrative is AI. So from then on, I began to pay serious attention to AI.

Bittensor's investment logic and selection criteria for encrypted AI projects

Why do you want to invest in Bittensor in the secondary market in 2023?

Jasmine: Many times, investment requires choosing a narrative that you think is promising. When you are sure that this narrative is reasonable, you need to choose a suitable investment target in the industry. At that time, Bittensor was the most reasonable choice.

First, Bittensor had a fair launch in 2021, which means it had a lot of good foundations from the beginning. Secondly, its community is very active. Although it had not yet been listed, many of the mechanisms discussed by the community were well set up. Many large platforms will support the development of ecological projects by issuing grants, which leads to many project parties often building on multiple platforms to obtain grants instead of focusing on one system or network. But Bittensor's mechanism is different. It continuously issues tokens to miners and subnet owners through the subnet mechanism. This mechanism is obviously an innovation.

In addition, the community is also a very important factor. Bittensor had formed a very focused and dedicated community at the time. Therefore, if you believe that AI is a big trend, then Bittensor was the best choice at the time.

Many AI project designs remain in the conceptual stage because there was nothing similar before. How do you distinguish between good and bad projects during the investment process? Mainly looking at the community ecology, what other factors are there?

Jasmine: It’s mainly about the ecosystem and the founder. Because I invested in Bittensor relatively early, the community was still relatively small at that time, so I had many opportunities to communicate with the founder. The founder of Bittensor is a very passionate person.

Many times, especially for some overseas projects, you need to convince them to pay attention to the Asian ecosystem. But we only talked to Bittensor once or twice, and he realized that he should pay attention to the global community, not just let the Asian market take over. I think his thinking is very international.

In addition, he is not the kind of founder who is suspected of "raising money", but he makes people feel very connected and has a chemical reaction. That's why I started communicating with him in November, and in February of the following year, I helped him organize a meetup for the Asian community in Singapore. Vitalik was also invited to participate at that time, and the whole process went very smoothly. He is not the kind of founder who only pays attention to the Asian community when the market is not good, but he has attached importance to the Asian market from the beginning. This is very important, and I don't need to convince him, he has already realized the importance of the Asian market.

From left to right: Jasmine, Bittensor founder Jacob and Ethereum founder Vitalik

In the first half of this year, many dog projects were swindling under the banner of the Bittensor ecosystem, saying that they were raising funds to go on a Bittensor subnet. During that period, the registration fee for the Bittensor subnet was also soaring. I didn't see much official statement at the time. What do you think of this situation?

Jasmine: In this open market environment, this situation is inevitable. Bittensor is an open network. As long as you have enough TAO, you can register a subnet. I don't think this should be the responsibility of the Bittensor Foundation, nor is it something they can control. Because the network design itself is open. Ultimately, it should be up to the validator to decide whether these projects occupy a subnet position. If these dog projects do not make substantial contributions, their subnets will be eliminated by the next subnet.

Besides Bittensor, what other projects do you think are promising?

Jasmine: If I think a project is promising, I will definitely invest in it. In general, I hope to see some excellent products emerge. Because I think the combination of Crypto and AI has great potential, not just in the form of models or infrastructure. Products like ChatGPT and Midjourney are real products that many people use.

I hope to see more application projects, and I have invested in some such projects, such as Virtuals and Myshell. Application projects are very important. If you can make a good product, it is an important channel to obtain real users. On the contrary, there are too many infrastructure projects now. Projects like Gensyn and Ritual have raised a lot of money and have many supporters. If you do an infrastructure project at this time, I don’t know what you can use to compete. Even these large infrastructure projects, whether they can really be made according to technological innovation is still unknown. At this time, if you start working on infrastructure projects, there is not much you can really do, except that VCs think the story is good and can tell a story with a ceiling.

After these AI projects are launched on the mainnet, is there hope to cultivate a good ecosystem?

Jasmine: Of course, everyone hopes to attract real users. The key lies in whether there is a good mechanism for distribution and whether the ecological projects above can design attractive products. Good products take time to polish, and a good ecosystem also takes time to build. The key lies in whether the project party has this awareness and foresight.

Some project parties may feel that after such a long time in the currency circle, there are very few projects that really have products, but this does not affect the project parties and VCs making money. However, I hope that there will be more projects that can balance the two, with both good products and actual benefits.

Crypto AI Investment: Current Status, Challenges and Founders' Suggestions

What is the current status of primary investment in crypto AI, and will it face the same problems as other tracks?

Jasmine: I think the problems faced by crypto AI are basically the same as those of other tracks. As long as Crypto is involved, similar challenges will be encountered. Because in the field of Crypto, it is relatively easier to make money than in other industries, and exit is also faster. Many VCs will choose projects with higher valuations and tokens that are launched as soon as possible.

Current primary investments are generally more cautious. There are four main types of primary investments now:

· One is that investors really think the project is good and are willing to support it for a long time. No matter what difficulties they encounter, as VCs or early investors, they are willing to help. This is a relatively normal and well-intentioned investment;

· Another is that investors hope to have some exposure to AI projects and increase their investment portfolios to prove that they have an investment record (Track Record) in the field of AI;

· Another is that the fund has investment pressure, such as raising 200 million or 300 million US dollars and need to invest the money within a fixed time. In the current market environment, it is difficult to complete investment tasks without investing in large projects, which may push up the valuation of some projects. The two types just mentioned (2 and 3) are as long as your equity structure table (Cap Table) looks good and there are some good funds investing together, they will support each other;

· The last type is that investors don’t care what you do, as long as you can go public quickly and the final fully diluted valuation (FDV) reaches about 200 million or 300 million US dollars, and you can make money.

In general, current investors basically focus on these aspects.

For small project teams or developers, will the threshold for crypto AI be higher than that of traditional tracks, such as financing?

Jasmine: Financing is indeed difficult. Now when people raise funds from exchanges and VCs, VCs have their own standards, which are usually driven by funds. VCs will hope that the project can meet one of the four conditions I mentioned before before investing.

For smaller teams, I strongly recommend that they find some suitable sources of income. For example, some Telegram trading robot projects that did not issue coins on the market some time ago found a good income stream. Finding the right market demand and product market fit (PMF), you can completely get financial support through income, and you don’t have to raise funds and issue coins through VCs or exchanges.

The key lies in the goals and pursuits of the project party. If you want to make a good product, you can focus on income and user needs; if you want to raise funds and issue coins quickly, you need to meet the standards of VCs and exchanges.

What qualities does an excellent project founder need to have?

Jasmine: In the early stages of a project, I value the founder's character more than the specific direction of the project. I think the founder is the most important factor. First of all, whether the founder and I have a chemistry, whether we can reach a consensus on many things, and whether our visions are consistent, these are all important. The founders of some projects may be very good, but if we cannot understand each other on certain key points, it will be difficult to cooperate.

I will not pursue all good projects, but will choose those projects that I have confidence in within my knowledge. Therefore, I hope to not only support each other with the founder, but also establish a pleasant cooperative relationship. The founder's character, professional ability and vision are all important.

As for the adjustment of direction, I don't think it is the most important. The direction that the founder may value in the early stage may not necessarily be the final direction. It is okay to make adjustments as their cognition improves. The key lies in the founder's sensitivity to the market and whether his intuition about certain things is correct, which may be more important.

What advice would you like to give to current founders of crypto AI projects?

Jasmine: First of all, make it clear whether you want to raise funds through VC or want to be self-reliant. If you don't want to raise funds, then focus on developing a product with market fit (PMF) that can solve practical problems for users and make money. For example, some previous trading robot projects on Telegram can make profits by finding suitable sources of income without raising funds.

If you decide to raise funds, you should focus on differentiation. Now there are already big projects occupying the market in many directions, and differentiation is the key. VCs will consider which projects they have already invested in and will not invest repeatedly. Therefore, you need to find differences with existing projects. At the same time, thinking from the perspective of VCs is also key. Considering what investment opportunities VCs are looking for and how to diversify their portfolios will help you better communicate with VCs and demonstrate the unique value of your project.

Currently, there are relatively few opportunities for infrastructure projects because many big projects have already raised a lot of money. Instead of competing with them, it is better to focus on the development of applications (APPs). APPs can bring new users, which is what exchanges and infrastructure projects need. If you can develop a good APP, it is easier to get support and attention.

In addition, it is very important to find someone with a good reputation to endorse you, which is more effective than blindly contacting VCs. For myself, I only invest in projects that I know or that are recommended by acquaintances. There are only these two levels of relationships. This is just my personal investment preference, it does not represent everyone, but it may represent some people.

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